Before making an offer on a property in Scotland or before exchanging contracts in the rest of the UK, it’s important to have a survey, although over half of all buyers rely on a basic valuation.
This can be extremely risky, particularly when you consider that around one in five properties are found by surveyors to have major faults, such as damp, dry rot or insect infestations. Serious defects are more likely in old buildings, although they are sometimes found in properties less than ten years old. It’s false economy and a huge gamble to buy an old property without having a survey.
If a survey reveals any problems they can usually be used as a bargaining tool to justify a lower price. A property vendor doesn’t need to inform prospective buyers of any defects that might exist, although there are plans to include a survey as part of a new ‘home information pack’ designed to speed up the buying process and reduce gazumping.
There are three levels of property inspections carried out by surveyors: a valuation, a homebuyer report and a full structural survey (described in detail below). Which one you choose usually depends on the age and type of property you’re buying. If it’s a relatively new home of standard construction, a valuation will probably suffice, particularly if it’s still covered by the builder’s warranty.
However, if you’re in doubt about the condition you should have a more thorough survey carried out, particularly if it’s over 50 years old, when you should have a full structural survey. An old home can have a variety of problems such as dry rot, rising damp, woodworm or other infestations, a leaking roof, rotten window frames, frost damage to stone and brickwork, subsidence or land-slip, rusty pipes and gutters, poor electrical and plumbing installations, and poor insulation. If new windows (e.g. double-glazing), central heating, re-wiring or re-plumbing are required it will be expensive and should be reflected in (or deducted from) the asking price.
Surveys should be carried out only by a qualified surveyor, who should be a member of the Royal Institute of Chartered Surveyors (RICS), which now incorporates the Institute of Surveyors and Valuers (ISVA), or the Royal Institute of Chartered Surveyors in Scotland (RICSS). Members of these organisations have professional indemnity insurance, which means that you can happily sue them if they do a bad job! Most good surveyors will also have an ISO 9002 certification, which is an independent verification of the quality of their services.
Tip: In Scotland you should have a valuation or survey before making an offer, which will help you determine how much to bid.
Put instructions in writing and include anything you particularly want inspected, plus details of any major work that you’re planning to have done. Check what you will receive for your money and obtain a written estimate including VAT and all expenses. It’s important to find a surveyor you can trust to do a good job, as a bad survey can be just as expensive as none at all (as some buyers have found to their cost). A home inspection can be restricted to a few items or even a single system only, such as the wiring or plumbing in an old house. If you want an inspection of an unusual property, such as a thatched cottage or period home, you should choose a surveyor with experience of these.
Lenders insist on a valuation before approving a loan, although this usually consists of a perfunctory check to confirm that a property is worth the purchase price. The valuation takes into account a property’s age, condition, area and the price of similar properties locally. Although it’s carried out by a qualified surveyor, it’s merely a cautious assessment of the value of a property and not a survey.
If you’re obtaining a loan to purchase a property, your lender must be satisfied that the property provides sufficient security for the loan, and he will therefore carry out an independent valuation, which you must usually pay for (whether or not you go through with the purchase). The cost (which may be refunded when the mortgage is finalised) varies depending on the lender and the value of the property.
It’s a gamble to rely on a valuation report as it’s no guarantee that a property is structurally sound. You may be able to combine a homebuyer report or full structural survey with your lender’s valuation, which should save you money, although you may prefer to use a surveyor who has been personally recommended or who you’ve used before.
If your lender’s valuation is less than the asking price, you may have to pull out of the deal if you cannot get the seller to reduce the price or raise more cash.
A homebuyer report (or homebuyer survey and valuation report/HSV) is a concise report on the condition of a property, together with a valuation. In addition to a mortgage valuation, it includes the current open market value and an opinion of how saleable the property will be in future. Any major defects in the property will be listed, along with recommendations about further investigations required.
The property will be inspected only where it’s reasonably accessible or visible and no test is made of the plumbing, heating, electrical or drainage systems (etc.).
It’s recommended for conventional houses and apartments that appear to be in a reasonable condition. A homebuyer report isn’t usually considered adequate for large houses over say 2,000ft2 (around 200m2), old properties (say pre-1940), and converted or purpose-built apartments.
Bear in mind that a homebuyer report isn’t much cheaper than a full structural survey and therefore, unless you have a good reason not to, you should consider having a full structural survey.
