According to insurance provider Churchill, 14% of buyers who have purchased a property in the past 20 years didn’t have a structural survey carried out before purchasing, solely relying on the mortgage valuation when taking out their home insurance. In addition, almost half of those who relied on a mortgage valuation said work was needed on their property within a year.
While it’s evident that purchasing a home without checking the building’s structure leaves the buyer at risk of the additional expense on any necessary works, it also means they are considerably underinsured – a serious and potentially costly issue. For example, a mortgage valuation survey will indicate the overall market value of the property without taking into consideration its specifications, so if the property had marble worktops, copper taps, and reclaimed vintage slate roof tiles, then the actual cost to rebuild it would likely be considerably more than its valuation. Therefore, it’s important that an accurate and detailed survey is carried out. This will give the homeowner their ‘build sum assured’ or ‘reinstatement value’ which is the amount that it would cost to rebuild the home from scratch in the event of a total loss. This includes architects fees, contractors, VAT, and so on, providing an accurate sum of how much it would actually cost.
By choosing not to take these key steps and only insuring a property at face value, the homeowner is putting themselves at an unnecessarily expensive risk. For example, if a property is valued at £200,000 – when it’s really worth £400,000 due to its specification – and then it burns down, the owner would only get 50% of the original amount. This means they’d make a £300,000 loss in total. As such, getting the correct surveys done is invaluable.
It’s also worth noting that it’s usually the opposite way round in London, where property value is often considerably higher than the cost to rebuild due to the huge premium on London property.
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