Buying a Property – Part 2 - The Real Value of a Building Survey

Never be tempted to cut corners when considering the purchase of a property because even if you think a building survey is expensive …… it often proves to be much more expensive not to have one

Source: http://www.buildingcommission.com.au/

In my last article I discussed the limitations of a survey that would be instructed by a mortgage lender (a valuation survey) and how a purchaser should not rely on this as means of assessing the condition of a building.  This is because the primary purpose of this type of survey is to establish the value of a property and to be confident that in the event of any default on behalf of the borrower, that the lender can re-coup what they are owed.  The objectives of a purchaser however are very different in that they want to be satisfied that the building they plan to buy, and often live in, is not concealing anything that they are not aware of.  I say ‘not aware of’ as it is perfectly feasible and acceptable to proceed with the purchase of a building as long as you are fully aware of any potential issues/problems.  Let’s face it, buildings, particularly older buildings are highly unlikely to be free from defects and in fact many of us will accept buildings with issues/problems at a lower price, as a way of trying to get a bargain, this is particularly true of property developers.

Not all of us are property developers and the vast amount of residential property transactions that take place each year are by members of the public who in many cases have little to no knowledge of buildings and therefore rely on professional guidance.  It would therefore seem sensible, particularly due to the large investment involved that prospective purchasers commission a survey so that they can establish if there are any issues/problems with the building they are considering buying. However, you may be surprised to learn that the vast majority of purchasers choose to ignore this very important part of the purchase process.  The Royal Institution of Chartered Surveyors (RICS) recently reported:

‘Results from an RICS’ survey of home buying consumers, released today, show that many homeowners who did not take out a home survey are left with a property they regret buying and an average of £5,750 in repair bills. The survey of 1,017 buyers across the UK found that consumers are clearly aware of the need for independent advice, with 94% of respondents agreeing it is important to commission a survey. However, nearly a third failed to do so. This means buyers are left ignorant of issues with the property, such as structural defects, dry and wet rot, subsidence and many other faults, only for these to become serious matters at a later date.  The new homeowner may then be unable to afford, or may lose the desire, to fix the faults and may be left with a property they may no longer want to live in but are unable to sell to recoup their losses.’                                                                                             

                                                                                         Source: http://www.rics.org/

Over a third of those surveyed failed to have an independent survey commissioned.  We could speculate on why, however as 94% of respondents agreed that it was important to commission a survey, I think it is reasonable to discount ignorance as the primary reason for this.  I suspect that cost may be a contributing factor, where many prospective purchasers see this as a cost they can do without and hope that they ‘get lucky’ and purchase a property with no issues/defects, that they were not aware of.  However, trying to save money at this point is a false economy.  True, a comprehensive residential building survey may cost on average between £700 and £1000 (costs will vary depending upon the size and complexity of a dwelling and the survey selected), however, this is always money well spent.  In fact purchasers should be asking themselves if they can afford not to have a building survey undertaken rather than thinking about how much they will save by not having one done.

Source: http://www.jscp.co.uk/

A level 3 Building Survey (see below), will provide a prospective purchaser with a comprehensive assessment of a dwelling and highlight not just significant issues, but anything that the Surveyor thinks is relevant.  Armed with this information, the prospective purchaser may decide you try to negotiate the sale price with the seller (to reflect the findings of the survey) or maybe even decide to discontinue their interest and look for alternative properties.  Either way, the information provides the purchaser with choices, where decisions can be made before contracts are signed rather than having to deal with the consequences when the property comes into their legal ownership.  I am sure that in hindsight many of those who took part in the RICS research above would have regretted not spending £700 to £1000 on a Building Survey, as they ended up with an average repair bill of nearly £6000.  Never be tempted to cut corners when considering the purchase of a property because even if you think a building survey is expensive you can see from above that it often proves to be much more expensive not to have one.  On the flip side, the Building Survey may not identify any significant issues.  Even in this scenario this represents good value for money as you now have piece of mind that the property you are considering is in reasonable condition and you are likely to avoid any nasty surprises.  The lesson here is very simple: Always commission a Building Survey before exchanging contracts!

The information provided by RICS below summaries three different levels of survey that you may consider when purchasing a dwelling:  RICS surveys are available to suit the particular circumstances of the client and the property:

Level 1 - Condition Report

Provides an objective overview of the condition of the property, highlighting areas of major concern without extensive detail. This option is ideal for buyers purchasing a modern house in good condition and for sellers and owners.

Level 2 - HomeBuyer Report

Is most suitable for standard older and modern properties that are in an apparent reasonable condition. It provides a concise report with advice detailing any significant problems that could make a difference to the value of a property.

Level 3 - Building Survey

The ‘flagship’ service providing a detailed report on a property. It is particularly useful for older, larger or non-traditional properties, or one which is dilapidated and has been extensively altered or if the buyer is planning a major conversion or renovation.

Source: http://www.rics.org/

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