Chapter 20: What a Property Survey Really Means

This is an extract from the ebook How to Really Buy a Property.

What's covered in this chapter
  • Who the surveyor is actually working for and their hidden agendas;
  • The types of survey and which ones are worth the cost;
  • Why surveyors should never estimate the cost of potential works;
  • Why retentions don't suggest the cost of repairs;
  • The difference between rising damp and penetrating damp;
  • How to check more than a structural survey covers and pay less;
  • Why a sagging roof may not be a real issue;
  • How to handle subsidence, movement and bulging walls;
  • When to use a survey to renegotiate and when to keep quiet;
  • How to choose a good surveyor, and make sure the lender does to;
  • Why you should never ask the vendor to carry out work;

Most buyers make one mistake here, they believe because they have paid the surveyor to do something, the surveyor is acting on their behalf and in their interests. Wrong. The surveyor is acting very much in his own interests to protect himself from any legal action you may be able to take after the purchase. It is fair that you have the right to sue a surveyor for damages if they miss out something which actually affects the value of the property, but the end result in recent years has been that many Surveyors go completely over the top in order to make sure no legal action is possible. Remember this:

If you buy the property the surveyor gets paid but may get sued for missing something. If, after survey, you decide not to buy the property, the surveyor still gets paid and has no chance of getting sued.

So ironically it is in the surveyors best interest to try and persuade you not to buy the property. For your part you have to try and separate fact in the report from over-the-top speculation and you can do this by considering two points:
  • What is the survey actually saying in terms of cost and hassle
  • Why did the surveyor say what he said.

In other words, as any historian will tell you, don't just look at what was said but ask why it was said. You should also be careful to differentiate work that should be expected (e.g. you should expect to repaint the windows every two years) and work that no person offering on the property would expect (e.g. the entire roof needs replaced). This chapter covers:
  • Types of survey - what is said and how to quantify it
  • Types of surveyor - why different surveyors can say different things about the same property

Types of Survey

There are three types of survey:
  • The Valuation
  • The Homebuyers
  • The Structural

The Valuation Survey

This is crucial as if the surveyor does not agree with your offer price the bank won't lend. It is also the most valuable type of survey and probably all you need for almost any purchase. Most people are not aware that the valuation survey will also report on anything crucial that should be investigated. If they believe there is a serious problem with, for example, damp they will hold back all or part of the mortgage until it is investigated (see below). It is much easier to read a two page report that is very specific about major issues that will affect value than a fifty page report telling you that the aerial may need re-fixing and one of the windows in the back bedroom needs to be repainted in the next twelve months.

It will probably come as a shock to find out how the surveyor actually works but it goes something like this. They visit the property and check for any really big problems that will affect value. They then look up and down the street for sold boards and 'phone up those agents to ask them what they have sold. In the modern world they can also check the history of sold properties in an area on the internet. If they find similar properties sold at similar prices they sign the valuation off and you get your mortgage.

In the absence of sold signs he calls any local agents and asks them what they have sold recently in the area and tries to match it up. There is nothing more to it than that. If you want to try it for yourself find a sold sign, call up the agent and say, "Hi, this is Fred Smith from Island Surveyors, I see you have sold something in the High Street, can I ask what it was and how much it sold for?". You'll get the complete run down including the actual price it sold for, not its asking price. Note that Estate Agents, by law, are not allowed to tell you (a buyer) the actual price a property has sold for until it exchanges as this is confidential information. Agents are however, always trying to please surveyors because they don't want properties down valued, so if you pose as a surveyor you will find out everything!

The Homebuyers Survey

Probably one of the biggest waste of times in the whole home buying process. It is a valuation survey followed by a lot of speculation. You are likely to find out fascinating things like screws missing from plug sockets, wood that needs replacing in windows, kitchen cabinet doors that need to be fastened. The crucial thing on this survey is the valuation. If, with all the property defects, the surveyor still concludes the property is worth the agreed price then (unless the vendor is very desperate to sell) don't try to use it for negotiation. If the survey states that 'in it's current condition the property is worth x' and x is the price agreed then there are no grounds for negotiation.

The Structural Survey

For older houses these are generally seen as a must have by almost anyone who has written on the subject but again you need to take a view. If there is something structurally wrong with the property a valuation survey will pick that up. Its most important feature is probably that it will be useful when you come to sell the property as you can show it to a potential buyer under the guise, "When I bought this house X, Y and Z were wrong. I had them all fixed and here are the guarantees or receipts." (See Chapter 22: Why Vendors are Poorly Prepared ).

