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Cemap 2&3 Self Testing > 14. Valuations And Surveys > Flashcards

14. Valuations And Surveys Flashcards

1
Q

Basic valuation - who is the contract between?

A

Lender and valuer

applicant has few rights

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2
Q

Do lenders have to make an assessment of the security of each mortgage?

A

Only building societies are legally bound to, but all do anyway

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3
Q

Who can carry out a valution as an assessment of security?

A

Can be an independent valuer or an employee of the lender

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4
Q

Which valuations/surveys contain a market valuation and reinstatment costs?

A

Basic val and full version of RICS 2 (not survey only)

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5
Q

Which valuation/survey notes superficial problems only and does not closely inspect?

A

Basic valuation

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6
Q

What is a desktop valuation? What is it’s purpose? When is it suitable?

A

Done on a PC in an office, no inspection at all - based on data from similar properties to determine a market price

Most suitable when property has already been inspected in the past because these are not very accurate. They don’t base off current conditions/are historic data

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7
Q

Is the valuation of a property the same thing as the market value?

A

NO - lenders valuations on basic val reports are what the valuer thinks it is likely to achieve if it is REPOSSESSED AND SOLD AT AUCTION (usually lower than market value)

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8
Q

How far out do valuation figures usually tend to need to be for the court to deem it negligent?

A

5-10% out

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9
Q

What are the two main circumstances for valuer negligence to be proven?

A
  1. DISCLAIMER was INSUFFICIENTLY PROMINENT
  2. Borrowers were INEXPERIENCED
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10
Q

Who is usually considered inexperienced borrowers?

A

First time buyers, those of modest means

NOT BTL/COMMERCIAL - expected to understand enough in limited nature to arrange own inspection if concerned

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11
Q

What should a valuer do if they are in doubt about any features of the property?

A

Recommend a more detailed report

especially true of subsidence

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12
Q

Are reinstatment values usually more or less than market value?

A

Standard construction = less

unusual design or materials = same or more

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13
Q

What should maximum LTV be based on?

A

Valuation or purchase price, WHICHEVER IS LOWER

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14
Q

What are other names for the following?
1. RICS Home survery L1
2. RICS L2
3, RICS L3

A
  1. Condition Report
  2. Homebuyer Report
  3. Structural/Building Survey
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15
Q

When is it usually not necessary for a buyer to commission their own surveys?

A

New build guaranteed by a scheme

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16
Q

Should an adviser recommend a customer get a RICS Home Survey report?

A

NO - If you recommend one and it is later revealed a problem could have been revealed if you recommended a different one, you could be sued

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17
Q

Does RICS L1 contain a market value/reinstatement figure?

A

NO

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18
Q

What type of properties is RICS L1 suited to? (3)

A
  1. Relatively new/conventional
  2. Reasonable condition
  3. Standard building materials
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19
Q

What does RICS L1 aim to identify?

A

Serious issues that need urgent attention and possible dangers, advises sols of key risks

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20
Q

Will RICS L1 recommend how repairs should be carried out?

A

NO

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21
Q

On the traffic light system on RICS reports, what do the colours mean?

A

RED = MOST SERIOUS/URGENT
AMBER = NON URGENT REPAIRS
GREEN = NO DEFECTS

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22
Q

Does RICS L2 Contain a professional market valuation & reinstatment figure?

A

YES

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23
Q

Does RICS 2 provide advice on repairs that need carrying out?

A

General advice, yes

not detailed advice and wont advise on repair costs

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24
Q

What are typical defects that can be identified in RICS 2? (4)

A
  1. Dry/wet rot
  2. Damp proof course
  3. Interior roof space
  4. Pointing
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25
Q

True or false, RICS 2 provides information on location, environment and EPC?

A

True

26
Q

What is included in a RICS L2 Survey only?

A

Same as RICS L2, but NO VALUATION/ REINSTATMENT FIGURE

27
Q

Which RICS report is considered thorough and detailed?

A

RICS L3

28
Q

Who can carry out a RICS L3 inspection?

A
  1. Qualified professional surveyor
  2. Engineer
  3. Architect
29
Q

True or false, if a RICS L3 report does not pick up on all defects you can sue the valuer?

A

True

30
Q

What does RICS L3 report cover in addition to what is included in RICS L1&2? (4)

A
  1. Electrics
  2. Drains
  3. Other services
  4. Lifts carpets and inspects the roof thoroughly
31
Q

Which surveys/valuations lift carpets and move furniture?

A

Only RICS L3

32
Q

In scotland, who is responsible for obtaining the Scottish Home report?

A

Vendor - they must have this in place before selling and make it available to all prospective buyers

33
Q

What is the most common defect that affects the lending decision?

