Topic 14 - Valuations and Surveys Flashcards
The contract for a basic valuation is between the:
borrower and the lender.
lender and the valuer.
borrower and the valuer.
The contractual relationship for the basic valuation is between the lender and valuer, although the applicant pays any fee charged for the valuation.
If a buy-to-let investor takes legal action for negligence against the valuer that carried out a basic valuation, the claim:
may succeed if the disclaimer was insufficiently prominent.
may succeed if the borrower was inexperienced.
is unlikely to succeed.
is unlikely to succeed - Courts have made it clear that buy-to-let investors and business borrowers should be experienced enough to understand the limited nature of a valuation report and arrange their own inspection if they have any concerns.
A basic valuation may make a recommendation to lend on a conditional basis. Such conditions would not include a recommendation to:
require a retention.
require an undertaking.
reduce the mortgage loan to value.
reduce the mortgage loan to value.- Reducing the loan to value of a mortgage is not something a valuer would recommend. That part of mortgage underwriting is the lender’s responsibility.
Which of the following statements is true of a RICS Survey Level 1 Report?
It contains all the information of a basic valuation together with comments on any aspects of the property that are dangerous, in need of attention or that need further investigation.
It provides an overall picture of the condition of any property, and can be arranged to include a valuation to satisfy the lender’s requirements.
It identifies aspects of the property that are dangerous, in need of attention or that need further investigation, and it provides advice, but it does not include a valuation
C - The RICS Survey Level 1 Report is a more detailed inspection than a basic valuation, and is intended to identify aspects of the property that are dangerous, in need of attention or that need further investigation. It also provides advice for buyers’ solicitors that summarises the key risks associated with purchasing the property. It does not include a valuation.
A significant difference between a RICS Survey Level 1 Report and a RICS Level 2 Survey Report is that only the RICS Level 2 Survey Report includes:
an energy efficiency assessment.
advice on repairs and maintenance.
a traffic-light system to rate each part of the property.
advice on repairs and maintenance - Both reports use a traffic-light system to rate parts of the property. Neither report includes an energy efficiency assessment, although the RICS Level 2 Survey Report will include details from an Energy Performance Certificate if an assessment has been carried out. Unlike the RICS Survey Level 1 Report, the RICS Level 2 Survey Report includes advice on repairs to issues identified and ongoing maintenance.
Which of the following statements apply to a RICS Level 3 Home Survey Report? Select all that apply.
A - It can include a valuation on request.
B - It is a contract between the lender and the valuer.
C - It is a more detailed assessment of the key elements of the RICS Survey Level 1 Report and RICS Level 2 Survey Report.
D - It provides the highest level of recourse if defects are not identified.
E - The surveyor will not inspect the electrical system or drainage system.
F - The surveyor will lift carpets and inspect the roof space
A, C, D & F - The contract is between the valuer and the buyer, who commissions the RICS Level 3 Home Survey Report. The electrical and drainage systems will be inspected.
Which of the following is most likely to cause subsidence in a property?
Removal of nearby trees.
Long-term leakage of pipes.
Chemical reactions in the soil.
Long-term leakage of pipes. -
Removal of nearby trees and chemical reactions in the soil are causes of heave.
Jackie has been informed that the property she is hoping to buy has a large patch of wet rot in the living room. The rest of the property appears to be in reasonable condition. Her lender is most likely to:
require an undertaking.
impose a retention.
refuse to lend.
impose a retention - As the rest of the property is sound, a retention is the likely response. An undertaking would be appropriate for less extensive, less serious issues.
Which of the following is true once an undertaking has been included as a condition by a mortgage lender?
There will always be a time limit for work to be done.
Completion will always be checked by an inspection.
Funds will be held back until the work has been completed.
The lender can check completion in a variety of ways, including phone calls, inspection or confirmation from the owner. A retention is where funds are held back until work has been completed.
The NHBC Buildmark scheme provides:
ten years’ protection against defects and damage caused by the builder’s failure to meet NHBC standards.
two years’ protection against defects and damage caused by the builder’s failure to meet NHBC standards.
ten years’ insurance for the full cost of damage caused by major structural defects.
two years’ protection against defects and damage caused by the builder’s failure to meet NHBC standards. - The Buildmark scheme provides protection against defects and damage during the first two years, where it is caused by the builder’s failure to meet NHBC standards. For the balance of the first ten years the scheme provides insurance for the full costs of damage over a specified amount, known as the minimum claim value (MCV), caused by major defects in the building’s structure.
A basic valuation is for the benefit of the lender and is paid for by the lender. True or false?
False: a basic valuation is for the benefit of the lender but it is paid for by the borrower.
Which form of inspection gives the borrower the highest level of protection against negligence from the person carrying out the inspection?
RICS Survey Level 1 Report.
RICS Level 2 Survey Report.
Valuation.
RICS Level 3 Home Survey Report.
RICS Level 3 Home Survey Report.
Lenders generally require valuers to specify both the value for lending purposes and the insurance reinstatement value of a property. True or false?
True: the insurance value is often different from both the value for lending purposes and the selling price.
Which of the following would be included in both a RICS Level 2 Survey Report and a RICS Survey Level 1 Report?
A report on the property’s energy efficiency.
Issues that need urgent attention.
A valuation.
Advice on how to deal with remedial work.
Issues that need urgent attention.
A RICS Level 2 Survey Report is expected to report on the existence and condition of a damp proof course. True or false?
True: the RICS Level 2 Survey Report will also report on the state of beams, rafters, etc, and any sign of dry or wet rot, etc.
