Do Banks and Building Society Surveyors

really value the property

or just rubber stamp the lending process?

If you need help and advise with regard to valuations, estate agents, surveys, building surveys, structural surveys, home buyers reports or any other property matters please call 0800 298 5424 for a friendly chat.

The relationship between banks and building societies and their surveyors

Many, or should we say most, chartered surveying companies are owned by mortgage companies (often known as banks or building societies); i.e. the large ones, such as Countrywide Surveyors, Colleys Surveyors, also known as Colleys Professional Services and E Serve. Once, many years ago, these companies used to be independent and, as such, were a good source of the banks and building societies getting independent information as to what property is really worth. In the 1970's many banks and building societies purchased estate agents practices and chartered surveying practices, to ensure (or should we say greedy to ensure) that they had valuations on the properties that they wanted to get mortgages on, which in the boom years of the 1970's, 1980's and 1990's meant that they could have lost mortgages if the surveyors were not quick enough to “value” a property, process the mortgage and get it onto their books.

Surveyors, or should we say valuers

We have been using the term surveyors, as this is commonly used. More correctly we should say chartered surveyors. The majority of the “surveyors” that come from the banks and mortgage companies are in fact valuers.

The mortgage is the real prize

Though you may think you are buying your next house or property, you should be aware that there are many invested interests involved in this process, including, of course, the mortgage companies (banks and building societies) who simply want to sell you a mortgage and reap the income from that mortgage for the next 20 to 25 years. Think about it, this is a product that you sell once and then gives you income for the next 20 to 25 years and what is more, you can actually sell the right to that income to other companies.

Pressure to rubber stamp valuations to get the mortgage

Having personally worked within these organisations there is a very big pressure for banks and building societies and their associated management for the valuers to value at exactly the same price that you have been offered for the property. In fact, we would ask here in this website, only in times of extreme increases in the market or extreme depreciation in the market do valuers seem to vary from this figure. We would argue that the rationale has been that if three or four properties in the area sell at a similar price, or even lower or even higher, then as long as the property has been for sale in the normal manner, i.e. estate agents, then it would be argued the market evidence is a far better indicator than the three or four other properties that sold at the lower or higher level and reflects the current market value and therefore is valued at the offer price. This is convenient and ensures that the mortgage sale goes through. We would also say that it ensures the valuers can carry out many valuations in one day and earn large amounts of fees!

Your offer on the property and the mortgage valuation are the same, is this a coincidence?

We would say it is much more than a coincidence; it is a travesty and a huge problem. Chartered surveying companies owned by banks and building societies simply value based upon what you have offered. They would argue that the evidence shows this, we would argue that they manipulate the evidence to make it meet the mortgage offer.

Royal Institution of Chartered Surveyors (RICS) Regulations

The RICS has put various regulations in place to establish if a surveyor is independent, but we don't feel that these regulations are stringent enough and, indeed, many chartered surveyors don't. This is why the Independent Surveyors Association (I.S.A.) was set up, which we would thoroughly recommend. As their motto says, “Independent Surveyors Association is putting the client first”.

Independent Surveyors Association (ISA)

We applaud the work of the Independent Surveyors Association establishing truly independent surveyors, of which we are a member, and they have carried out excellent work within the surveying profession of bringing to the attention of many and various issues.

RICS Chartered surveyors and problems

Even though we are a chartered surveyors we did not realise until recently how difficult it was to complain about the standard of work. We were recently carrying out some monitoring work for a client, who were unhappy with the chartered surveyors (who coincidentally were owned by a mortgage company) and didn't feel their valuation represented the true value, or indeed the requirements of the Royal Institution of Chartered Surveyors.

We decided to see how we could complain directly to the company itself, but they refused return phone calls and then suggested we get in touch with the RICS. On enquiring about them we were advised that they weren't regulated by the RICS so the client would have to take individual legal action against the surveyor concerned.

So we have a situation where one of the largest surveying companies in the UK, albeit that it is not an independent surveyor but a mortgage owned surveyor you would have to take to court, rather than the chartered surveying company concerned taking responsibility for the complaint or the RICS.

Lots of assumptions made by chartered surveyors

There are many assumptions made by chartered surveyors when they are valuing. These assumptions have been made and agreed over the years and written into the “Red Book” to ensure that each surveyor is valuing on the same basis and that there is transparency in the valuation process and also to give consistency in this process. The main theory used for valuing houses is known as a comparables process.

The strength of comparables

Interestingly, in our experience, the strongest comparable is the house that is being sold itself, as it can rightly be argued by the surveyor that, assuming it has met the above criteria, it is the most up to date and accurate information about what that property would sell at, because the other comparable properties, apart from the data being dated would no doubt be different in some way.

Even in a road of terraced properties (think Coronation Street ) here will have been some alterations and amendments to the properties, whether it's the adding of double glazing, central heating, new bathroom, kitchen or stone cladding, etc.

Dated comparables

The main source of comparable data used is from the Land Registry, which is a few months old, up to three months old, so therefore it doesn't reflect the latest trends in price buying.

Relying on the estate agents for comparables?

Some surveyors also gather comparables from estate agents. Whilst this data is likely to be more up to date it does tend to be tainted by the estate agent's view on the market as he may only recall those properties that are valued at a similar level to the one the surveyor is looking at, or indeed he may have forgotten the most relevant comparables or is he simply may have not been the person in the office who dealt with that particular property and of course the surveyors should never forget comparables from the estate agency selling the property, as there is a vested interest.

