The Types of Survey – Overview

  • Mortgage valuation: is not a survey – it is to confirm to your lender that they could recover their loan if needed
  • RICS Level 1 Condition report: the most basic detail level
  • RICS Level 2 Homebuyer Report: mid level survey
  • RICS Level 3 Building Survey: the most comprehensive level of detail

 

Survey Factors

Understanding the factors below is important to understanding why a survey is right for you:

1. Age:

As the property increases in age there are likely to be more subtle hidden defects or maintenance repairs required meaning you should look towards a more comprehensive survey that can detect these. Over 100 years old and you should look at a Building Survey. A Condition Report suits a new property (up to a maximum age of 10 years) and a Homebuyer Report for a property no more than 100 years old.

 

2. Type:

The larger and less conventional your property is, the more complicated the structure becomes. This requires a greater the level of time and expertise to analyse the property correctly and you should consider a higher level survey.

 

3. Condition:

If the current condition of the property is poor, more time and expertise is needed to establish which issues are cosmetic and which issues are structural and the higher the level of survey you should commission.

 

4. Length:

Your surveyor will spend longer at the property conducting inspections as the level of survey increases. This is to do with the report detail.

 

5. Report Detail:

As the level of survey increases the more detail you receive

  • Condition report: defect
  • Homebuyer report: defect plus cause
  • Building survey: defect, cause plus advice to fix

 

6. Report Content:

  • Condition report: obvious defects
  • Homebuyer report: obvious and hidden defects
  • Building survey: obvious and hidden defects, maintenance required now and very soon

 

7. Cost:

As the level of survey increases the cost increases due to the increased expertise, time and advice

 

8. Survey Outcome:

  • Mortgage valuation: lender decides if their money is safe and whether to provide you an offer
  • Condition report: you are aware of any obvious defects that you will need to address
  • Homebuyer report: the report helps you decide if you should renegotiate based on the issues found
  • Building survey: the survey helps you decide if you should renegotiate based on the issues found and how much you will need to budget each year for maintenance repairs after moving in

 

Deciding on which survey:

For each factor above, decide which survey level you think your property and requirements fall into. The highest survey level your needs fall into is the survey type you should get. All surveys can come with a valuation if you request one when getting a quote.

 

Next steps:

  • Decide which survey to get
  • Get quotes
  • Instruct a surveyor

Auction benefits

1. No chain – the sale is between you and the vendor and is legally binding when the hammer falls

2. No risk of gazumping, gazanging or gazundering

3. Shorter buying process – all your pre-commitment checks are done before you get to auction and there is no chain

4. Thrill – it’s an exciting and nerve racking process making your bids and trying to win

 

Auction draw backs

1. Bidding wars – it can be easy to get carried away and bid above your budget. If you do this you need to make sure you can cover any shortfall in funds

2. You must pay for pre-commitment checks ahead of the auction – and you may not win

3. Auction properties are often in a poor state (either in need to refurbishment or potential structural issues) – this is why the guide prices are lower than properties marketed online or on the high street

 

The Auction Process

a. Pre-auction – Preparation

1. Find the auction houses in your area

2. Request the catalogues and make a shortlist of properties you’re interested in

3. Arrange viewings for the properties

4. Check accuracy of the particulars – you should take responsibility to ensure they are accurate. Are sizes, locations, photographs, boundaries, and the stated condition correct? Information is often stated as approximates.

5. Get a survey – make sure you know what you are buying as you are responsible as soon as the hammer goes down. Houses are often sold at auction because they cannot be sold normally on the market. Whilst not a regular occurrence, one buyer in Scotland purchased a home at auction to have it condemned by the local council within days of the sale and had to bear the cost of it being demolished. Although you may not bid as a result of your survey or don’t win the bidding you lose the cost of the survey but it could save you thousands by not bidding too high on a property that needs extensive work.

6. Plan your bidding strategy – look at sold prices for similar properties of a similar style and size in the area and establish the costs of doing any work or repairs. Pay too much and you’re making a loss. You can also speak to local estate agents and neighbours for information and for their opinion

7. Watch an auction – understand how it works so it’s less overwhelming on the day. You can watch auctions live here

8. Look at the legal pack – you may want a conveyancer ready in case you win the bid. You could also ask them to look through the legal pack to make sure there are no surprises such as hidden covenants or clauses that could cost you money down the line.

9. Check your finances – if you need a mortgage you should arrange a ‘mortgage in principle’ before the auction so you are ready as soon as you win the bid (and the sale becomes legally binding). You will need to pay the 10% deposit immediately on the day and will only have 28 days to pay the balance. Failure to pay will result in losing the deposit! On top of this you could be sued by the vendor and find yourself having to cover the costs of re-listing and selling the property along with any shortfall in the price you agreed and the new final selling price. Interest could also be charged every day until sale. Some conveyancers suggest that a mortgage in principle is not enough and you should have the valuation carried out to get a full agreement. This means you don’t have to desperately search for an alternative lender willing to offer a mortgage.

10. Super keen? You can put in an offer before the auction. There is no harm in asking. However, it will normally have to be a strong offer to make the vendor willing to withdraw it from the auction.

 

b. At Auction

1. Tactics – arrive early to get a spot where you feel comfortable and the auctioneer can clearly see your bid. You can also pick up the addendum sheet advising on any additional information or changes. Check if the order of the properties on sale has changed or if any have been withdrawn.

2. Documents – take two forms of identification and proof that you can afford the deposit

3. Price – don’t expect to pay the guide price. The guide price is set to entice buyers and so is likely to go for more. It may go up before the auction due to interest levels.

4. Relax – you may find it exhilarating, you may find it scary. Remember, there will be more auctions. It isn’t the end of the world if you don’t win so stick to your planned budget and don’t get sucked into that bidding war. Not sure you can keep a cool head? Take a friend along who can bid on your behalf so you stick to your limit.

5. Building Insurance – have a quote ready. If you win, the property becomes your risk the second the hammer falls.

 

c. Post Auction

The process picks up with your next stage being completion where you will need to arrange to pay the outstanding amount.  This is normally around 4 weeks after exchange of contracts through an estate agent but if you have the funds ready you could arrange to complete the same day.

 

Jargon Buster

1. Guide price: where bidding is expected to start

2. Reserve price: the sellers minimum sale price at auction and a figure at which the auctioneer cannot sell below. It can be up to 10% above the guide price and is confidential between the seller and auctioneer

3. Comparables: examples of similar properties that have sold. These (and any suggested rental incomes) are a guidance only

 

Did you know?

1. The auctioneer can refuse a bid without saying why

2. The auctioneer is entitled to resolve any bidding disputes and their decision is final

3. If a reserve price isn’t met the auctioneer can withdraw the lot

4. The auctioneer is an agent for the seller – they can put forward offers before or after an auction (the seller may accept or refuse these)

5. Costs at auction (on top of normal buying costs)

a. Administration fees around £200 – £300

b. Auction house fee – can be around £1,000. Sometimes you also have to pay the vendors fee

6. There is usually 4 weeks between the catalogue publication and the auction – you’ll have to act fast

 

To see how this compares to the normal buying process, see our 3 Step Homebuying Guide.

 

References:

http://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/how-to-buy-a-house-at-auction/

http://www.bbc.co.uk/homes/property/buying_auction1.shtml

http://www.moneysavingexpert.com/team-blog/2013/09/24/property-auctions-can-you-bag-a-bargain/

http://www.agentspropertyauction.com