The estate agent has found the house and you have arranged the mortgage. The next obstacle is the survey – but how many brokers really understand what this is all about?
What are surveyors and what do they do?
Surveyors don't just value and inspect homes – they get involved in areas related to land and properties of all types. The professional body, the Royal Institution of Chartered Surveyors, lists 16 specialist areas (see box). These give an indication as to the breadth of the surveying profession. You will probably not have heard of some of these. Geomatics, for example, is the collection, analysis, interpretation and presentation of spatially related information including land and hydrographic surveying, mapping and positioning.
However, most surveyors in the mortgage business will specialise in residential properties. They advise on matters relating to an existing or new home such as market value, how much it would cost to rebuild, construction, defects and boundary disputes. Chartered surveyors are professionally qualified and will provide impartial advice. They follow strict rules of conduct enforced by their professional body and must have insurance.
Why is a surveyor needed?
To ensure the property is good security for the mortgage a lender will instruct a surveyor to inspect the property and provide a valuation report, invariably written on a pre-printed form. Whilst it is a useful document, the valuation report is for the lender's benefit, not the purchaser's. Although it is an added cost you should always advise your clients of the benefits of getting their own comprehensive survey.
What is a valuation report?
A valuation report gives a lender:
An assessment of the market value
An assessment of the cost of rebuilding the property – called a reinstatement value – which is often used to determine the cost of insurance
An indication of anything that might adversely affect the value (e.g. subsidence or the need for major repairs like a new roof).
A valuation report is not a survey and your clients should not rely on this information alone – it isn't enough to provide a comprehensive indication of the property's condition. Also, your clients may not have any grounds for complaint if they rely on the valuation report and later find a problem with the property's structure. A better alternative is to advise all your customers to undertake a homebuyer survey or building survey.
What are homebuyer and building surveys?
The homebuyer survey is the minimum inspection before buying a property. It is reasonably priced and looks at the main structural parts of a building without going into the extensive detail of a full building survey. It is best suited for modern properties of conventional construction and will give the comfort of knowing that the property does not suffer from any major problems.
A building survey is a comprehensive inspection of a property including the fabric of its structure. It is suitable for all types of homes including period properties, listed buildings and homes of unusual construction. The surveyor will produce an extensive report.
What if the report is bad?
Many reports come back with less than an 'A1' rating but this is not the end of the world. Suppose the surveyor's report has identified woodworm in the loft, the next step would be to speak to a woodworm specialist, get an idea of the cost and effort involved and start to negotiate with the vendor. Remember to make allowance for the inconvenience involved in such work. With a surveyor's report and an estimate from the specialist it should be possible to reduce the asking price.
What is the cost?
Costs vary depending on where the property is, the type of property and its value. For an average four-bedroom house the buyer might expect to pay around £700 for a homebuyer survey and £1,000 for a building survey. It's important to shop around with a few local surveyors.
Where can surveyors be found?
The best place to find local surveyors is from RICS. Either go on to its website or ring the contact centre. The website has a 'find a surveyor' section. Enter your postcode and names and contact details of the nearest firms will be listed. The website is www.ricsfirms.co.uk and the phone number is 0870 333 1600.
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