Shared Ownership Mortgages: Valuation
When you apply for a mortgage, the mortgage lender will require an independent valuation of the property. This is a legal requirement so that they can effectively book the value into their loan accounts and contractually, the surveyor doing the valuation must be appointed by and responsible to the mortgage lender. Mortgage lenders will therefore not accept a valuation done on the part of anyone else.
Mortgage lenders will normally have a panel of chartered surveyors who they can appoint to do the valuation and they have to base their lending on the valuation of their surveyor, not the price that you have agreed to pay for a property.
The surveyor is usually based locally to the property being valued and should therefore have a good knowledge of what a property is likely to be worth, given its type, location, age etc.
The applicant for a mortgage is generally required to pay for the survey, even though it is not specifically for you. However at times when the mortgage market is quite competitive from a lenders point of view, they may well offer a free valuation as an incentive.
While it is reasonable to expect that two local surveyors would agree on what the value of a property is – this is not always the case. It is worth remembering the adage “that the value of a property is a matter of opinion, not a matter of fact.”
If, as is generally the case, the mortgage lender’s surveyor agrees with the selling price then all is well and a mortgage offer will be issued on the selling price. However, in instances where the lender’s surveyor provides a valuation somewhat less than the agreed purchase price, what can you do?
Your options include:
- You can challenge the decision of the lender’s surveyor. You would normally need to supply the details of at least three very similar properties that have sold nearby for the agreed selling price in the last 12 months.
- You can send the lender’s valuation to the housing association or vendor selling the property and ask them to reduce the price.
- If you have the funds available you could consider paying the difference yourself. However, with Shared Ownership, this is not entirely straightforward as the mortgage lender will require the contract to show that the selling price and the share being purchased is shown in accordance with their valuation – if you’re thinking of going down this route then be sure to consult with your solicitor first.
- You could cease your application with that lender and re-apply with another. However remember to ask them not to appoint the surveying company which did the valuation for the previous lender. It’s worth noting that while you cannot ask a lender to use a particular surveying form, you can ask that they do not appoint a particular one.