Does a valuation mean a mortgage offer is approved?
12 August 2020
Getting a mortgage for a house is a long and exhausting process. And an important step in this process is the mortgage valuation. This is also commonly referred to as a valuation survey. It is carried out by the mortgage lender and the purpose is to check if the property is actually worth what the mortgage borrower is planning to pay for it. The mortgage lender also wants to make sure that the property can be used as appropriate security.
A MORTGAGE VALUATION DOES NOT MEAN THAT A MORTGAGE IS APPROVED
Getting a mortgage valuation does not automatically mean that a mortgage is approved. This is because there are other requirements that the borrower needs to comply with. There is first, the Pre-Application Stage, where the borrower must evaluate his/her credit score and make it appealing for the mortgage lenders. Then comes the second stage, where a mortgage lender is selected. Next comes the Application Stage, where a lender can be approached for Agreement in Principle. Then comes the fourth stage of Assessment conducted by the lenders, where several documents of the borrower are examined. Next is the stage of Valuation which will be examined in detail below. And then lastly, a mortgage offer is made.
It should also be noted that different mortgage lenders work in different ways. Hence, there may be some lenders who may make an offer before valuation. Still, this does not mean that the mortgage has been approved. In these kinds of processes, it is usually implied that the offer is subject to other conditions, such as valuation.
PROCESS FOR VALUATION
The process for valuation depends upon the surveyor that has been hired by the lender, as it is usually for the latter’s benefit. During the assessment, the following aspects are carefully examined:
- price and the value of the property
- value of other properties in the same area/region
- general stability and condition of the property
- defects that will affect the value of the property
- minimum reinstatement value (the amount of money that would be needed to build the property from the very ground up)
A surveyor can choose whichever method he/she desires to conduct an assessment. Some of the options are as follows:
- Desk-based evaluation: this usually involves the surveyor making relevant assessments online, for example, looking at online sales and price data that may be compiled from the Land Registry. In this type of evaluation, the surveyor does not actually visit the property. It is the most common way of conducting an assessment. It is mainly used for those properties that the surveyor is already aware of and if he/she believes that investing in that property is not a risk.
- Drive-By Valuations: this involves the surveyor visiting the property and surveying it from the outside. It does not involve the surveyor actually going inside. This option is chosen if the surveyor believes that he/she has enough information to make a report but still wishes to check the property to confirm the findings.
- Combination of Drive-By and Desk-based evaluation
- Physical visit of the property: this requires the surveyor actually visiting the property for at least 15 – 30 minutes. The surveyor, when conducting the assessment, will look for obvious defects. The decision to do this kind of an evaluation is usually because the lender or the surveyor is not aware of the relevant area that the property is located in or because non-standard materials were used to build the property.
Once the surveyor has completed the assessment of the property, a report is made and submitted to the lender. Some lenders may choose to share the report with the borrowers, while others may not. There are also some lenders who may charge the borrower for the valuation service (and this is done when the mortgage application is filed).
After the valuation, if the lender is satisfied with the value and condition of the property, a mortgage offer may be made. When this offer will be made is entirely dependent on the mortgage lender. Some lenders may choose to carefully examine the report. It also depends on what kind of evaluation the surveyor adopted. In the case of a desk-based evaluation, an offer can be made within hours or days. In the case of a physical visit, an offer can be made after several days or weeks.
CAN A MORTGAGE BE REFUSED AFTER VALUATION?
Yes, mortgages can be refused after valuation for several reasons and some of these are as follows:
- The mortgage lender is not satisfied with the condition of the property
- The lender believes that the property is overpriced and the selling price does not reflect its true value
- The area that the property is located in is not ideal, for example, the property is located in a high-risk flood zone
- The property is located near a commercial area
- The previous owner did not comply with relevant regulations or legislation
- It is a type of property that the mortgage lender does not deal with
- The property does not meet other relevant requirements set by the mortgage lender
DIFFERENCE BETWEEN A MORTGAGE VALUATION AND A SURVEY?
The mortgage valuation is for the lender, while the survey is for the borrower/buyer of the property. There are three options when it comes to carrying out a survey and these are as follows;
- Homebuyer Report: This survey is very concise and focuses on the structural defects of the relevant property only.
- Building Survey: This survey does not only focus on structural aspects of the property but also focuses on other interior and exterior aspects. It is primarily used for old properties.
- Full Building Survey: This is the most comprehensive survey option available. It will provide a detailed analysis of the property including structural aspects, maintenance, repairs and other interior and exterior aspects.
If you are looking to buy or sell a property get in touch with one of our dedicated conveyancing solicitors today to see how we could help you through your property purchase or sale.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.