Your Mortgage Is Approved, But Is The Property Actually Sound?

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One thing that genuinely surprises me when talking to home buyers is how many people decide not to have a survey carried out on a property simply because their mortgage lender has agreed to lend them the money.

And I have to say, I find that quite extraordinary.

Some buyers seem to believe that because a bank or building society has looked at the property, agreed its value and approved the mortgage, that somehow means the property must be in good condition.

But that simply isn't the case, and it is a misunderstanding that could potentially cost buyers a considerable amount of money.

So, let's look at what actually happens when you apply for a mortgage, why a mortgage valuation is not the same as a property survey, and why I believe buyers should think very carefully before deciding to skip a survey altogether.

First, let's understand the difference between a mortgage valuation and a property survey.

When you apply for a mortgage, your lender needs to establish that the property provides suitable security for the money they are lending you. They want to know that, if something goes wrong and they need to recover their money, the property is worth enough to support the loan.

That is essentially what the mortgage valuation is about.

It is there to protect the lender's financial interest, not to give you a detailed assessment of the condition of the home you are about to buy.

And that is a really important distinction.

Depending on the lender and the property, the valuation might involve a physical inspection, but it could also be carried out remotely using available information, or through a more limited inspection. It isn't necessarily someone spending time going around the property, looking at the roof, checking the structure, investigating damp or examining the condition of the building.

Even where somebody does visit the property, their purpose is still to assess it for the lender. They are not carrying out a full building survey on your behalf.

So, when somebody tells me, "I haven't bothered with a survey because the bank has valued the property and agreed the mortgage", my immediate reaction is, what exactly do you think the bank has checked?

Because there could be all sorts of problems with that property that have absolutely nothing to do with whether the lender is prepared to advance the mortgage.

Let's consider some examples.

There could be problems with the roof. Perhaps it is nearing the end of its useful life, there are missing or damaged tiles, or there are signs of water ingress that haven't yet become obvious inside the property.

There could be damp, timber defects, problems with the foundations, structural movement or alterations that haven't been carried out properly.

There could be an extension that has been built to a poor standard, or defects that are hidden behind plasterboard, flooring or other finishes.

Some of these issues might be relatively straightforward to deal with. Others could cost thousands, or potentially tens of thousands of pounds.

And the point is, you could complete your purchase, collect the keys and move into your new home, only to discover that you have inherited a problem that could have been identified before you bought it.

Now, I'm not suggesting that every property has serious defects, far from it. Most people will buy a property and never encounter anything particularly significant. But the fact that a property looks perfectly presentable, or that a mortgage lender is happy to lend against it, doesn't mean there aren't problems waiting to be discovered.

And this is where a property survey comes in.

There are different levels of survey available, and the right one will depend on the property you are buying, its age, construction, condition and any particular concerns you might have.

A RICS Level 1 survey is the most basic option. It provides an overview of the property's condition and highlights significant issues, but it isn't intended to provide a detailed investigation.

A Level 2 survey, often referred to as a HomeBuyer Report, provides a more detailed inspection and is commonly considered for conventional properties that appear to be in reasonable condition.

Then there is a Level 3 survey, often referred to as a Building Survey. This is a more comprehensive inspection, generally worth considering for older properties, unusual construction, properties that have been altered, or buildings where there are concerns about their condition.

The important thing is to speak to a suitably qualified surveyor and make sure you choose the right level of inspection for the property you are buying.

And please don't just choose the cheapest option because you want to keep your purchase costs down.

I appreciate that buying a property is expensive. There are mortgage fees, legal fees, search fees, removals, stamp duty where applicable, and all the other costs that come with moving home. I understand why buyers are looking for ways to save money.

But let's put this into perspective.

You could be spending hundreds of thousands of pounds on a property, possibly taking on a mortgage that you will be paying for the next 25 or 30 years, and yet decide not to spend a few hundred pounds having somebody properly inspect the building.

That doesn't make much sense to me.

Think about buying a second-hand car. You wouldn't necessarily assume that because a finance company is prepared to lend you the money to buy it, the car must be mechanically sound. You would want to know what condition it is in, whether there are any underlying problems and whether you are about to take on an expensive repair bill.

So why would you approach what is probably the biggest financial commitment of your life any differently?

And there is another point worth making here. A survey doesn't mean that every single defect will be identified. Surveyors have limitations, and there may be areas they cannot access or inspect. But a properly instructed survey gives you a much better understanding of the property's condition and can highlight issues that you might otherwise never have considered.

It can also give you the opportunity to go back to the seller, obtain further specialist reports, negotiate on the purchase price or, if the problems are serious enough, reconsider whether you want to proceed at all.

That is a much better position to be in before you exchange contracts than discovering a major problem after you have completed.

Now, because this is Moving Home, Uncovered, I also want to make an important distinction between property surveys and property searches.

They are not the same thing, and one does not replace the other.

A survey is concerned with the physical condition of the building. It looks at the property itself, its construction and any visible defects or concerns that may need further investigation.

Property searches look at different risks and information associated with the property and its surroundings.

For example, an environmental search can identify potential issues such as flood risk, contaminated land and ground stability. A local authority search can reveal planning and building control information, along with other matters affecting the property. There are also searches and enquiries that help establish matters such as highway adoption and other legal or practical considerations.

A surveyor is not going to replace those searches, and a search report is not going to tell you whether the roof is leaking or the foundations are moving.

You need to understand both sides of the picture.

I have spoken in previous episodes about the importance of buyers taking an active interest in the information being obtained about their property. That includes reading the search reports, understanding the risks and asking questions when something isn't clear.

The same applies to surveys. Don't simply pay for one, receive a report and put it in a drawer. Read it, understand what it is telling you and follow up on anything that needs further investigation.

If the report recommends that you obtain a specialist inspection, take that recommendation seriously. It may be identifying something that needs a closer look before you commit to buying.

Ultimately, what I want people to take away from this episode is quite simple.

Your mortgage lender agreeing to lend you money is not a guarantee that the property is in good condition. It doesn't mean the building has been thoroughly inspected, and it certainly doesn't mean there are no hidden defects.

The lender is looking after its investment. You need to look after yours.

You are the person who will be living in that property, maintaining it, paying for repairs and potentially dealing with the consequences of problems that weren't identified before purchase.

So, please don't confuse mortgage approval with a clean bill of health for the building.

Get the right survey, make sure you understand the findings, and combine that with the appropriate property searches and legal due diligence.

It is far better to spend a little more time and money understanding exactly what you are buying than to find yourself facing an expensive surprise after you've got the keys.

Thanks for listening to this episode of Moving Home, Uncovered. If you found this useful, subscribe so you don’t miss future episodes, and head over to propertysearchesdirect.co.uk/podcast to send me your questions. I’ll cover them in future episodes to help make moving home a smoother, less stressful experience for everyone.