The main reason for the discrepancy is that most mortgage borrowers believe that their lenders’ valuation is a survey – which it is not. Lenders do little, if anything, to disabuse their customers of this notion, perhaps because they make so much money out of valuation fees – some people estimate the net income to be as much as £100 million per annum.
In fact lenders put the responsibility on the buyers’ lawyers by way of their lenders handbook. Lawyers tend to bury a clause recommending a survey in their terms and conditions or letter of engagement which most clients do not read. This is no surprise as so much of their conveyancing business is introduced by estate agents whose primary interest is in securing the sale.
Which? found in May 2008 that one in four homebuyers who did not get a survey averagely spent out more than £2,500 to put problems right that they would have known about with a survey. For one in ten people the cost was over £10,000. This means that every year homebuyers are paying out some £250 million to fix problems in their new home in the first year after moving. A recent report from the AA appears to suggest that the problem is worse than this, finding that across all homebuyers the average cost of repairing problems was over £1,000.
It is interesting that the Which? report also found that those people that did get a survey averagely achieved a reduction in the asking price of the property of £2,000.
RPSA Council Member Alan Milstein said “It is time for lenders to take responsibility for providing their clients with proper advice. They should make it explicit to their borrowers that the valuation they procure is for their purpose alone and says nothing about the condition of the property. They should advise homebuyers to get a survey or condition report and take a written signed instruction to this effect.
If the only way that lenders will take responsibility is by way of dictate by the FSA then that is what must happen. That is why we as a Council have written to Hector Sants to take urgent action to investigate this issue.”
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