Of course, as part of a broker’s TCF duties, understanding and explaining the substantial differences between these options is an important task. Yet the often fraught nature of the broker-valuer relationship means a huge opportunity to serve clients better is being lost.
When it comes to surveys, something that should benefit everyone remains a sore point.
Too many consumers are still more than happy to accept a lender’s valuation as proof enough that the house of their dreams is in good enough repair to go ahead with a purchase. In reality, it is a basic check to ensure it is worth the money the lender is providing. It doesn’t go into any real detail about the property or necessarily highlight any structural problems that might cost thousands to put right.
To make matters worse, mortgage valuations are often made more attractive to consumers because lenders waive the fee as an incentive to get the mortgage.
But, the good news is that, for those who would otherwise rely entirely on the lender’s mortgage valuation, the new low cost Home Condition Report can now compliment the mortgage valuation and can provide a clear report on the physical condition of the property, plus details of urgent faults. But remember, it does not provide an additional valuation.
The recommended option remains the Homebuyer’s Survey which is a RICS standard survey suitable for conventional properties built within the last 150 years and in reasonable condition. This comprehensive report will identify issues such as damp, rotten timbers and roof defects.
Without this kind of survey, problems can go unnoticed for a long period of time, meaning homeowners can face big bills later on. Indeed, findings from the Royal Institution of Chartered Surveyors (RICS), show a quarter of all homebuyers who fail to have a survey, are forced to undertake remedial building works after purchase. The average bill for these works, such as damp-proofing or repairing a roof, is over £1,800 – although in individual cases this can be far higher. It’s an anomaly that in a country obsessed with homes and their value, we show such disregard for the due diligence of house buying.
You wouldn’t buy a second hand car without looking under the bonnet and yet people will make the most significant buying decision of their lives without checking some of the fundamentals. Nobody wants a home that needs extensive repairs or one they can’t sell on. This tells me that education is a key part of the task in hand.
But the relationship between surveyors and brokers does not help. Primarily this is because there is no aligned interest in remuneration (even if both are working for the end client). While both may represent the end consumer, the broker’s procuration fee means the speed of the completion matters – even more so in a world of reduced volumes where cash-flow is crucial to the success of any small business.
Equally the size of the procuration fee often depends on the loan size, making valuations directly affect the broker’s remuneration. The regulator has recognized this issue and, under the principles of Treating Customers Fairly, has stated that brokers should not be trying to protect the sale by not offering a survey.
But brokers remain wary of valuers and surveyors whom I suspect are regarded at best as a necessary evil. The tension is evident in the number of challenges many surveying firms are receiving to their submissions from lenders whose sales team react to brokers’ complaints that values are too low.
With fewer valuers and surveyors than ever, many frustrations like turnaround times will endure – especially as the market picks up. But this misses the point. If client advice is paramount all house-buyers should be encouraged to have their own surveys. It is an opportunity for the broker to add real value to the client’s experience. In a market where mortgages make up less than half of most brokers’ sales, brokers need clients to come back for protection and general insurances and good client relationships result from doing what is best for the client. Advisers can ensure buyers understand that a private survey is not just a cost but an investment.
Of course, this process has to go hand in hand with consumer education too – something RICS and other consumer watchdogs could do more to address.
The average person purchases very few properties in their lifetime and the survey process is never adequately explained at the point of sale. Brokers need to explain that there is no protection or redress on a standard valuation but that a private survey can offer that protection. That is what client relationships are about.
Alison Beech is Business Relationship Director and head of Valunation, Spicerhaart
