Report uncovering £200,000 of potential repairs highlights need for buyer education
A specialist lending brokerage has spoken out on the importance of homebuyers getting a survey when they purchase a property, after one of its clients ‘dodged a bullet’ by uncovering £200,000 worth of potential repairs.
The Mortgage Mum Specialist Finance acknowledges that a RICS level 2 (homebuyers) survey can sometimes be viewed by property purchasers as not being worth the money. But it believes this recent case highlights just how important surveys are. The case raises, too, the question of the role that brokers play in encouraging clients to take on a survey – is the onus on advisers to persuade buyers to play safe and get their properties surveyed?
The buyers in this case were delighted when their offer was accepted on what they believed was their dream home - a £750,000 property in Essex. It was at the top end of their budget but they had secured their mortgage. “They said they wanted to get a survey done because the property had been on Rightmove for a while and they wanted to just make sure that everything was as it should be,” explained Amy Davenport (pictured left), who leads business support and operations at The Mortgage Mum Specialist Finance.
The level 2 survey report brought up a multitude of issues including wet rot and the need for a new drainage system. “They were looking at around £200,000 of work to put it all right, to which their budget couldn’t stretch – it was unviable,” Davenport said. “They were gutted that they had to go back to the drawing board, but their actual words to us were, ‘We feel like we've dodged a bullet.’ They were incredibly relieved that they'd spent the money because they would have got this house and been unable to put the things right.”
Consistently low numbers of clients choose to take a survey, in Davenport’s experience – around 10% of property purchasers organising their borrowing through The Mortgage Mum Specialist Finance. “We have found that first-time buyers or buyers of properties that are extremely quirky are more likely to go ahead with a survey than home movers generally,” she said. “I feel that this isn't one of those costs that you should scrimp on. We will routinely ask a client and give the reasons why we would suggest a survey is a good idea. Obviously, you can't force anyone to have one and we wouldn't want someone to do so if they're absolutely opposed, of course. But this one has proven the worth of them. We have a coined a phrase of ‘survivor's bias’, because if nothing comes up in the survey, you think, ‘Well, that was a waste of money.’ But that's just because nothing was wrong with it. If something had been wrong with the property, the survey obviously would have been worth its weight in gold.”
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Why buyers can be confused by surveys
Davenport believes that the industry as a whole should actively educate property purchasers on the importance of surveys. Mortgage adviser Michelle Lawson (pictured second from left), director of Lawson Financial, believes there’s confusion among buyers that largely stems from unclear terminology. “Buyers are often unaware that a Level 1 is for the lender and may not involve a physical inspection, while a Level 2 is more comprehensive and recommended for buyers,” she said. “However, Level 2 reports can be alarming if not properly understood, as they highlight every issue - sometimes leading to renegotiations or sales falling through. Many buyers rely on emotional decisions and spend little time in the property, missing hidden issues like poor DIY work. Better naming such as Mortgage Valuation Report and Property Buyers Report, and broker and consumer education, could improve understanding.”
Broker Emily Franks (pictured second from right), of Emily’s Mortgage Services, knows from her own experience the value of a survey. “Before I joined the property industry, I purchased a property that ended up needing 10k worth of repairs that I wasn’t aware of,” she said. “Buyers are absolutely leaving themselves vulnerable if they don’t make the most of the tools available to them - iron out problems before they cost you money.” Is there any evidence, though, that in a tougher economy people are skimping on surveys? “I don’t think this is the case at all, if anything I think clients are more cautious about potential unforeseen costs so build this into their budget,” she said. “We should all - estate agents, brokers and conveyancers - ensure a client knows what options are available to them to allow them to make the decision. I always discuss the options with my clients and I did when I was an estate agent too.”
Broker Eric Miller from Affinity Group, commented: “I always encourage my clients to get at least a home buyers report (level 2 survey). Considering this is potentially the largest investment they will ever make, it is well worth doing their due diligence. Anyone purchasing a new build should equally undertake a snagging report. I don't believe that the cost of these reports have much of an influence when considering the costs of moving. If there is anything of minor concern when viewing a property that should be highlighted to the surveyor and questioned with the vendor as soon as possible.” Miller added: “The onus cannot be on the broker when it comes to a client’s choice of property - we do not view the property ourselves and even if we did, we are not qualified to advise on those areas. I think we should strongly consider adopting the Scottish approach where the vendor is responsible for providing a report on the property. I have seen chains collapse and a lot of time and money wasted because someone was trying to sell a property and failed to disclose issues. A simple damp survey requirement can prevent a lender from offering on a property and if neither party can afford the cost of the works then there is a stalemate. Addressing these issues before properties hit the market would certainly make a lot of transactions run smoother.”
Countrywide Surveying Services has conducted research and found that 88% of consumers who used a home condition survey said they would do so again. Furthermore, 92% of respondents reported that their survey gave them peace of mind, which highlights the importance and value attached to independent property assessments, suggests Countrywide’s managing director, Matthew Cumber (pictured right). "The research also found that 60% of home condition surveys uncovered previously unknown property issues, a key factor in helping buyers to avoid unexpected costs and post purchase complications,” Cumber said. "However, we also found that there is a significant knowledge gap among first-time buyers, with 73% lacking confidence in navigating their property purchase and this is where brokers have a huge part to play in helping educate their customers on the value of a survey, and have a degree of duty of care in ensuring that customers are fully informed as to the purchase they are making."
