The recent publication of the 7th edition of the RICS Valuation Standards contains one key change that has residential surveyors’ tongues wagging; Paragraph 3.4 of UK Appendix 10 expressly rules out the inspection of the roof void (that’s the loft in layman’s terms) during a valuation for mortgage purposes. A ‘head and shoulders’ inspection of the roof space has long been a staple part of any residential valuation as a simple external inspection will not reveal hidden problems such as inadequate support for the roof covering, woodworm or the presence of asbestos. So what lies behind the RICS decision and what does it mean for mortgage lenders and purchasers?
The reduced level of inspection could leave purchasers with expensive and unforeseen repair bills. While the cost of remedying problems such as woodworm, inadequate support for the roof structure or the removal of asbestos tanks and flues is not particularly great, knowledge of these defects may affect the prospective purchaser’s decision to buy, or how much they are prepared to offer on the property. This particularly the case in areas of low house prices where a £1,000 repair bill is a significant percentage of any purchase price. If purchasers feel that the valuation report they have been supplied has mislead them by not mentioning certain defects, they may well seek recourse through company complaints procedures and litigation.
It is no coincidence then that the updated Mortgage Valuation Specification comes at the same time as RICS launch their new Condition Report. This is a basic survey that sits in between a mortgage valuation and a Homebuyer’s Report in cost. It gives the purchaser a basic rundown of the construction of the property and any defects that are deemed worthy of mention. Unlike the Homebuyer’s Report, it does not give advice on how to repair these defects. By reducing the scope of the mortgage valuation inspection, RICS are trying to steer purchasers away from relying on a valuation report and towards the commissioning of a more detailed survey. In principle, this is to be applauded as the mortgage valuation is just that; a valuation and not a survey, and relying on it to assess the condition of a property before purchasing is not appropriate. However, money is always the key driving factor in consumer decisions and there will always be a large percentage of purchasers who do not wish to part with more money during what is already an expensive and stressful process.
The roof void inspection is useful for determining the exact construction of certain properties. Houses that look to be traditionally brick-built may turn out to be timber- or steel-framed and this is often only apparent once the valuer is up in the loft. Omitting the loft inspection could end up with mortgage lenders lending money on property that they would otherwise not deemed acceptable. How long before a valuer is sued by a lender for recommending a particular home as a suitable security when in fact it falls outside the lender’s criteria? Indeed, the reaction of many lenders to the new Residential Mortgage Valuation Specification is telling. The list of lenders that have instructed their valuers to continue inspecting roof spaces includes Halifax, Lloyds TSB, Cheltenham & Gloucester, HSBC, Co-Op, Coventry, Northern Rock and Principality. Supporters of the RICS ruling are Nationwide and Royal Bank of Scotland, but they still require valuers to provide them with a building insurance figure - another thing that the new valuation specification does not include (paragraph 6.6). This is a kick in the teeth for RICS as their inspection standards which were rigidly adhered to by most mortgage lenders in the past. It may even mark the beginning of a split between RICS and many mortgage lenders. RICS would do well to remember that when a valuer carries out a mortgage valuation, their client is not the home purchaser but the mortgage lender and this new ruling puts us in a difficult position, with the interests of our clients on one hand and our governing body on the other. Companies and organisations that ignore what their clients want tend not to last long. In addition, the RICS decision to reduce the scope of the valuation inspection is all the more worrying in a climate where the FSA are scrutinising what they consider to be inflated mortgage valuation fees.
For me, the bottom line has to be that a valuer cannot have complete confidence in the structural stability, construction type or suitability for mortgage of a property unless we carry out a ‘head and shoulders’ inspection of the roof. This view is shared by many mortgage lenders and I am grateful for this, not least because I would otherwise have to change the name of this blog.
