Mortgage valuation survey – what do they look for

A Guide to Mortgage Valuation Surveys

If you are planning to purchase a property and apply for a mortgage, the mortgage lender will carry out a valuation survey or mortgage valuation to check that the property is worth the price that you are planning to pay for it. A mortgage lender may also need to perform a valuation survey on your property if you are planning to re-mortgage your current home, to check that the house is worth the amount that you have stated on the application.

What is a Mortgage Survey?

A mortgage survey or valuation is for the lender’s benefit. It is purely to check whether the property is worth the asking price and has a limited scope. It is designed to only provide information to the bank or lender to help them understand whether or not the property is worth enough to act as viable security for the mortgage amount that you have applied for. However, a mortgage valuation can also benefit you as the buyer since it can provide you with an idea of whether you might be potentially paying too much or too little for your new home.

Mortgage Survey Definition – How Does a Mortgage Valuation Work?

Lenders will conduct mortgage surveys in a variety of different ways. Traditionally, a surveyor will visit the property to inspect it and put together a short report, however, surveyors today are more likely to determine the value of your property using recent online sales data and taking a quick look at the property from the road in some cases. It is not always possible to predict which type of survey your property will be given.

 

Reasons for a Physical Mortgage Property Survey:

The type of survey that your home is given will depend on the lender’s risk appetite. There are many factors that go into determining whether your property should be physically surveyed, including the construction and type of property and whether there is anything that could cause lending issues. For example, if you are planning to purchase a property that is constructed using non-standard materials, the lender will be more likely to instruct the surveyor to visit it in person. Additionally, a physical visit might also be arranged if the lender has not lent in this area before, or if there is not enough information about the property online to compile the report.

However, it is less likely that your property will get an in-person visit since high street lenders in particular have access to a lot of online information that they can use to assess the suitability of a property for the mortgage, which has led to more lenders offering free valuations.

Regardless of whether the valuation is conducted in person or online, the lender will take the surveyors’ professional opinion of the property’s value into account when making a final decision on the mortgage that it will offer you.

What Does a Mortgage Surveyor Look For?

If the surveyor visits in person, they will take around 15-30 minutes to take a look around the property for any obvious problems or defects that could have an impact on its value. They will also confirm key details of the property for the lender. After visiting, they will make an assessment of the market value of the property by looking at three sales transactions on similar property types in the local area and take the supply and demand of the local market into account. The surveyor may also provide the mortgage lender with a figure for minimum reinstatement, which is the estimated cost of rebuilding the property from the ground up.

If the mortgage lender does not think that there is going to be much risk involved in lending for the property, they may instruct the surveyor to conduct a desk-based or drive-by valuation, or both. A desk-based valuation will involve the surveyor analysing local house price data along with an algorithm that provides an automated valuation of the home. In a drive-by valuation, the surveyor will drive past the property to take a look at the exterior but will not enter the building. This is often the case when a surveyor has enough information on a property to make an informed decision on its value but wants to check the general condition beforehand.

Mortgage Property Survey vs. House Survey:

A mortgage valuation survey is not the same as a house survey, and you shouldn’t rely on one to confirm whether or not the property is in good enough condition for you to purchase it. Since it is a short visit for the benefit of the lender and may not always involve a surveyor visiting the property, it cannot be used to determine if there are any serious structural issues with the home or costly problems such as damp or dry rot.

You will need to arrange for your own surveyor to carry out a home buyer’s report or a full structural survey on the home along with the mortgage valuation. These surveys are much more intensive and are designed to alert you to any potential problems or defects that are present in a property before you make the decision to buy it. Some home buyer’s reports will also include a mortgage valuation, however, it’s important to check that the survey is accepted by your lender or you may be left paying for two valuations.

How Much Does a Mortgage Survey Cost?

A mortgage valuation will typically cost between £150 and £1,500 depending on the size and value of the home. However, many lenders will offer a valuation for free to entice new customers. The cost of the mortgage valuation will usually depend on the property’s asking price.

How Long After Survey Mortgage Offer?

After carrying out the mortgage survey, the surveyor will provide your mortgage lender with their opinion on the property’s value. If the surveyor is in agreement with the asking price or the re-mortgaging price of the property, your lender is likely to offer you the mortgage that you have applied for.

On the other hand, if the surveyor is of the opinion that the price is higher than the property is actually worth, you may get a down valuation. This could lead to the bank providing you with a revised mortgage offer, which can affect the purchase or re-mortgage.

A down valuation occurs when the surveyor decides that the property is worth less than the asking price or agreed sale price. This could ruin the deal by leaving you with a shortfall unless the seller is willing to lower the asking price to reflect the surveyor’s valuation of the home.

Mortgage Valuation Survey: What Do They Look for and How to Avoid a Down Valuation

As many as one in five homes in the UK are down valued by lenders, so it’s important to understand what the lender is looking for in the valuation survey and know how to avoid this from happening to you.

To avoid down valuation when selling or buying a home, you can do the following:

Get an Expert Opinion:

If you are planning to sell your home, it’s a good idea to get several local estate agents who have recently sold similar properties to come and value your home. They will not only look at the condition of the property but can also take local market activity into account to give you a suggested price.

Research the Value of the Property:

Spend some time researching the value of the property that you want to buy or sell. Take some time to look at how much similar properties in the area have sold for over the past few months to get an idea of a realistic price.

Ask Your Lender:

If you are selling a property, you can ask your lender to check the property value that they currently have on file, which can be used to guide your decision when it comes to determining an asking price for your home.

Find the Right Mortgage Lender:

If you are a buyer and you want to purchase a property that is unusual or has a higher risk compared to others, it’s a good idea to seek out a mortgage lender that specialises and has a lot of experience in the type of property that you plan to buy. A mortgage broker will have access to every available mortgage deal and will make it easier for you to find lenders that are more likely to agree to a loan for the type of property that you want to purchase.

Make a Realistic Offer:

When buying, it’s important to do your research and make a realistic offer on a property. If you have seen similar properties in the area sell for less, don’t be afraid to make a lower offer, as this could save you a lot of trouble in the future if the house is down valued.

A mortgage valuation survey is carried out for your lender to ensure that the property is worth the amount you’re going to pay for it. While it’s important to have one carried out, it shouldn’t replace a home survey.