Who is at fault?
Is it the fault of the agent, for overvaluing, or the surveyors for undervaluing? Or, alternatively, are both parties to blame in equal measure? Some say surveyors are being too cautious with their valuations, while others say agents are overvaluing to win instructions and secure stock.
Either way, it’s causing aggravation, with banks and building societies refusing to lend on approximately one in five properties because they have been down-valued by their surveyors.
Recent Which? research showed that one in five properties also had to drop in price eventually due to difficulties selling, leading to unhappy vendors who have been given one price by their agent and end up having to settle for a lower one to get their home sold.
In some cases, chains are breaking up and sales falling apart because the agent and surveyor valuations aren’t adding up.
Part of the reason for the confusion may be the fact that more than one valuation is carried out, with mortgage lenders, estate agents and Chartered Surveyors all giving separate valuations. While an estate agent valuation is for the benefit of the buyer and seller, a mortgage valuation is used to confirm to a lender how much a property is worth and whether the mortgage on said property would be secure, focusing most on the parts of a property that are likely to impact on its long-term value.
A mortgage valuation usually lasts for around 20 minutes and the report is generally for the lender’s eyes only.
It’s also important to emphasise here that a mortgage valuation and a house survey are not the same thing. A house survey, carried out by an independent Chartered Surveyor, provides far more comprehensive information and detail about the condition of a property than a mortgage valuation.
Previously, we’ve taken a closer look at the differences between a house survey and a mortgage valuation, and why it pays for buyers to not rely exclusively on a mortgage valuation when buying a home.
The different valuations available
As well as estate agent and mortgage valuations, valuations are also provided by Chartered Surveyors in the form of the RICS HomeBuyer Report in England & Wales and the Home Report in Scotland.
First introduced in 2009, the HomeBuyer Report offers a more in-depth account of the condition of a property and helps buyers to decide whether or not they want to go ahead with the purchase. In 2016, RICS split the HomeBuyer Report in two to give buyers different options – the traditional report with valuation was joined by one without valuation and reinstatement costs.
In effect, the new report offers exactly the same as the standard HomeBuyer Report, just without the valuation part.
The HomeBuyer Report includes a (now optional) current valuation of the property in question, as well as detailed background information of the property and its location, details of major faults and urgent problems that would need specialist attention before completion, damp test results taken from walls, and information about the general condition of the building and the likelihood of issues with dry rot or woodworm. HomeBuyer Reports are undertaken by RICS Chartered Surveyors and costs start from £400.
A Scottish Home Report, meanwhile, is a requirement for those looking to sell a home in Scotland. It is a pack which outlines the condition and value of a property and Scottish sellers aren’t able to sell a home without it. Those who do are breaking the law and risk a hefty fine.
It is the seller’s responsibility to arrange a Home Report before a property is listed on the market. What’s more, it must be made available to potential buyers if requested. The cost of a Home Report depends entirely on the price of a property.
There are certain homes which are exempt, including new-build homes, newly converted homes and seasonal and holiday accommodation. The Home Report is explained in much more detail here.
With a range of different valuations on offer, mixed messages are perhaps more inevitable. As such, some have called for properties to be pre-valued by surveyors before an estate agent steps in, to prevent the valuations being too far apart.
Lower valuations could, however, put people off listing their homes at a time when housing supply is needed more than ever. A valuation is just that, an estimate of how much a property might be worth in the current marketplace. When all’s said and done, a property is only worth what someone is willing to pay for it, although market conditions and other variables dictate towards this.
Clearly, there is sometimes a gap between the valuations offered up by estate agents and surveyors, and something needs to be done in order to prevent more sales collapsing unnecessarily. If estate agents don’t offer honest and fair valuations, public trust in them will soon be eroded and the profession’s credibility affected.
The overvaluing issue is, though, as much as anything about a lack of supply, which is making agents more desperate to secure instructions. If there are fewer homes on the market, estate agents will have to work harder to gain new stock from would-be sellers and may, as a result, overvalue to get them on board.
If the supply of new homes was upped, which the government has long promised to do (with mixed results), then the supply/demand imbalance would be levelled out more and the problem of overvaluing could be reduced. It will, as usual, require a multi-pronged approach to address this issue, but with a significant share of sales falling through because of valuation discrepancies, the will is no doubt there for more consistency and accuracy.