Choosing An Estate Agent

Mortgage Valuations: What Are They And Do I Need One?

Mortgage valuations are standard procedure when buying property. But their purpose can be confusing and can cause buyers to question aspects of the process. This post aims to address those queries for you along with help Choosing an estate agent.

What Is A Mortgage Valuation?

Sometimes referred to as valuation surveys, mortgage valuations are essentially conducted purely for the benefit of your lender. The reason they are done is simple: lenders want to be certain that the money they lend you is going towards a worthwhile investment. Your property must provide them with the security they require to justify the loan.

Mortgage valuations help lenders ascertain whether or not the price being asked for the property is accurate. However, the extent of the 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 they are 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. 

In short: 

  • 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, there are instances where 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, which may or may not be carried out 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 lenders. Such cost-cutting allows lenders to offer free mortgage valuations as an enticement to prospective clients, so there are benefits to all concerned. Discuss this when you are Choosing an estate agent.

What Is Considered In A Mortgage Valuation?

If your lender requires a physical inspection of the property by the surveyor, you might be wondering what exactly they are going to look at and what might be flagged?

Here are a few things that may be noted:

  • Damp
  • 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 are now offering 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 the 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. Choosing an estate agent is a very important step.

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. 

Choosing An Estate Agent

Regardless of which side of the transaction you are on, Compare Agents can help you choosing an estate agent. We analyse the performance of every active estate agent in the UK and using basic information about your home, we provide you with a list of agents that cover your postcode and how they perform against each other.

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