Unit 4 – Topic 14 Flashcards
Valuations and surveys
Why would a lender require an undertaking ? (14.6.1)
A. Extensive dry rot
B. Extensive wet rot
C. A large part of the roof needs repair
D. A small part of the chimney needs repair
D. A small part of the chimney needs repair
The work required if an undertaking is requested will not be necessarily vital and could typically be internal or external decoration, minor structural defects or the treatment of localised dry rot (which means the dry rot is contained). Repairs required by a retention will be more important than those for an undertaking, so in this question, it’s the small repair to the chimney that requires anundertaking.
Which of the following is the most likely reason why a builder would refer a claim to the NHBC ? (14.7.1)
A. The value of the claim is under £500
B. The builder disputes the claim
C. The property is more than 10 years old
D. The claimant is not the original owner
B. The builder disputes the claim
A claim is made to the builder for remedial action initially, but will go to the NHBC for arbitration in the event of a dispute.
A survey has shown problems with extensive dry rot. The lender is likely to : (14.6.2)
A. impose a retention
B. require an undertaking
C. require a warranty
D. require an engineer’s report
A. impose a retention
Repairs required by a retention are more extensive and important than those where an undertaking may be acceptable. The lender will almost always inspect the work before releasing the retained funds.
Examples of reasons for a retention are substantial repairs to a roof, or extensive dry or wet rot problems. If the question states that the dry or wet rot is ‘localised’ an undertaking should be sufficient.
Alan wishes to make a claim under his NHBC ‘Buildmark’ guarantee for a defect in his property. To whom should he initially submit his claim? (14.7.1)
A. The local authority
B. The builder
C. The NHBC
D. His buildings insurer
B. The builder
Claims for remedial action under the NHBC scheme are initially made to the builder. If the builder doesn’t play ball, the NHBC guarantee will step in to cover the costs of the claim.
Colin recently commissioned a RICS Home Survey Level 1 Report on the property he wishes to buy. Which of the following is true? (14.3)
A. It is designed to be available for all types and ages of property.
B. The surveyor provides condition ratings for the main parts of the property
C. The surveyor will give advice and recommendations regarding any remedial action.
D. The surveyor will look at areas that are covered or hidden, if asked to do so.
B. The surveyor provides condition ratings for the main parts of the property
This type of report was previously known as the Condition Report. The surveyor uses a 1-3 basis (akin to a traffic light system) to provide a condition rating on the main parts of the property.
A survey shows that a property is subject to heave; this is most likely to have occurred because of : (14.6)
A. the removal of a large tree
B. extensive damp in the supporting timbers
C. extensive wet rot
D. the roots of a tree, which are absorbing water
A. the removal of a large tree
Heave occurs when underground forces cause the land below the property to rise unevenly. It is usually caused by the removal of trees or shrubs close to the building, by clays soils expanding when wet, or occasionally by a chemical reaction in the soil.
Which of the following statements in respect of a basic valuation is correct? (14.1)
A. The report will confirm whether or not the agreed purchase price is reasonable.
B. The report will usually only highlight any necessary repairs if the loan-to-value ratio is high.
C. The valuation is carried out on behalf of the lender, but the
applicant usually meets the cost.
D. The valuation must be carried out by a valuer who is independent of the lender.
C. The valuation is carried out on behalf of the lender, but the
applicant usually meets the cost.
The contractual relationship for the basic valuation is between the lender and valuer, although the applicant pays any fee charged for the valuation.
Where a negligence case brought by a borrower against a valuer conducting a basic valuation is successful, this could be because: (14.1)
A. The borrowers were considered inexperienced in property matters
B. The lender failed to offer a choice of valuers
C. The mortgage term was very short
D. The property was considered unusual
A. The borrowers were considered inexperienced in property matters
With a basic valuation, a claim for negligence is only likely to succeed in two circumstances:
* the disclaimer was insufficiently prominent;
* the borrowers were inexperienced – this would typically apply to first-time buyers or those of modest means buying a home.
A mortgage advance has been provided in two stages, six weeks apart. What factor triggered this approach? (14.6.2)
A. A valuation which was lower than the agreed sale price
B. A town planning application which affects the property
C. A borrower’s poor credit rating
D. A retention clause in the survey report
D. A retention clause in the survey report
Mortgage retention is when a lender refuses to release the entire mortgage funds to a customer straightaway. They retain some of the capital until certain works have been carried out. A lender will only usually retain part of a mortgage because the surveyor has identified work that needs to be carried out. before the property is brought up to the stated value.
Which of the following RICS Home Survey Level reports gives the buyer some legal recourse if the surveyor was negligent, within the parameters of the report? (14.3)
A. 2 & 3
B. 1 & 3
C. 1 & 2
D. 2
B. 1 & 3
RICS Home Survey Level Reports 1 and 3 give the buyer recourse if the surveyor is negligent. With the Level 2 report, previously known as the Homebuyer Report the applicant has little comeback in the event that serious problems are encountered later. However, the report aims to identify major defects, allowing an opportunity to reject the property, make an amended offer or plan expenditure necessary to counter the problems.
