RICS is looking into improvements to the way that home surveys are carried out and communicated. Why is this so important?
A home survey is a crucial part of any property purchase as it protects the buyer’s investment and I was part of the RICS working group that investigated whether the current approach to surveys is still fit for purpose.
We found that there are issues with the way that surveys are communicated. The way people consume data has changed dramatically in recent years, but home surveys have not caught up and current standards do not enable flexibility.
People simply don’t have the time to read a long report any more, so, the new standards that have been proposed will enable greater use of other media like photo and video, more accessible terminology, and more open communication.
These new standards are important because they could potentially benefit every property transaction – ensuring that buyers are more clearly informed about what they are buying and helping the process to run more smoothly.
Is the increasing use of AVMs putting clients at risk?
Yes. Lenders are increasingly deferring to AVMs, particularly on lower LTV cases and often they don’t even offer buyers the opportunity to upgrade to a physical inspection of the property.
If nobody is going into the property, who is going to point out that walls have been removed or a loft converted without meeting building regulations, for example. Or pick up on areas of poor condition that could be costly to rectify.
A lender might be happy to take on the risk, based on an AVM, but the client could be taking on a liability that they might not be able to afford. So, brokers who are not discussing the value of a physical inspection of a property, could be letting their client down and may even leave themselves open to potential claims in the future.
I’d also suggest that addressing whether or not a client should have a survey early in the process could even help to improve conversions. Purchasers are required to confirm that a survey has been at least considered when they sign the title, but this is at the end of the process and can cause additional delays if they decide they do want the property to undergo a full inspection. So, rather than wait for the tail end of a transaction when delays can be critical, raising the issue at day one can provide buyers with more confidence and help the process to run more smoothly.
How can surveyors sometime provide significantly different valuations on the same property?
This is most commonly the result of different types of valuation instructions and their ability to accurately assess the condition of a property.
So, for example, two properties may look exactly the same from the outside on a drive-by valuation, but an internal inspection could reveal that a property has a huge crack in the back wall and requires significant investment to put this right. Or, on a remortgage case where the client has fully refurbished and extended the property, a physical inspection may reveal the property is worth a lot more than originally thought when simply looking at the front of the house.
Different lenders will also have different stipulations within their guidance notes, and this can influence the surveyor’s decision. The most accurate way to value a property remains a physical inspection rather than a drive-by or AVM.
What would you say to brokers who are frustrated by down valuations?
First, I would say that there is no such thing as a down valuation. A surveyor provides the only formal valuation of the property. If this valuation is lower than the amount a buyer has agreed to pay, then it just shines a light on the property being over-inflated in the first place.
Any valuation carried out by a chartered surveyor needs to be done so within the framework of the RICS Red Book guidelines and the lender’s own guidance notes. Any disparity in valuations are most likely to be as a result of the different approach used by different lenders in their guidance notes.
If you could see one headline in 2019, what would it be?
“Homebuying process made easier for everyone”
I am on a government working group that is looking into improving the homebuying process and it’s something I feel very strongly about.