Aside from this the actual value of a structural survey is questionable. The surveyor is not a specialist in any particular field so the report is filled with vague statements such as "The windows appear in need of replacement and should be inspected by a specialist" or "The roof may be bowing and should be inspected by a specialist." More on this is covered in the section What is in a Survey (below).

Remember it is not possible to have a structural survey done on a flat as it requires access to all parts of the building and unless the neighbours are all very understanding it is not going to happen.

Requesting structural surveys on flats generally annoys the vendor who knows they can probably sell to someone else a little less awkward or a little less naive.

Retentions in a Survey

If the surveyor, carrying out any of the above surveys, believes the property is worth the price you have agreed to pay for it all is fine. If, however, he sees a major problem such as damp around the windows he will suggest that the bank holds back a certain amount on the mortgage until it has been satisfactorily investigated.

He will say, "The property is worth £250,000 as long as the windows are sound. Until this has been established no one (including the lender) should pay more than £240,000". The surveyor is not saying that the windows require £10,000 worth of work. He cannot because he is not qualified to cost repairs. So he chooses an arbitrary figure. It is simply a way to make sure something is checked before a loan is secured on the property or you pay out the cash.

The retention can be a small amount or the total price agreed (usually in the case of suspected subsidence or other major structural issues). The best way to deal with them is as described in the remainder of this chapter. Take them in your stride, in most cases the issue is much smaller than the surveyor believes and retentions are removed after investigation of the issue.

What is in the Survey

To prove your money is well spent a surveyor will usually want to pick up on something. The choice below is almost a check list of where the surveyor will choose one or two items for further investigation:
  • Damp
  • The Roof
  • The Electrics
  • The Plumbing
  • The Structure
Remember a good surveyor will simply say "there is damp which requires further investigation". A bad surveyor will say "there is probably around £5,000 worth of damp that needs to be repaired". The latter is a ridiculous statement. Does this surveyor own a damp company? In other words remember this
  • The surveyor is not a damp proof specialist and will not carry out the work so should not quote.
  • The surveyor is not a roofer and will not be carrying out the work so should not quote.
  • The surveyor is not a qualified electrician and will not be carrying out the work so should not quote.
  • The surveyor is not a qualified plumber and will not be carrying out the work so should not quote.
  • The surveyor is not a structural engineer and will not be carrying out the work so should not quote.

True Story - Damp at Packington Street
Sarah and Nicki had successfully offered on a two bedroom lower ground floor garden flat just off Islington Green in London. They had seen no end of properties and although this one was above their original budget they stretched to afford it. They then cut costs by going with a lender that had the lowest fees. The surveyor that looked at the property was a self employed individual who agreed that the property was worth £240,000 (their offer) but said £5,000 should be held back as a retention because of damp in the property.

A damp proof company was instructed to give a quote on how much work they believed was in the flat. They found £346 plus VAT! The surveyor had evidently picked a figure out of the air.

Sarah and Nicki doubted the difference in the two figures and instructed a second damp proof company who quoted £379 plus VAT. The vendor felt that the buyers were obviously desperate to reduce the price and if it wasn't this they would find something else in the legal paperwork so, having lost confidence in them, withdrew the contract.

Ironically the surveyor is simply someone who is trained to see tell tale signs that then require you to get a further specialist in. If you want to be thorough and save time then get a valuation survey and at the same time pay for a roofer, plumber, electrician and damp specialist to inspect the property (for freehold properties pay a structural engineer as well). You will short-cut the long survey report and you will know the absolute worst case scenario as each specialist going in will be hunting for work. Then you can take a proper quantified view.

You or the vendor, or both, should expect to pay for the specialists if you do decide to investigate further. This was not always the case but these tradesmen are very aware of how much surveyors are trying to cover themselves now. They are also aware that no matter what they find they are unlikely to get the work as any quote they give will usually just be used as a negotiating tool. As soon as the new buyer moves in they either take a view on the work or get other quotes to see if someone else will do it cheaper.

Here is how it works in reality:
  • Mr X offers and gets a survey carried out
  • Mr X is very worried about damp and so gets damp specialist in
  • Damp specialist says £3,000 of work required
  • Mr X tries to negotiate price, the vendor says , "The damp has never been a problem to me, when I moved in I took a view on it"
  • Mr X eventually successfully gets £1,000 off price and goes through with deal
  • Three years later Mr X sells his property
  • Mr X gets an offer which he accepts
  • Mr Xs buyer has a survey which shows up damp
  • Mr Xs buyer gets a damp specialist in who says £3,000 of work is required
  • Mr Xs buyer tries to negotiate the price, but Mr X is furious
  • Mr X tells his agent, "The damp has never been a problem to me, when I moved in I took a view on it"
  • Mr X eventually agrees to take £1,000 off as a token of good will to the buyer