Kingston Property Experts: Unlocking the Mystery of Mortgage Valuations: Everything You Need to Know!

A Blog by Nub News sponsor and local property experts Bartlett and Partners

By Eli Haidari

20th Jun 2023 | Property News

A Blog by Nub News sponsor and local property experts Bartlett and Partners
A Blog by Nub News sponsor and local property experts Bartlett and Partners

A Blog by Nub News sponsor and local property experts Bartlett and Partners

What is a mortgage valuation?

Mortgage valuations, also known as valuation surveys, are solely done for the benefit of your lender. The idea is simple: they want to make sure the money they're lending is going towards a good investment, one that'll give them the security they need to justify the loan.

The survey helps lenders check if the property's price is right, but it's a pretty limited assessment.

What's the difference between a mortgage valuation and a house survey?

Mortgage valuations differ from house surveys in their purpose and scope. While valuations are conducted for the benefit of lenders, surveys are for the purchasers. The cost of mortgage valuations may be borne by the borrower, but the results are only used by the lender to inform loan decisions.

Homebuyer's reports and building surveys provide a more comprehensive view of the property condition than a valuation survey. They uncover potential defects that a valuation may miss, giving buyers peace of mind about their investment.

Do you need both a mortgage valuation and a house survey?

In most cases, obtaining both a mortgage valuation and a house survey is advisable. Unless you are purchasing without mortgage finance, you can't proceed without the valuation taking place. Whilst the addition of the house survey will include significantly more information.

Occasionally, a home buyer's report may incorporate a valuation, too. However, this comes with a caveat, as many lenders may not accept it. For this reason, it's important to check the small print. This is particularly crucial when the addition of a valuation to the home buyer's report necessitates an additional fee as it often does.

How are mortgage valuations conducted?

Your lender will send a surveyor for a mortgage valuation, but there's no guarantee they'll inspect the property. The decision may depend on several factors that differ between lenders.

Drive-by valuations are now common; some won't even involve a physical inspection. Surveyors are analysing data points instead; these include the lender's house price statistics and Land Registry data. Then, an Automated Valuation Model (AVM) is used to evaluate the property value.

Surveyors cut their fees by avoiding physical inspections. That's how lenders can offer free mortgage valuations to lure in buyers. It's a win-win situation where everyone gets perks.

What is surveyed during a mortgage valuation? 

So, if your lender is asking for a physical inspection of your property by a surveyor, you might be wondering what exactly they're going to look at, right? We've already figured out that these valuations are limited in scope, so what could potentially be a red flag?

  • Damp
  • External cladding
  • Suspicion of structural movement
  • Unclear lease terms
  • If the surveyor suspects non-standard construction

What does a mortgage valuation tell you?

As a buyer, you should not expect much information from mortgage valuations. They mainly help the lender assess whether the property serves as appropriate security against the loan request. Additionally, at times, you may not see the final report, as the surveyor usually informs the lender of their discoveries without involving the buyer. This will remain true even if you paid for the valuation yourself!

Will I be charged for a mortgage valuation? 

When it comes to paying for a mortgage valuation, you might wonder if it's fair for lenders to charge you for something that mostly just benefits them (we get where you're coming from!) The good news is, many lenders are now offering free valuations to entice borrowers like you. But keep in mind that there are still some that charge, usually ranging from £250 to £1,500 depending on the property being surveyed. Just something to keep in mind!

What happens once the mortgage valuation has been conducted?

Once the surveyor has carried out the mortgage valuation they will then 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 they are going to grant you a mortgage offer. In most cases, this will almost be a formality.

For those whose valuation falls short of the agreed price, you may receive what is known as a 'down-valuation'.

What happens if the mortgage valuation doesn't align with the purchase price?

As we touched upon above, if the mortgage valuation is lower than the agreed sale price this could result in a down-valuation. Unfortunately this rarely benefits either buyer or seller;

If you're selling, a down valuation could set you back to square one. Even if things go relatively well, you're still likely to have to accept less than your asking price to keep the sale going. It's not exactly a pleasant scenario to contemplate.

Buyers may expect a better deal if the property is down-valued, however, this is not always the case. The seller may refuse to negotiate and insist on selling at the initial valuation. In these situations, you may need to find a cash difference to proceed, which is understandably not always possible. Unfortunately, this puts the purchase in jeopardy and may result in the transaction falling apart.

Are down valuations common?

Down valuations appear to be increasing, but getting reliable figures from lenders is difficult as they consider such information commercially sensitive and do not usually share accurate data on the subject. It's essential to bear in mind that mortgage valuations benefit the lender, not the buyer. Therefore, if the surveyor believes the property is overpriced, it's their responsibility to report those findings honestly.

Keep in mind that setting the asking price is different. Estate agents work to provide realistic estimates to sellers, but they use different criteria than surveyors. Also, agents face pressure from vendors to secure the best price, which can result in aspirational asking prices instead of realistic ones. Market appraisals can sometimes result in asking prices that differ from a surveyor's view.

Regardless of which side of the buyer/seller fence you are on, we can help advise on sailing through the choppy waters of moving home. With a combined local experience of 35 years, there isn't much that we at Bartlett & Partners wont have successfully navigated. We would love to hear from you if you are thinking of a move.


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