What is a valuation?
All mortgage lenders will undertake a valuation of the property you want to buy. For many this is a legal obligation; for all of them it is a necessary step to confirm that the property you are buying is adequate ‘security’ for the loan that is, they want to know if the property is worth what you are hoping to pay for it, since in the event of repossession, they would want to know that the property could be sold and the borrowed sum recovered.
A valuation is required by the lender to verify that the property is adequate security for the mortgage. There are three principal types of valuation: • A standard valuation: just that, a basic assessment of the property. This will not be a detailed examination and is principally to satisfy the lender that the property is suitable security for a mortgage. • A Home Buyer’s Report: this is based on a more detailed inspection of the property and is designed to highlight key features of the property and indicate any faults, so that the purchaser can take an informed decision on whether to proceed with the purchase or whether to amend his offer accordingly. • A Full Structural Survey: a comprehensive report on the property. A relatively expensive option but providing the most in depth report on the property of the three options. This is to be recommended where the property is of considerable age or unusual design or construction.
A valuation process is undertaken to ascertain the fair market value of a property. Factors that form vital inputs for a valuation would be maintenance, quality of construction, location, the infrastructure of the area, the nature of the property, whether freehold or leasehold, if leasehold then the period of lease etc. A valuer would normally adopt two or three different techniques separately to determine the property value and then compare the results to arrive at the correct value.
