The Association claims only one in five homebuyers obtain a survey or condition report on the property they are buying yet 80% of homebuyers believe that they get a survey. The main reason for the discrepancy is that most mortgage borrowers believe that their lenders’ valuation is a survey, which it is not.
The RPSA, claims: “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.
“In fact the lenders put the responsibility on the buyers’ lawyers by way of their 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 spent 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 £250m 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.
Alan Milstein, council member at the RPSA, added: “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.”
When asked for comment, the Council of Mortgage Lenders, responded: “Lenders do not represent the interests of home buyers, and the guidance we provide in our handbook for conveyancers acting on behalf of lenders urges them to make this explicitly clear.
“To quote the handbook directly, it says: ‘When a home condition report is not provided we recommend that you should advise the borrower that there may be defects in the property which are not revealed by the inspection carried out by our valuer and there may be omissions or inaccuracies in the report which do not matter to us but which would matter to the borrower. We recommend that, if we send a copy of a valuation report that we have obtained, you should also advise the borrower that the borrower should not rely on the report in deciding whether to proceed with the purchase and that he obtains his own more detailed report on the condition and value of the property, based on a fuller inspection, to enable him to decide whether the property is suitable for his purposes.’”
The CML also cited examples on the Halifax and Nationwide websites explaining the difference between their valuation and a survey to their customers.
