What to expect from a lender valuation
- By: Ashley Saunders
- December 2020
For a lender to approve a mortgage, they’ll want to ensure that they are making a good financial decision. Part of this process involves a lender valuation, where a qualified surveyor inspects the property you’re hoping to buy.
The lender’s surveyor will confirm the property’s value, look for issues that may impact the future value and will check it’s a property they’ll lend against. The lender valuation is critical as it’s one of the last hurdles to complete before setting exchange and completion dates.
What is a lender valuation?
Covering two aspects, the lender valuation or mortgage valuation is an essential step in the mortgage application process and is carried out by a qualified surveyor.
Firstly, the surveyor will value the property based on their knowledge of the local area and other similar properties that have recently sold. This figure might be different from what you’ve agreed to purchase the property at, but is a fair market value for the property.
The second element is a condition report. As with the typical property survey that you might have had, this is a visual inspection. The surveyor will look for defects, potential problems and features that could affect the property’s value.
A lender will use this condition report to assess the risk in lending you the money to buy the property. You might have your mortgage application declined if this report uncovers a structural issue, the property is in a high-risk flood zone or above a shop or restaurant.
Does Scotland follow the same process?
If your buying in Scotland, the process is different as your mortgage lender may rely on a mortgage valuation arranged by the vendor rather than having an independent survey completed.
Who arranges it?
Each lender works with several surveyors and so will pick the nearest one to you to conduct the lender valuation. One instructed, the surveyor will compile their report within two weeks.
As the lender valuation is not the same as a full survey, it typically only 2 or 3 pages and is only designed to be seen by the lender.
Some lender will provide you with a copy when asked but they’re under no obligation to. That said, they will probably tell you if the survey reveals any serious issues.
As it’s not a detailed survey, it won’t provide you with a list of repairs or maintenance that is required. So you should purchase a survey as part of the buying process to ensure you are making a sound financial decision.
Will you have to pays for it?
While some lenders claim not to charge for the lender valuation, you will end up paying for it one way or another. Others will ask for it as part of the fees paid when applying for a mortgage.
A mortgage valuation can cost between £150 and £1,500 is usually based on the price of the property.
Mortgage valuations vs house surveys
It’s worth thinking of a survey as an insurance policy as it will highlight a range of issues with the property. So it’s worth paying for one on top of the mortgage or lender valuation survey.
As any major issues uncovered by the survey could impact the property’s value, you might want to renegotiate the price with the vendor or walk away as the property requires too much additional investment.
There are three surveys to choose from.
Aimed at conventional properties in reasonable condition, a HomeBuyer Report costs around £400. It will identify any structural problems, such as subsidence or damp. But is only a visual inspection and won’t look under floorboards or behind walls.
You will receive a detailed report with recommendations that will cover what repairs are necessary, along with approximate costs to fix them.
As the most comprehensive survey available, a building survey costs from £600. It’s much more thorough than a HomeBuyer Report and will flag internal and exterior problems. The surveyor will check the attic, under the eaves, and if needed, under the floorboards.
The report will give you a full breakdown of the structure and condition that it’s in. And so it extremely helpful if you’re buying a property that’s older, unusual or in poor condition as it will give you a clear picture of the works you’ll need to carry out.
Full building survey
This comprehensive report provides you with an in-depth analysis of the property’s condition. It includes advice on defects, repairs and maintenance options.
You’ll want a full building survey if you’re buying a property in poor condition, is older, larger or has had alterations. This survey is also useful if you are planning alterations.
Should I be worried about being ‘down valued’?
Uncertainty in the market causes surveyors to be more cautious when calculating values for a lender valuation. This can lead to properties being ‘down valued’, where the surveyor indicates in their report that the property is worth less than the agreed purchase price.
If a property is down valued, the lender may ask you for a larger deposit to maintain an appropriate level of risk. You can either accept this lower amount, try to re-negotiate a better price with the vendor or walk away and start the process again.
It’s therefore vitally important that you research the local market before making any offers to ensure your paying a fair market price and won’t get caught out later in the process during the lender valuation.