MORTGAGE HELP DESK UK

What are Valuations and Surveys?

What is a valuation? What types of valuation are there? What is the cost of a valuation? Which valuation method is best?

What is a valuation?

Mortgage lenders carry out valuations on the property that you want to buy, this is done to check whether the property you are buying will provide the lender with sufficient security for the loan. This is because the mortgage lender will want to know in the event of a repossession, will the sale of your home be sufficient to pay for the amount you have borrowed. The mortgage lender will also base the deposit amount on this.

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What types of valuation are there?

There are three main types of valuations available:

1. Standard/Basic valuation: this type of valuation is not a detailed one of the property, it will be done to give the lender the answer of will the proeprty be sufficient security or not. Basic valuations conducted by the lender are generally free, however there are some lenders who may charge you for this.
2. A Home Buyer's Report: this type of valuation is more detailed and is designed to highlight key aspects of your home and indicate any faults that the property may have, so that you can take a well informed decision on whether you are to proceed with the purchase of the property or whether to ammend the offer you are making to the seller. This report will usually be made by the same valuer who carried out the basic valuation for the lender.
3. A Full Structural Survey: Is a fully detailed report on your property. This option compared to the other options is relatively expensive, however the positive thing about this method in comparison to the others is that it provides the most detailed report on the property you wish to buy. This method of valuation is usually carried out on properties that are of a considerable age or of an unusual design or construction.

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What is the cost of a valuation?

The cost to carry out a valuation on a property will usually differ from lender to lender. There are some mortgage lenders on the market who offer free basic valuations, however this usually is bundled up with higher lender fees. There are some lenders on the market who will make you pay for a basic valuation of your property and will thus charge you a lower lenders fee, there are also mortgage lenders who will pay for both a basic and homebuyer report.

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Which valuation method is best?

The answer to this question will depend entirely on your own circumstances, however Royal Institute of Chartered Surveyors recommends that as a home buyer you should at least consider the option of a Home Buyer’s Report.

What happens if the valuer finds faults with the property?

If after the valuation, your property is not satisfactory for your mortgage lender, then one of the following scenarios may apply:

1. You may have to put down a larger deposit payment.
2. In the case that the property is priced much higher than the valuation, then there are two options, one is to negotiate a lower price with the seller, or the other is in the case that the seller does not reduce the price, you may have to find other means to finance the gap.
3. The lender may be happy to lend to you, however the mortgage offer will be subject to what is known as an undertaking. This is usually if the property has faults the lender will require that you fix these within a given period of time.
4. If there are structural problems in the property, the lender may retain part of the mortgage advance payment until those aspects of your property have been repaired or improved.
5. If the property is an un-mortgageable property then the lender will not proceed with the lending process at all because your property is of a type that the mortgage lender will not or can not lend in any circumstances, due to mortgage lending policy .

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