When someone applies for a mortgage on a property, the lender will arrange a mortgage valuation to check whether that property’s value is sufficient to cover the loan requested by the applicant.
A mortgage valuation is based on a limited visual inspection of a property by a regulated RICS Registered Valuer. The inspection typically takes around 20 to 30 minutes, although there is significant additional research carried out before and after the site visit.
Many, but not all lenders provide a copy of the valuation report to their loan applicant as a courtesy. The valuation is however only for the lender’s purposes and should not be relied upon by anyone else.
The seller in a property sale transaction will not receive a copy of the mortgage valuation report.
Estate agent’s market appraisal
Who is it for?
The seller.
What are the features of a market appraisal?
An appraisal is assessment of a marketing/asking price completed by an estate agent. Estate agents will invite offers with marketing comments like ‘offers around’ etc.
It is not a legal valuation.
It is forward-looking and predicts where the property market is headed and what price could be achieved in the near future.
The estate agent is hoping to gain the seller as a customer. The appraisal is speculative and may be inflated to test the market.
Surveyor’s mortgage valuation
Who is it for?
The lender only.
What are the features of a mortgage valuation?
A mortgage valuation is a formal report completed by an RICS registered valuer. The valuer’s principal aim is to provide an accurate valuation.
The report is a legally binding document.
It is reached by comparing the sales of similar properties, in the same or local area, in recent months.
Mortgage lenders use it to assess their lending risk as the mortgage is tied to a property. Therefore, the bank demands an evidence-based approach from the surveyor.
If the surveyor’s mortgage valuation is less than the applicant’s expectation, then some people outside of the valuation profession may call this a ‘down valuation’. In this instance a mortgage might only proceed if the applicant has the extra funding to make up the difference.
However, in reality this should not be called a ‘down-valuation’. What is being described here is the difference between the application estimate or agreed purchase price (which reflects what the seller and buyer have agreed the property is worth to them) and the market value (which is based on comparable evidence from other recent transactions on similar properties in the area).
Valuations can be challenging when house prices and transaction levels are falling or rising at a faster rate than usual. When the market is like this, surveyors can sometimes be perceived as being too cautious.
Many assume that when surveyors provide valuations which are lower than expected, they are just trying to avoid negative consequences from the lender clients. This is not the case. The surveyor’s principal aim is to provide an accurate valuation based on current market conditions and to fulfil the legal terms of their instruction.
However, it is important to recognise that in most circumstances SDL’s client is the bank or building society. It is not the seller, or even the person taking the mortgage.
If a valuation fee is charged, this is the applicant’s contribution to the cost of the lender obtaining a valuation service from SDL for the lender’s own purposes and is not an implied contract between mortgage applicant and SDL.
The lender is asking SDL Surveying to provide them with our opinion of the market value of the property to assess their lending risk, and to help safeguard themselves from any loss that may be incurred if they lend too much against an individual property.
Please note, we are legally restricted in discussing certain elements of the mortgage valuation report with other parties, including the mortgage applicant, the mortgage broker, the vendor, and the agent in a sales transaction. This is because the lender is our sole client, and no other third party.
If you have a complaint relating to our customer service, please:
A mortgage valuation is not detailed enough to inform you about the condition of the property you are purchasing.
A mortgage valuation tells you little about the building’s state of repair, and it won’t necessarily point out structural problems that you may have to pay to fix further down the line. What’s more, you may not even receive a copy of a report or be party to advice contained within it.
We recommend that you should always commission your own independent home survey. This type of survey will help you to: understand the property’s state of repair, avoid expensive surprises down the line, and potentially re-negotiate the sale price so that it fairly reflects the cost of necessary repairs.
