Paying for a survey is a ritual of property buying and often runs smooth, but what do you do when the survey reveals a problem?
You might think finding a house and agreeing a price is the difficult part – but in truth it’s just the beginning.
Next comes the survey. Buyers and sellers alike will be keeping their fingers crossed for the A-OK, but what if you’re told the price isn’t right?
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What can go wrong?
Banks and building societies are stumping up a fair whack of money for you to buy a home, so it stands to reason they would want to check it’s worth what you’ve agreed to pay, hence the need for a valuation. Unfortunately, sometimes the result is out-of-tune music to your ears.
The lender might tell you that the property isn’t worth the sum you were willing to pay. If that’s the case, it’s not going to give you the size of mortgage you want.
If you opt for a more thorough survey as opposed to the lender’s basic drive-by valuation, other problems may come to light that could affect your original offer. For example, the survey may point to serious repairs needed or any subsidence issues. If repairs are pressing and are likely to be costly, you might want to revise your offer and renegotiate a lower price.
Two sets of couples I know have had similar experiences with property valuations; one was told the property simply wasn’t worth so much. The other couple discovered the same but it was because of structural issues; a conservatory needed underpinning. Both found themselves in a tricky situation and their house buying dreams were put on hold.
Why does it happen?
Property prices are still falling in many areas of the country. Some sellers put their house on the market with an unrealistically high price.
Or the home may have lost value since they put it up for sale at the right price. This is more likely for homes that have been on the market for a long time.
Therefore a report might show a mismatch between the property’s offer price and its true value.
In other cases, any repairs needed are highlighted on a survey. This could happen where an older home has been neglected and is only worth the money other neighbouring homes are selling for if it’s brought up to scratch.
On the flip side, thorough surveys will detail every minor defect, which can look worrying when it needn’t be. Problems shouldn’t always be taken to mean that the property isn’t worth the price you’re paying, but if repairs are likely to be expensive you can try making a lower offer. If your lender is happy at least you know you’re in the right ballpark with your offer.
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No refunds
Most valuation and survey costs are non-refundable. However, Halifax announced last month that it would become the first lender to refund valuation fees if a sale collapsed.
Buyers must go on to take out a mortgage with the lender on another property to qualify for the money back though. Read more of the details in Halifax to refund valuation fees for failed house purchases.
What about ‘free’ valuations
Mortgages for both new buyers and existing owners switching deals often come with a free valuation as an added incentive.
A valuation advertised as free should stay so even if the deal collapses. But it’s likely that you will have paid an initial booking fee for a mortgage and that’s money lost unless you found a fee-free and free valuation deal, as offered by Clydesdale and Yorkshire Banks.
Any extra money paid for a HomeBuyer’s Report or a full structural survey will be lost. These surveys are far more detailed and are for your benefit over that of the bank or building society.
What can you do?
You have two real options. Renegotiate with the seller or walk away. Neither is easy.
If the property has been overvalued, approach the sellers to see if they will lower the price. Remember this isn’t you being cheeky – if they don’t lower the price, the bank won’t give you a home loan, simple as that.
They might decide to stay put instead of move, which is their prerogative, but there’s little hope of them finding another buyer happy to fill the funding gap with their own money. One of the couples I mentioned above successfully renegotiated and the seller agreed to take the hit. My friends got their keys and moved in last week.
The other couple were forced to walk away. They lost what they paid for the HomeBuyer’s Report, which is typically between £400 and £600 depending on the property. The scale of the repairs is more than they wanted to take on with their first home, so their search continues.
Use our mortgage comparison tool to find a home loan that’s right for you and get the ball rolling. You can also find more help in our property buying guide.
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At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.