0:01 AM, 11th October 2024, About a month ago
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When starting out as a property investor, one of the most important things to understand is the difference between a mortgage lender’s valuation and a survey.
Surveys are essential for identifying issues that could become costly repairs or complications down the line. Yet, many new investors overlook this step, believing it’s an unnecessary expense, or they rely on a mortgage valuation, which is far from comprehensive. Let’s break down the different types of surveys and why they matter for different property types.
Why Get a Survey?
Imagine buying a car worth £30,000. The dealer offers to have it fully inspected for £350, highlighting any problems so you can negotiate the price before you hand over the money. You wouldn’t hesitate to take the offer, right? Now, think about a property purchase in the same way. You’re about to invest hundreds of thousands of pounds in a property, so why wouldn’t you want the same level of reassurance? A survey is a small price to pay for peace of mind and the security of knowing you’re making a sound investment.
Types of Surveys
There are several types of surveys available, each tailored to different types of properties and offering varying levels of detail. Here’s a breakdown of the most common ones:
This is often the first point of contact investors have with any kind of survey, but it’s important to note that a mortgage valuation is not a survey at all. A mortgage valuation is arranged by the lender to ensure the property’s value matches the agreed purchase price. The purpose is to protect the lender’s interest, not yours. It simply verifies whether the property is worth the loan amount, and the report will only flag major red flags that could affect resale value. The valuation doesn’t cover the condition of the property in detail, so it’s not enough for you to rely on as an investor.
A step up from a mortgage valuation, the RICS Condition Report offers a basic review of the property’s condition. It’s presented in a traffic light system:
However, this survey doesn’t provide a valuation and offers only basic descriptions of any defects. It’s suitable for newer properties that are in good condition.
One of the most popular surveys among buy-to-let investors, the RICS Homebuyer’s Report provides a more detailed look at the property. It covers areas like damp, rot, subsidence, structural issues, and more. It’s non-intrusive, meaning the surveyor won’t lift carpets or drill into walls, but it still gives a thorough overview of the property’s condition.
You can also opt for this report with a valuation included. The added valuation takes into account any issues raised, giving you leverage to negotiate on price. This report is ideal for standard properties in reasonable condition.
The Home Condition Survey is slightly different as it’s produced by the Residential Property Surveyors Association (RPSA), not RICS. This survey is more detailed than the Homebuyer’s Report, including colour-coded sections and photographs of the issues. It even covers extra information, like the property’s boundaries and broadband speed. However, it doesn’t come with a valuation. This is a good option for properties of standard construction that are in relatively good condition.
The most in-depth survey available, the RICS Building Survey, is intrusive and provides a detailed analysis of the property’s structure. The surveyor will lift carpets, drill into walls, and inspect every nook and cranny. The report outlines the severity of any issues on a scale from 1 to 3 and provides guidance on repairs and timelines.
This survey is suited for older properties or those that require major renovations. It doesn’t come with a valuation, but it offers comprehensive peace of mind and can save you thousands in unexpected repairs later on.
Choosing the Right Survey
Your choice of survey depends on the type and condition of the property you’re buying. For newer, well-maintained properties, a RICS Condition Report or Homebuyer’s Report might be enough. For older properties or those in need of renovation, a more detailed Building Survey will be necessary.
I always recommend at least getting a Homebuyer’s Report, even for properties that seem in good condition. This type of survey offers a balance between cost and detail, providing a comprehensive view of the property’s condition along with the opportunity to renegotiate if issues are discovered.
Why Relying on a Mortgage Valuation is a Risk
A common mistake among new investors is assuming the mortgage valuation is enough. Remember, the lender’s valuation is for their benefit, not yours. They are only interested in ensuring the property is worth the loan amount, and they won’t provide you with a detailed list of problems or repairs that need addressing.
If you rely solely on the lender’s valuation, you could be walking into a property with significant issues that won’t surface until after the sale is complete. By then, you’ll be the one footing the bill for costly repairs.
Final Thoughts
Surveys may feel like an additional cost during what is already an expensive process, but they can save you thousands in the long run. Whether it’s to negotiate a better price, avoid a money pit, or simply ensure you’re making a sound investment, a survey provides essential information. Always get a survey—it’s one of the best ways to mitigate risk and protect your investment as a new property investor.
Shop around for surveyors, as prices and services can vary. Make sure you’re getting the right advice and report for the property you’re looking to buy.
Get Started with Confidence
If you’re just getting started in property investing and want to ensure you avoid common, costly mistakes, check out my Buy To Let Blueprint online course. It guides you through every step of purchasing a safe and profitable buy-to-let investment property. You can learn more about my course here.
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