Choice of comparables

Interestingly, the choice of comparables, whilst needing to match the basic specifications of the property, i.e. semi-detached three bedroom house in a certain post code, is normally picked based upon a similar price. There is no other judgement possible from the data we have seen, i.e. the condition of the property, specific road concern, is the garden on the sunny side of the street, does it have parking, etc, etc. As none of this information is generally recorded, whilst there may be a few surveying companies out there who have their own data bases that record this information, in our experience from working for surveying companies, it tended to be the surveyors themselves that had their own data base, perhaps run on a PDA in the office or their own computer.

Who picks the comparables?

Generally, we have experienced, that surveyors are too busy rushing around travelling to all the different properties they have to get to, to spend very much time in the office. This generally means that their work is either picked up first thing in the morning or sent to them and it includes comparables. These comparables will have been picked by their secretaries or admin people. Whilst they do become skilled at it over the years they are certainly not surveyors, and in our experience, they are picking the comparables purely based on the price. This becomes very strange where sometimes you would have a list of comparables and you had not physically seen any of them.

This system works when prices are going up

It could be argued that the system of comparables worked when prices were going up, as normally by the time the surveyor had carried out his valuation the house had gone up in value anyhow. They allowed for a big margin of error and the surveyors already have plus or minus 10% as a general guide to accuracy. Did that lead to the spiralling upwards of house prices? This, together of course with the estate agent pushing the market up also, as their income is based on commission, which is in turn based on the price of the property.

What happens in a stable or downward market?

Stable Market

In a stable market it could be argued that the comparables used are more relevant, as although the time has elapsed as the market is stable the price will not have changed very little at all. This therefore gives the surveyor time to get to know the prices in an area (as they did years ago) and be able to use more comparables that they have actually seen as the data isn't as fast moving.

Downward Market

In a downward market there is again a similar problem to that of an upward market, in that the data available to the surveyor is out of date (that's without the argument that the data is not correctly collated and analysed). Therefore the surveyor has to take an educated guess as to how the market is going.

Many surveyors would argue this is the very basis of the skill that they carry out when they are doing valuations. We would agree that it once was, however, with mass production valuations, by this we mean where a surveyor is looking at six to ten per day, they simply do not have the time to think about the valuations once they have actually been to the house, had a look round, etc.

What does the surveyor do on a valuation?

In our experience, due to the time pressures on surveyors (brought about by the mortgage companies that they are often owned by wishing to get as many mortgages in place as possible) the surveyors literally have a quick walk round the property looking in each room and a look around the outside of the property, it should also in theory have a head and shoulders inspection of the roof space, but in practice we are aware that many surveyors don't do this. They then typically get back into the car and dictate the report, which is a two page report. It is very rigid in structure, giving little scope for the surveyor to say anything other than yes or no in the various tick boxes and indeed they are required to use standard phrases.

Standard phrases

The standard phrases need a bit more examination. There has been a great deal of thought put into the standard phrases, as they are generally very well worded to minimise the surveyors / mortgage companies liability.

Caveated to death

There is a surveying expression where something has a caveat, also known as a get out clause, and many surveyors use these. We have found in the past when interviewing surveyors that some of them proudly say that they have never been sued, when in fact when you look at their reports, due to the caveats that they have put in them they have never actually said anything in their surveys!

Conclusion

So, where does this leave you when trying to establish what the value of your property is? As with many things in life, the best way of doing this is to do it yourself. No doubt over the course of looking for a property you will get to know the values in the area that they are selling at. You then need to combine this information with the information that is available from the Land Registry. Sooner or later you will have viewed a property that is sold and shown in the Land Registry and you will be able to compare its for sale price against its actual sale price and also you can have a thought on the condition and the various attributes, such as did it have good parking, good sized double / single rooms, or was the single room really a box room, and fairly quickly (you will be surprised how quickly) you will build up detailed knowledge of the prices in the area and from this you will be able to value the property you are looking to buy. Of course, whatever price you offer, whether you valued it yourself or whether you just go with the estate agents price, or whether you negotiate a much lower price, you will tend to find that the banks / mortgage company's surveyor will value it at exactly the same price!

Why do banks, building societies and mortgage companies value at exactly the same price as what I offer?

The reason is because they use what we would explain to be the comparative method of valuation and the best comparable is always the property that you are actually buying and unless there is major reasons for it to be any other value it will be valued at the price that you offer. In fact, we would go so far as to say that the surveyors that we have worked for make it very difficult to value at any other price, particularly to down value, as the national company of surveyors that we were involved with, which is in the top five largest surveying practices in the country, required a lengthy review process that involved meeting your line manager (which in turn meant that you weren't out surveying, which in turn meant that you weren't meeting your targets), so you see the system is stacked in favour of the surveyor returning the value that you have offered for the property.

You may also be interested in these other articles about valuations:

Chartered Surveyors Valuations

Valuation the Same, Snap

Section 18 Valuation

Do chartered surveyors really value the property or just rubber stamp the lending process?

If you truly do want an independent expert opinion from a chartered surveyor with regard to valuations, mortgages, mortgage companies, estate agents, surveys, building surveys, structural reports, engineers reports, specific defects report, structural surveys, home buyers reports or any other property matters please contact 0800 298 5424 for a chartered surveyor to give you a call back.

If you have a commercial property, be it leasehold or freehold, then you may wish to look at our Dilapidations Website at www.DilapsHelp.com and for Disputes go to our Disputes Help site www.DisputesHelp.com .

We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).

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