About the Valuation
The valuation is compulsory. It is a basic check of the property so that the mortgage lender can be sure it’s worth what you’re borrowing.
This means their loan is secure ie if you default on the loan they can recoup their money by selling it.
While the valuation benefits the lender you will probably have to pay for it. (See below re Free Valuations)
The property is valued by it’s physical condition being checked over.
It’s market value is also estimated by comparing it to a “scale” of the prices of other similar houses in the area which have sold recently.
In this way it can be a useful guide to you in making your offer
Besides getting the condition of a property wrong a bad valuation would be where the value is miscalculated.
This could be a serious problem, say, if a house is priced at £100,000 and the valuation is £80,000. This is because the mortgage lender would only want to lend you – say – 75% of £80,000 (ie £60,000).
You, the buyer, would have to find the extra £40,000 and the sale would probably be ruined – unless the sellers agreed to drop their price.
There is a suspicion that it’s in the interests of lenders to deliberately undervalue the house ie if it’s true value is higher then their loan is that much safer.
Local surveyors are said to produce the most accurate valuations because they know their area intimately.
However, sadly, some mortgage lenders may insist on you using big firms of valuers, who they have a special arrangement with, and who cover large areas.
Besides being less personal – unlike the “family business / good service” feeling that you’re likely to get from a local surveyor – they’re not as darn good!
They’re also more likely to have a good old British “nod and a wink” agreement with their client – the mortgage lender – to deliberately undervalue the property.
If you feel your prospective house has been undervalued
You can go to another lender and pay for another valuation – and keep on doing so until you get a valuation in line with the sale price.
Arguably you could then complain that the other valuation(s) were wrong and get the money you paid for them reimbursed.
If this is the case for you complain to the lender. But make sure they have actually given you a copy or full details of the valuation so you have something to go on.
Until recently mortgage lenders didn’t have to do this and some may “overlook” it – despite the fact that you, the buyer, paid for it.
While the valuation may not cover you fully for any serious structural problems that emerge after you’ve bought the house, contrary to a common misconception, you can make a claim if it was badly done.
It could be a serious matter further down the line so make sure you keep a copy of the valuation.
Finding Your Valuer
The Mortgage Lender may have their own “panel” of Surveyors to choose from or you can probably choose one locally.
The more local the valuer is the better. Go for a long established firm. The Estate Agents may be able to give you some names. (You’re looking for a Chartered Surveyor).
You pay approx £150 plus for the valuation but it’s really in the mortgage lender’s interests.
Perhaps because they recognise this basic unfairness, a number of Mortgage lenders are now offering free valuations.
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