Mortgage valuations are standard procedure when buying property. But their purpose can be confusing and can cause buyers some confusion. This post aims to address any queries for you. Get your first time buyers conveyancing quotes here.
What Is A Mortgage Valuation?
Sometimes referred to as valuation surveys, mortgage valuations are conducted purely on behalf of your lender. The reason they are done is simple: lenders want to be sure that the money they lend you is going towards a worthwhile investment. Your property must provide the security they require to justify the loan.
In other words, mortgage valuations help lenders ascertain whether or not the price offered for the property is fair. However, the extent of this kind of survey is limited.
What Is The Difference Between A Mortgage Valuation And A House Survey?
Mortgage valuations differ from house surveys because of their limited scope and the reason for being conducted. Mortgage valuations are for the benefit of the lender, even though you may, in some instances, have to pay for the valuation yourself.
House surveys, on the other hand, are conducted for the benefit of the buyer. Unlike mortgage valuations, home buyer’s reports and full structural surveys are more in depth. They will uncover defects that may be missed by a valuation survey.
- A house survey will provide peace of mind to buyers over the condition of the property.
- Mortgage valuations help lenders make a decision on the validity of the loan amount requested.
Do I Need A Mortgage Valuation And A House Survey?
In most cases, you will need both. As mentioned above, mortgage valuations and house surveys differ considerably. Buyers shouldn’t proceed purely on the outcome of the former.
However, sometimes a home buyer’s report will include a valuation as well. There is a catch though – many lenders won’t accept them. Check the small print. This is especially important if the inclusion of a valuation in the home buyer’s report incurs an additional fee.
How Are Mortgage Valuations Conducted?
Your lender will instruct a surveyor to carry out the mortgage valuation. This may or may not be done in person. Whether or not the surveyor will actually visit the property will be determined by several factors, which can vary considerably between lenders.
- ‘Drive-by valuations are becoming more and more commonplace, and some mortgage valuations won’t even require that.
- Desk-based valuations are not unheard of, and they are conducted by analysing various data points such as Land Registry and local house price statistics held by the lender themselves.
These figures are fed into an Automated Valuation Model (AVM) (an algorithm built for the task) to provide the surveyor with a valuation of the property in question.
By avoiding visiting properties in person, surveyors are able to lower the fees they charge. This cost-cutting allows lenders to offer free mortgage valuations as an enticement to prospective clients, so there are benefits to all concerned.
What Is Considered In A Mortgage Valuation?
If your lender requires a physical inspection of the property, you might be wondering what exactly they are going to look at.
Here are a few things that may be looked for:
- Potential risk of damage from nearby trees
- External cladding
- Suspicion of structural movement
- Unclear lease terms
- State of the roof tiles
- If the surveyor suspects the property is concrete built
What Does A Mortgage Valuation Tell You?
As the buyer, very little. Don’t expect too much information about the property to flow back to you. In some instances, you won’t even see the final report. The surveyor will inform your lender of their findings, but you may well be left in the dark – even if you paid for it.
The Cost Of A Mortgage Valuation?
Many lenders offer mortgage valuations free of charge in order to win your business. However, this isn’t always the case. The valuation fee can vary from £250 to £1,500. This will be dependent on the value of the property being surveyed. The results are usually back within a fortnight.
What Happens After The Mortgage Valuation?
After the mortgage valuation the surveyor will report back to the lender with their findings. If the valuation matches the loan amount requested, the lender will make a decision on whether or not to grant your mortgage offer. In most cases, this will be a formality.
For those whose valuation falls short of the asking price, you may receive what is known as a ‘down valuation’. For sellers, a down valuation could result in a lost sale. Even the best case scenario for sellers is that they will likely have to accept less than their asking price for the sale to continue.
You might expect buyers to be in a contrasting position, but it isn’t as straightforward as that. Down valuations may result in a cheaper purchase, but not always. The seller is under no obligation to negotiate and they may flat out refuse to match the mortgage valuation.
Equally, a lender isn’t going to offer more than the mortgage valuation prices the property at. You could be left with a situation where the only way to proceed is to find the difference in cash. Naturally, this isn’t a viable option for most buyers.
Are Down Valuations Common?
Down valuations seem to be on the increase. If a surveyor feels that the property is overpriced, it is their duty to report such findings accurately.
Setting the asking price, however, is somewhat different. Estate agents will do their best to provide realistic estimations to sellers, but they will be working with different criteria than that of a surveyor.
Remember, too, that agents are under pressure from vendors to secure the best price they can. Market appraisals can sometimes result in asking prices that differ from the view of a surveyor. Equally, agents are also obligated to follow the vendors instruction, which can result in an aspirational asking price being set rather than a realistic one.
Regardless of which side of the transaction you are on, Conveyancing Store can help you get to where you want to be. We compare conveyancing solicitors in seconds and using basic information about your home, we provide you with a list of conveyancers that are suitable. Get your first time buyers conveyancing quotes here.