Research from the chartered surveyors revealed that not taking out a private survey costs buyers on average £1800 to repair hidden defects in their home which has led to cases of borrowers being placed in a difficult position to keep up with their monthly mortgage payments.
In a study, e.surv discovered that consumers were not taking out a private survey because of confusion over the difference between a lender’s valuation and a private survey. e.surv claims that some professionals in the homebuying process are failing to offer appropriate advice and not making clear the distinction between a lender’s valuation and a private survey.
The research also said that despite typically costing less than 0.5% of the value of the property, many consumers viewed a private survey as an unnecessary expense.
The company is undertaking a campaign to educate the customers on the importance of taking out a private survey. It is working with lender affiliates and partners to help them meet their TCF obligations as laid down by the Financial Services Authority.
Earlier this week, the Council of the Residential Property Surveyors Association wrote to the FSA regarding the same subject stating that: “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 £100m per annum.”
Richard Sexton, business development director of e.surv, said: “It’s vital that consumers are aware of the consequences of not getting a survey, and are given clear information about the range of options available to them. Lenders need to make it clear to their customers that a mortgage valuation won’t give them the full information about the property.
“We are working closely to help lenders offer more transparent advice to customers about private surveys. Giving better advice before, during, and after the homebuying process will help lenders ensure they meet their ‘Treating Customers Fairly’ obligations.
“Educating consumers on the importance of a private survey, and the type of survey most appropriate to their situation, isn’t just of great benefit to them, it’s also in the best interests of the lender. A valuation protects their investment, but a private survey guarantees it.
“Private surveys have been perceived by consumers as technical, overly-complicated reports that are an unnecessary expense in an already expensive process. Many of them are poorly advised by professionals and are not receiving suitable advice that takes into account their individual circumstances.
“Even those who do receive good advice can’t always see past the upfront cost of the survey. They baulk at the price tag and hope they’ll be fine without it, even though it’s an investment on the most importance purchase they’ll make. Indeed, Section 4.4 of the CML lending handbook warns borrowers not to rely on the lenders valuation and to seek independent advice.”
Rob Clifford, board director at Direct Valuations, added: “The issue is that buyers don’t understand that a lender’s valuation is of no value to them. Sometimes a lender will produce a report which the buyer doesn’t even see and even if they are given a copy of the report, it’s nothing they can rely on. They don’t have a route of recourse because the valuation was for mortgage purposes only..
“There’s no question that the valuation is for the benefit of the lender and I don’t hold that they should be the ones responsible. They have a job to do to ensure that what they’re lending on is of sufficient security. No one’s misleading consumers, buyers are making assumptions.
“It can be argued that perhaps brokers and conveyancers should have a responsibility but overall I think the issue is that buyers need to be educated that a private survey grants them a power and self reassurance that a lender’s valuation doesn’t. It’s for their benefit at relatively little cost.”