A

Structural movement, either of property (poor construction) or the ground it is on (subsidence and heave)

34
Q

How do lenders usually react if structural movement is deemed to be:
1. Long standing and non-progressive
2. Recent and progressive

A
  1. Usually okay to lend
  2. Structural engineer will need to inspect further, might refuse to lend if it can’t be fixed
35
Q

What is subsidence? What are the signs of this? (3)

A

Where the land below a property drops unevenly

  1. New cracks in plaster
  2. New cracks in brickwork
  3. Rippling of wallpaper not cause by damp
36
Q

What conditions lead to subsidence? (3)

A

usually clay soil

  1. Water table drops after long dry spell, leading to tree roots absorbing moisture and drying out the ground
    OR
  2. Long term leaking drains or pipes
37
Q

What is heave?

A

Where the ground rises unevenly beneath the property

38
Q

What is heave usually caused by? (3)

A
  1. removal of tress/shrubs
  2. clay soil expanding when wet
  3. a chemical reaction in the soil
39
Q

How do surveyors know to look for heave?

A

Problems tend to be localised, e.g. Thames basin, so they look in these areas

40
Q

Other than structural movement, what other issues usually affect the decision to lend? (5)

A
  1. Untreated woodworm
  2. Severe damp
  3. Previous removal of a chimney breast
  4. extensions non-compliant with building regs
  5. traditional roof coverings that have been replaced with concrete
41
Q

What is a lender likely to do if a defect is
1. small problem
2. more serious work
3. very serious work

A
  1. require an undertaking
  2. retention
  3. not lend
42
Q

Does the lender have a right to inspect to see whether undertaking work has been carried out?

A

Yes, has right to inspect 3-6 months later but few do as little can be done about it, even though it is a breach of conditions

43
Q

What is a new build guarantee desigined to do?

A

protects buyers against defects in the early years

44
Q

What is the role of NHBC? (3)

A
  1. Provides warranty
  2. provides insurance
  3. works with builders to raise standards
45
Q

In which two ways does the NHBC Buildmark scheme regulate the build process?

A
  1. Builders must meet quality standards
  2. Inspections are carried out by NHBC personnel
46
Q

What protection is offered by the NHBC Buildmark scheme?

A

First 2 years - defects caused by builders’ failure to meet standards

next 8 years (up to 10 year mark) - full insurance costs provided for any damage over the minimum claim value

47
Q

How do you make a claim using the NHBC Buildmark scheme?

A
  1. first 2 years - claim goes to builder initially, but passes to NHBC if there is a dispute with NHBC covering the cost of action
  2. direct to NHBC who provide the insurance
48
Q

Are Minimum claim values for the NHBC Buildmark scheme fixed or reviewable?

A

reviewed annually on april 1st each year

initially subject to MCV set april before property is built

49
Q

True or false, there is no upper limit on claims made to NHBC?

A

False - all claims are subject to an upper limit

50
Q

True or false, the NHBC Buildmark scheme provides protection before completion?

A

True, some protection is provided from exchange of contracts

Buyer would be protected against builder becoming insolvent or committing fraud (even before completion this could lead to them losing their deposit or covering extra costs)

51
Q

What is a Premier Guarantee? Who provides it?

A

Guarantee scheme like NHBC, but protects new build developers instead of buyers

provided by a syndicate at Lloyds of London

52
Q

What protection is provided by a premier guarantee?

A

As with NHBC, 10 years protection, with more comprehensive in first 2 years

Up until 2 years - defects insurance
further 8 year, until 10 years - structural insurance

53
Q

Who does the LABC New home Warranty protect? (3)

A

Builders of:
1. Speculatively built resi housing (built before a buyer is found)
2. Social Housing
3. Completed properties

54
Q

In what ways is the LABC New home warranty similar to the premier guarantee? (2)

A
  1. underwritten by Lloyds at London
  2. same conditions - has to be built to NHBC standards
55
Q

What is the main difference between the LABC new home warranty and the premier guarantee?

A

As well as at defects and structural insurance period, there is insurance for the

Building period

56
Q

What are two other warranties given by LABC?

A
  1. Evolution Building Warranties
  2. Build-zone warranties
57
Q

What is the aim of the consumer code for homebuyers? Who was it developed by?

A

Ensure homebuyers are better informed about their rights by providing them with transparent documentation & a dispute resolution service

key industry & trade bodies, inc NHBC, LABC & UK finance

58
Q

What are the 4 ways in which consumers must be treated under the consumer code for home builders?

A
  1. treated fairly
  2. know what level of service they should expect from their builder
  3. be given reliable info
  4. know how to make a complaint
59
Q

Who must comply with the consumer code for home builders? (3)

A
  1. NHBC
  2. LABC
  3. Permier Guarantee
60
Q

Do lenders usually lend without NHBC new build guarantee, premier guarantee or LABC new home warranty?

A

Most like it, but can lend without if there is regular architect inspections

architect must have £1 million indemnity insurance

Cemap 2&3 Self Testing (29 decks)

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