£86,000 house valued at £1

Don't let this housing horror happen to you!

Hallowe’en came early for one homeowner in Durham this week when Nationwide told him the house he had paid £86,000 in 2007 was worth just £1.

That’s right: £1. For a property his tenants are paying £550 a month to rent – and that he’d just spent £10,000 renovating. Forget Freddy Kreuger horror films, this is every homeowner’s worst nightmare (on any street).

You can see a picture of it here. It’s not exactly falling down around his ears, is it?

So what’s the problem? Well, according to the property survey carried out for Nationwide, the property seems to be suffering from damp and rot, and there are concerns about the stability of the roof.

The ridiculous £1 price tag is apparently a standard valuation applied by Nationwide’s surveyors when a property is unsuitable for the lender to lend on.

While this is clearly an extreme example, it does serve as a useful reminder of just how important it is to do your homework in the today’s post-credit crunch mortgage market.

Here’s our step-by-step guide to making sure you don’t get landed with a home from hell!

Don’t rely on a valuation report

Homebuyers often rely on their mortgage lender's basic valuation report on the assumption that if the mortgage company is prepared to lend money on it, then the house must be okay. But the only thing the lender is interested in is whether they'll get their money back by selling the property if you default on the loan.

Their valuation report won't tell you about any potential structural problems or even whether the house is worth the price you've offered. The only thing it'll tell you is that it's worth at least the value of the mortgage you're taking out. In reality, it isn't even really a survey.

So it's important to employ a professional to inspect the property thoroughly. There are two types of survey:

Homebuyer's Report

This sort of intermediate survey is fine for houses that are less than 100 years old, that are fairly conventionally built and that show no alarming-looking cracks that might require the services of a structural engineer to check it isn't going to fall down around your ears.

Surveyors will check for any major and minor defects including visible damp, woodworm, roof and rot problems, what the implications are for the value of the property and the potential cost of repairs, and whether any more specialised inspections ought to be carried out.

At the very least it will enable you to make a decision about whether you're happy to pay the purchase price and whether you want, or can afford, to deal with any necessary work on the property after you've bought it.

Full Structural Survey

This kind of survey is essential if you're buying a house that is more than 100 years old -- a recent study from Lloyds TSB Insurance found that Victorian and Edwardian properties are three times more likely to suffer from dry rot, four times more likely to experience subsidence and five times more likely to have issues with rising damp.

As a consequence, occupants face an annual upkeep bill of £3,800 - nearly double the £2,040 maintenance costs of newer properties.

What’s more, the downturn may have caused financially stretched homeowners to put off this essential upkeep, resulting in a backlog of over 18 million maintenance problems.

Check out this table showing the number of Victorian homes believed to be in severe disrepair:

Region	Number of Victorian Homes	Number of owners who have put off repairs	Number of Victorian Homes in severe disrepair
UK	4.9 million	1.96 million	631,000
East Midlands	342,000	136,800	68,400
West Midlands	228,000	91,200	45,600
South East	537,000	214,800	80,550
South West	391,000	156,400	58,650
London	928,000	371,200	102,000
East of England	439,000	175,600	65,850
North East	244,000	97,600	21,960
North West	521,000	208,400	46,890
Yorkshire and Humber	602,000	240,800	54,000
Wales	327,000	130,800	42,510
Scotland	342,000	136,800	44,460

Source: Lloyds TSB Insurance plc

A full survey is also important for homes of unusual construction or which are so dilapidated that there could be myriad problems lurking beneath the floorboards or behind the walls. It should also uncover any botched building work carried out by previous owners!

It is particularly important to pay for this sort of survey before you buy if you have notice any strange smells (a sign of damp) when you view the property. Similarly, watch out for cracks in internal plasterwork or external brickwork, doors or windows sticking for no particular reason or rippling wallpaper (a sign of subsidence). And if it looks like a tree has been removed recently or there are small round marks in a wall near the ground, that’s a sign the property may have received subsidence or damp treatment.

Watch out for invisible problems

Finally, be aware that there are other ‘invisible’ reasons not to buy a property, such as noisy neighbours or crime. Speak to the neighbours on both sides and on the opposite side of the street both to get an honest view of the area (the seller is likely to be biased) and to find out if there are any potential conflicts you are about to step into the middle of.

Rogue traders can turn your dream home into a nightmare. Make sure you don’t get caught out.

And that’s not all you need to be worried about. Read The 12 biggest property blunders to find out how to avoid other potentially hazardous mistakes when buying a property.

Speak up!

Whatever housing horror you’re afraid of, don’t be afraid to speak up about your concerns to your lawyer and your surveyor. Make sure that both are specifically asked to check them out – that is their job, after all.

Yes, this could potentially add a few hundred quid to your homebuying bill, but it could also stop you from making a very expensive mistake indeed.