Mortgage valuation vs house survey: know the difference

A mortgage valuation is carried out for the lender, not for you. Its job is to confirm the property is worth enough and is acceptable security for the loan. It is not a condition inspection and it will not tell you whether the roof is sound. A survey is the report you commission for yourself, from a surveyor working for you, and it is the only one of the two that is designed to find problems you would have to pay to fix.

When you apply for a mortgage the lender arranges a valuation. Often you pay for it, sometimes it is free as part of the product, but either way the lender is the client. Increasingly it is not a visit at all. Many lenders use an automated valuation model, which is a statistical estimate based on sale prices and property data, or a drive-by inspection where the surveyor never goes inside.

Even a full internal valuation is brief. A surveyor may spend 15 to 30 minutes in the property, checking the type of construction, obvious defects that could affect value, whether it is habitable and mortgageable, and what comparable properties have sold for.

The output the lender cares about is a figure and a yes or no. You may be shown a copy of the report, but it usually says very little, and it carries no duty of care to you in the way a survey you commission does. Treating a clean valuation as a clean bill of health is the single most expensive mistake buyers make.

A survey is commissioned by you, from a surveyor you instruct, and it reports on the condition of the building. It exists to tell you what you are buying, what needs attention, roughly what it might cost and how urgent it is.

Surveys in the UK are commonly described by the RICS Home Survey Standard levels. There are three, and they escalate in depth and price.

The most basic option. It gives a condition rating for the main elements of the property using a simple traffic light system, flags urgent issues and legal matters to raise with your conveyancer, and stops there. It does not usually include advice on repairs or a valuation.

Costs vary by property value and region, but a figure of roughly 300 to 500 is a common range. It suits a modern, conventional property in visibly good order where you mainly want a professional to confirm nothing obvious is wrong.

The most commonly chosen level for typical homes. It covers everything in Level 1 plus more detail on defects, advice on repairs and maintenance, and comments on things like damp, insulation and drainage as far as they can be seen. It is available with or without a market valuation and reinstatement cost figure.

Costs commonly run in the region of 400 to 1,000 and rise with property value. It is a visual inspection of accessible areas. The surveyor will not lift fitted carpets, take up floorboards or move heavy furniture.

Level 2 is the sensible default for a conventional house or flat built in the last hundred years or so that appears to be in reasonable condition.

The most thorough. A Level 3 building survey goes into the construction and materials, describes visible defects and their likely causes, sets out the consequences of not fixing them, and gives repair options. Reports often run to fifty pages or more.

Costs commonly start around 600 and can run well beyond 1,500 depending on the size, age and value of the property. All these ranges vary by region and by surveyor, so get two or three quotes.

Level 3 is the right choice for older properties, anything with unusual construction such as timber frame, thatch or non-standard materials, listed buildings, properties that have been extensively altered, anything visibly neglected, and any property you plan to extend or substantially renovate.

Set the cost against the transaction. Spending 700 on a survey when you are buying a 300,000 house is roughly a fifth of one per cent of the price. A single missed problem, a re-roof or a failed damp course, will usually cost several times the survey fee.

The case for going up a level is strongest where the property is old, altered, or where you cannot easily judge condition yourself. The case for going down is weakest where you have no contingency fund, because those are exactly the buyers who cannot absorb a surprise.

Bear in mind that no survey covers everything. Surveyors do not test services, so gas, electrics, heating and drainage usually need separate specialist checks if you want certainty. Level 2 and 3 reports typically recommend these where relevant.

Read the report properly, then separate the items into three groups. Urgent work that must be done before or shortly after moving in. Work needed in the next few years. Ordinary maintenance that comes with any house.

For anything in the first two groups, get written quotes from contractors. Quotes are what turn a surveyor's cautious wording into a number a seller can respond to.

Then decide what to do. You can proceed as agreed and budget for the work. You can ask the seller to carry out repairs before exchange, which often stalls because sellers rarely want the disruption. You can ask for a price reduction, which is usually the cleanest route. Or you can walk away.

Here is how a renegotiation typically runs. Price agreed at 300,000. The Level 3 survey identifies roof covering nearing the end of its life and a damp issue in the rear wall. Two contractor quotes total 12,000. You go back with the report extracts and the quotes and ask for 12,000 off. The seller argues some of it is normal wear, and you settle at 6,000, giving a revised price of 294,000. Evidence moves the number. Assertion does not.

Be realistic about leverage. In a market where the seller has other interested buyers, an aggressive reduction request can lose you the property. In a slower market, or where the seller has already found somewhere, it usually lands.

A downvaluation is when the lender's valuer puts the property below the agreed price. It is not the same as a survey finding problems, and it is far more disruptive, because the lender lends against the lower of price or valuation.

Work through an example. Agreed price 300,000, deposit 30,000, so you need a 270,000 loan, which is 90 per cent of the price. The valuation comes back at 270,000. The lender will now lend 90 per cent of 270,000, which is 243,000. Your 30,000 deposit plus that loan leaves you 27,000 short.

Your options are to renegotiate the price down to the valuation, to find the extra cash, to take a lower loan to value at the same price if you have the funds, or to go to a different lender and hope for a different valuer. That last route means a new application and a new valuation fee, and there is no guarantee of a better outcome.

You can also challenge the valuation. Most lenders have an appeals process, and it works only on evidence. Supply three or four genuinely comparable recent sales, meaning similar property type, size and condition within a short distance and a recent timeframe. An estate agent can pull these quickly. Appeals succeed a reasonable proportion of the time when the comparables are strong, and almost never when the argument is simply that the buyer disagrees.

If you are weighing up how a valuation or survey outcome affects your borrowing, an adviser can model the options before you respond to the seller. The MortgageMatch directory lets you find an FCA-authorised broker near you to work through it.