If you combine a homebuyer report with a lender’s valuation, which is refunded by your lender, you only pay the difference between the cost of the valuation and the homebuyer report. The cost of a homebuyer report varies depending on the value, age and condition of a property.
Around one in four property buyers has a full structural survey, which is usually tailored to individual requirements and is particularly suited to larger, older (e.g. over 50 years old), more complex properties, which may be outside the scope of a homebuyer report. This includes property over three stories in height, buildings of unusual construction (thatched, timber, etc.) and when you’re planning to carry out major alterations such as extending or converting a property.
Some people delay having a full structural survey done until both parties are ready to exchange contracts, as it’s expensive having a report done for every house you’re interested in. The surveyor will examine everything that’s reasonably visible, in addition to reporting on the construction and condition of a property. A structural survey includes the structural condition of all buildings, particularly the foundations, roofs, walls and woodwork; plumbing, electricity and heating systems; and anything else you want inspected.
Discuss with the surveyor exactly what will be included in a survey, and most importantly, what will be excluded. You may need to pay extra to include certain checks and tests, such as an environmental survey and an energy efficiency rating. The surveyor will also advise on any repair costs and the suitability of proposed improvements or extensions you plan to make. Although the scope of a full structural survey is greater than a valuation or homebuyer report, there will still be some inaccessible parts of the structure and limitations.
If you want a detailed survey, make sure that the vendor will allow your surveyor free access to the property, e.g. to the roof space (loft), and allow him to pull up carpets to examine floorboards. You will receive a written report on the structural condition of a property, including anything that could become a problem in the future. Some surveyors will allow you to accompany them and they may produce a video of their findings in addition to a written report.
It’s important to find out what the land a house is built on (and any land that comes with it) was previously used for, as some homes have been built on unsafe sites such as rubbish tips or chemical factories. You should also check what’s in the ground (e.g. radon gas) and what’s under it (e.g. an old mineshaft). Many houses in the UK are built on clay, which is prone to shrinking in prolonged hot weather, resulting in houses literally cracking up (usually due to inadequate foundations). If this isn’t visible to the eye as cracked walls, ceilings or floors, a structural survey should reveal whether there’s a problem. You should also have a house checked for termites and other pests, which are common in some areas. Your surveyor should also note any trees near to a house which may have caused (or could cause) structural problems, either due to damage caused by their roots or drying the soil which can lead to subsidence.
The cost of a full structural report depends on the value, size, age and condition of a property, and can vary considerably. You should shop around and obtain a few quotes (you may be able to negotiate a lower price).
Sometimes the valuation or surveyor’s report shows that a property is in poor condition or that there are structural faults or other problems such as dry rot, woodworm or rising damp. If the poor condition isn’t already reflected in the asking price, you should negotiate a reduction to cover the cost of repairs or renovation. If a property needs work doing on it, you should obtain a quotation in writing from a local builder or specialist.
A lender may refuse to provide a mortgage on a property in poor condition or may insist that certain work is carried out before a mortgage is approved.
Don’t be put off too much by problems brought to light by a survey, but check what they would cost to rectify. You may find that other prospective buyers are scared off by problems and that you can negotiate a good reduction for the necessary work. If a property needs renovating, arrange for a builder to inspect the property and give you a quotation (add another 25 per cent for safety). If you’re buying as an investment and plan to sell a house after doing it up, you need to know how much each job will add to the value of the property in order not to waste money doing non-essential work that adds little or no value.
When buying a rural property you may be able to negotiate the amount of land to be included in the purchase. If you’re buying a property with a large plot of land or a property that’s part of a larger plot of land owned by the vendor, the boundaries should be redrawn. You should engage a surveyor to measure the land and draw up a new plan, which must be registered with the Land Registry. You should also check with the Land Registry to find out what the land can be used for and whether there are any existing rights of way.
Bear in mind that many surveyors miss problems or include non-existent problems and recommend unnecessary specialists. Many surveys are hedged with get-out clauses that try to limit the surveyor’s liability.
Tip: If your new home turns out to have damp or dry rot or to be infested with death-watch beetles, which your surveyor has failed to discover, you can usually successfully sue him for damages – especially if you’ve given him written instructions in respect of these and other possible problem areas (always advisable).
Complaints should be made in the first instance to your surveyor or his professional body . Members of the RICS have an in-house complaints’ procedure and also have compulsory arbitration schemes in the event of a dispute.
This article is an extract from Buying, selling & letting property (UK). Click here to get a copy now.