Valuation

At a glance

• When deciding whether to make a mortgage offer, lenders take into account both the customer's ability to make the payments and the property being offered as security against the mortgage loan.
• As part of its assessment as to whether the property will form acceptable security, lenders will generally commission a valuation. This is the lender's valuation and should be distinguished from any valuation or survey commissioned by the customer. The lender calculates the amount it is prepared to lend based on this valuation. For more information on the difference between a lender’s valuation and a survey, visit the RICS website.
• Appendix 10 of the Royal Institution of Chartered Surveyors (RICS) “Red Book” sets out the specification for valuations of residential mortgages. 
• To save time and cost, some lenders offer their customers the opportunity to instruct the same valuer as that used by the lender. The type of product often offered is less comprehensive than a full building survey, but gives the customer a concise report on the general condition of the property - identifying significant defects and repairs needed at the time of the inspection; and providing a brief description of any factors likely materially to affect value.
• The position is different in Scotland because of the Home Report (pdf).

CML position

We encourage our members to provide clear information to mortgage customers about the status of a lender’s valuation, covering:

• The nature of any mortgage  valuation commissioned
• The cost of that valuation (if payable by the customer)
• The scope, extent and cost of any additional valuation product (such as a Homebuyers report) offered to customers.

We welcome initiatives such as that undertaken by RICS to increase the number of home buyers commissioning surveys or valuations and clarify the different products available to customers.

Why this is important for lenders

Clear product description and pricing is important to comply with regulatory requirements and to promote customers’ understanding of an important financial transaction. For example, some customers could confuse the lender’s valuation report with a survey and assume that the report is for their benefit, not the lender’s purposes. It is therefore important that lenders explain the nature of their valuation to their customers.