Cost of Buying a House.

Basic Mortgage Survey or Valuation

All lenders require a basic valuation. They need to know that they are not lending you more than the property is worth. Although this is often referred to as a survey, it is too superficial to merit this title. The valuer arrives at a value by comparing the property with similar ones, taking factors such as age, condition and location into account. The valuation also points out any obvious major faults which could affect the property's value, but is very brief and is not nearly as detailed as a real survey. The basic valuation is commissioned by your mortgage lender and is for their benefit.

If the house is valued lower than the purchase price then your mortgage offer may be reduced, withdrawn, or offered on the condition that specified work is carried out on it first. If it does reveal that the house is worth less than the price you have agreed to pay for it, you may be able to renegotiate the price with the seller, but check with the surveyor how the value was given was reached, and that he or she is certain you are paying too much. Some mortgage lenders waive the fee for the basic valuation as part of a package to attract your custom.

Homebuyers Report

The RICS (Royal Institution of Chartered Surveyors) introduced the RICS HomeBuyer Report designed to be a user-friendly report with the minimum of technical jargon. It includes a colour coded Condition Rating usually referred to as the 'Traffic Lights System'. The surveyor must rate each element of the property using one of the following Condition Ratings.

Condition Rating 1 (green) - No repair is currently needed. The property must be maintained in the normal way.

Condition Rating 2 (amber) - Defects that need repairing or replacing but are not considered to be either serious or urgent. The property must be maintained in the normal way.

Condition Rating 3 (red) - Defects that are serious and/or need to be repaired, replaced or investigated urgently.

The report is now quite lengthy, usually in the region of 25 pages, but it is divided into easily readable and logical sections as follows:

  • Introduction to the report
  • About the inspection
  • Overall opinion and summary of the condition ratings
  • About the property
  • Outside the property
  • Inside the property
  • Services
  • Grounds (including shared areas for flats)
  • Issues for your legal advisers
  • Risks
  • Valuation
  • Surveyor's declaration

The report will also include many appendices which provide useful information about what the purchaser needs to do next and, particularly in the case of leasehold properties, any enquiries that legal advisers need to make prior to exchange of contracts. It allows the surveyor to add photographs to the report.

Section C is particularly useful to the buyer as it gives an overview of the Condition Ratings for each element of the building and includes a concise section giving the surveyor's overall opinion of the property. This will include a comment as to whether the surveyor considers the agreed purchase price to be reasonable. Normally this will be the section that the client turns to first.

Section D includes a brief section related to energy efficiency and will include reference to the Energy Performance Certificate that must be prepared before a property is marketed. * (see end for EPC notes)

Section G will give an overview of the condition of the services based on a visual inspection. However, the surveyor will not test the services. If the property is vacant the services may have been turned off or disconnected. The surveyor will generally not be able to turn services on unless the vendor is present and is able to turn them on for him/her. The surveyor will recommend further investigations if these are considered appropriate. Often it will be necessary to have the gas, electric and central heating systems tested in older properties.

Section J is used to identify risks to the building, grounds or occupants. This could cover such problems as potential flooding, the presence of asbestos based materials, an unprotected pond that could be a danger to small children or lack of safety glazing to doors.

The RICS also offer a product called a 'Condition Report'. This is a simplified version of the Homebuyer Report and includes many of the elements discussed above, including the 'Traffic Lights System' for flagging up defects. The Condition Report does not, however, include a Valuation or advice on future repairs and maintenance. The Condition Report can be commissioned by vendors, prior to putting their property on the market, to prevent unforeseen issues cropping up when their potential purchaser has a mortgage valuation or survey carried out.

Full Structural Building Survey

This is the most comprehensive - and the costliest type of survey. It is suitable for any building, but is especially recommended for older buildings (75 years and upwards); those constructed out of unconventional materials such as timber or thatch; and properties which have had lots of alterations or extensions, or which you intend to alter or renovate.

The surveyor will check the property thoroughly, looking at everything that is visible or easily accessible to examine the soundness of the structure, its general condition and all major or minor faults. More specialist surveys can also be carried out on aspects such as foundations, damp proofing, or tree roots, either by a specialist within the firm of surveyors or by an independent specialist surveyor.

The report you receive will be extremely thorough and very long, as surveyors are legally obliged to inform you of all the findings of the survey. You should not necessarily be put off if it seems that endless defects are listed - every house has some defects and surveyors tend to show the worst-case scenario for anything they discover.

You should be provided with a list of prices for repairs and maintenance work, which will also tend to over- estimate prices. A full structural survey normally takes much longer than the one or two hours required for the homebuyer's report. The survey report can also take a long time to produce, so this is a much lengthier process than for a homebuyer's report. You will probably have to wait up to two weeks after the inspection for the report, for which there is no standardised reporting format. A buildings survey costs anything up to £1,000, again, depending on the price of the house.

Stamp duty

Stamp duty or Land and Buildings Transaction Tax in Scotland is a tax that anyone purchasing property or land costing more than a pre determined amount has to pay. The amount you'll pay varies on the price of the property this calculation Is quite complex, so here's an calculator to help.

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Legal fees

A solicitor or licensed conveyor is normally required to carry out all the legal work for you when buying and/or selling a property. Legal fees are generally between £850-£1,500 including VAT. They will also provide local searches, which will cost an extra £250-£300, to check whether there are any local issues.

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