Scotland is one of the few places where a buyer sees a surveyor's valuation before making an offer. That is a real advantage, but only if you understand what the lender does with that figure. In a competitive market the gap between the valuation and what it takes to secure the property is the number that decides whether you can actually proceed.
Looking for advice on your own situation rather than the general picture? Our first time buyer mortgage advice page is the place to start, or you can talk it through with an adviser using the form below.
What the Home Report is
The Home Report is provided by the seller and contains three parts: a single survey with a valuation, a property questionnaire covering matters such as council tax band, alterations and past damage, and an energy report. The seller or their agent must supply it within nine days of you asking.
The valuation in the single survey is a chartered surveyor's opinion of what the property is worth. It is not the asking price, and it is not what the property will sell for. Those three figures are routinely different, and conflating them is where the trouble starts.
Some properties are exempt, including new builds that have never been occupied and certain seasonal holiday homes. Exempt properties still need an Energy Performance Certificate.
Asking price, offer price and valuation are three different things
- Asking price,A marketing figure. In Scotland it is frequently set below the valuation, as "offers over", specifically to attract competition.
- Home Report valuation,The surveyor's opinion of value. This is the figure the lender starts from.
- Offer price,What you actually agree to pay. In a busy area this can be well above both of the others.
A property marketed at offers over £150,000 with a Home Report valuation of £160,000 that sells for £172,000 involves all three numbers, and only one of them determines your mortgage.
How the lender assesses it
A lender advances a percentage of the lower of the purchase price and the valuation. In practice, when you offer above valuation, the valuation is the lower figure and therefore the one that counts.
This is not negotiable and it is not lender-specific. The consequence is simple arithmetic: every pound you offer above the Home Report valuation is a pound you must fund yourself, in addition to your deposit.
A worked example
Round figures, purely to show the mechanics. Not a quotation, and not an indication that any lender would lend on these terms.
- Home Report valuation,£200,000.
- Your accepted offer,£215,000.
- Deposit you had planned, at 10%,£20,000 — but 10% of what?
- What the lender works from,£200,000, the lower figure. A 90% mortgage is £180,000.
- Cash required,£215,000 less the £180,000 mortgage — £35,000.
- The shortfall against your plan,£15,000 more than the £20,000 you had budgeted.
The £15,000 is exactly the amount by which the offer exceeded the valuation. That is the whole mechanism, and it is why the valuation figure should shape your bidding rather than be discovered afterwards.
What if the lender's own valuation differs?
The lender will normally instruct its own valuation, and it does not have to agree with the Home Report. Sometimes a lender will accept the Home Report figure; sometimes it will value lower, particularly where the property is unusual, in poor condition, or where local evidence does not support the figure.
A down valuation means the lender lends against its own lower figure, which increases the cash you need. Where that happens the options are generally to renegotiate, to find the difference, to try a different lender whose valuer may take another view, or to withdraw. None of those is automatic and none is guaranteed to work.
Talk to two people before you bid
Your solicitor handles the offer and the missives, and in Scotland an accepted offer moves quickly towards a binding contract. Your mortgage adviser can tell you what a given offer price means for the cash you need and whether the borrowing still works at that level.
The order matters. A quick conversation before you submit an offer costs nothing and prevents the far more expensive discovery that you are committed at a price you cannot fund. What the offer means legally is a question for your solicitor; what it means for the mortgage is one for us.
Common questions
This guide is general information, not regulated financial advice, and reflects our understanding of the rules at the date shown. Tax treatment depends on individual circumstances and may change. Your home may be repossessed if you do not keep up repayments on your mortgage. Not all buy to let mortgages are regulated by the Financial Conduct Authority.