What is a Basic Valuation?
The Building Societies Act 1986, amended by the Building Societies Act 1997, requires a building society to make an assessment of the security offered for each mortgage secured on land. In the case of new mortgages, this requirement is satisfied through a basic valuation report. Other lenders have no statutory obligation to carry out an assessment, although the vast majority will do so as part of a prudent approach to lending.
The valuer may be an independent professional valuer or an employee of the lending institution. A basic valuation often takes as little as half an hour and is, by definition, a fairly superficial inspection
What is a desktop valuation?
Carried out on the PC using software perhaps used when a property has been valued recently or the application is for a re mortgage. Not an in person valuation so it does assess the properties condition or any risks with structure.
Rights of the applicant
The contractual relationship for the basic valuation is between the lender and valuer, although the applicant pays any fee charged for the valuation. As they are not part of the contract, the applicant has few rights in relation to the valuation.
What is meant by retention
A portion of the loan held back by the lender until the buyer provides evidence that specified repairs have been completed satisfactorily.
Courts have ruled that a valuation that errs by more than 5–10% above or below the true value could be deemed negligent True/False
True
What is reinstatement value?
The reinstatement value is the valuer’s estimate of the cost of rebuilding the property from scratch in the event of destruction by fire or another catastrophe
What is more serious an undertaking or a retention?
Retention.
Can advisers recommend a specific type of survey?
Advisers must not recommend a specific type of survey. For instance, if the adviser specifically recommends a RICS Home Survey Level 2 Report and something later comes to light that would have been picked up by a RICS Home Survey Level 3 Report, the adviser may be subject to a claim. However, if the surveyor misses something that should have been covered by the RICS Home Survey Level 2 Report, the adviser will not be liable.
The contract for a RICS Home Survey Level 1 Report is between the buyer and the surveyor True/False.
True
What is the main focus of a RICS Home Survey Level 1 Report?
The overall condition of the property, the RICS Home Survey 1 report just gives a ‘snapshot’ and has limited scope. The The surveyor will not look at hidden or covered areas and the report may not identify all defects. Neither will it make recommendations or give advice regarding how repairs or remedial action should be carried out.
What additional elements does the RICS Home Survey Level 2 (survey and valuation) Report contain?
The report contains all the elements of the RICS Home Survey Level 1 Report, plus:
a professional market valuation;
an insurance reinstatement figure;
a list of any problems or defects that may affect the property’s value;
advice on repairs and ongoing maintenance;
information about the location, the local environment and the property’s energy efficiency.
RICS Home Survey Level 2 Report (survey only)
The RICS Home Survey Level 2 Report (survey only) includes all the elements of the RICS Home Survey Level 2 Report (survey and valuation) apart from the valuation and reinstatement costs.
In what situation will a RICS Home Survey Level 3 Report include a valuation?
If the applicant requests one
What is the key difference between a RICS home Survey Level 3 compared to a Level 2 & 1
the surveyor will lift carpets, inspect the roof space and generally probe a lot more than they would on Level 1 and 2 reports.
What is the purpose of an undertaking.
The purpose of an undertaking is to bring the property up to a standard acceptable to the lender or to remove obvious defects. Examples may include to to decorate internally or externally or to tackle some localised dry rot.
What is the purpose of a retention?
Examples of a retention are substantial repairs to a roof, or extensive dry or wet rot problems
What is the NHBC?
The National House Building Council (NHBC) provides warranties and insurance protection for new homes in the UK. It works with the building industry to raise standards and improve protection for consumers.
What does the NHBC Provide?
It provides a 10-year warranty/insurance for new-build homes.
If a buy-to-let investor takes legal action for negligence against the valuer that carried out a basic valuation, the claim:
Courts have made it clear that buy-to-let investors and business borrowers should be experienced enough to understand the limited nature of a valuation report and arrange their own inspection if they have any concerns.
All new houses have a guarantee of ten years against major defects. True or false?
This guarantee exists only if the builder is covered by the NHBC or a similar insurance-backed scheme.
