You essentially have three reporting options to consider, although if you have a finance organisation involved, they may stipulate some minimum requirements so it is best to ask them for direction. You can simply rely on verbal advice if you are a cash buyer and have a sound knowledge of building matters, but most purchasers opt for either of the following reports:-
Level 1 – Valuation report. This can follow a finance organisations standard form or the RICS Red Book minimum requirements. This level of report is for valuation purposes only, it merely records the property details that will affect value. Low detail, therefore low fee.
Level 2 – RICS Homebuyer Report (HBR). This is a standard report describing all building elements such as ceilings, floors, windows etc. The report will identify any building defects and give you advice if further investigation or repairs are needed. The report is structured using a simple traffic light indicator for those who like to skim read. Items shown green are nothing to worry about, orange items need further investigation or repair and red items immediate repair or have a serious fault. The idea of using a traffic light system was intended to help those purchasers in stressful times to understand a report at a glance rather than having to wade through pages of technical details. The HBR is the most common report and used on properties which are old or have been altered / upgraded where defects may be hidden. The report is a standard format with some limitations.
Level 3 – Building Survey Report (BSR), sometimes referred to as a ‘Structural Report’. The RICS has a standard format which is very similar to the HBR (Level 2) although there is significantly more detail, photographs and even sketches can be included in the report. The BSR does not have provision for market valuations and the RICS assume the purchaser will also have a Level 1 Standard Valuation Report if understanding the market value is required. The BSR provides budget costs for any of the reported repairs or alterations, so the Surveyor is expected to consider associated costs with the property as part of the report requirements.
Which report should I choose?
It is a matter of personal choice and will be dependent on the type of property and financial requirements. Each report has different levels of detail and increasing fees. Before deciding on which report, you should consult your finance company and discuss the options with a Surveyor. A new property formed to modern regulations should have no defects and be low risk, therefore it would be reasonable to assume a Level 1 survey will be fine. A slightly older property with inherent risks may be worth opting for a Level 2 report. Any property of high value and constructed before 1950’s should have a Level 3 report.
What is the cost of these reports?
Each type of report contains more detail therefore more time is spent investigating the construction details and report production. Fees are flexible and depend on the property and type of report. You should ask for a fee proposal before appointing a Surveyor and use the following as a guide; Level 1 – based on £1 per £1,000 of property value. E.g. a property worth £500,000.00 is a £500.00 fee. Level 2 – use the above scale but add £400 for additional drafting. E.g. a property worth £500,000.00 is a £900.00 fee. Level 3 – these are really bespoke reports, dependent on the property. The Surveyor will need to consider the property, but a property worth £1m could require a fee of £1,500.00 to complete the required inspection and report.
There are associated costs publishing an RICS Red Book Valuation Report therefore we apply a minimum fee of £300 to all level 1 surveys and a minimum fee of £900 to all level 2 surveys. The service we provide is compliant with the high standards of RICS and we go the extra mile with follow up inspections and meetings to make sure you understand the property before continuing with the sale.
Our fee scale may not be the most competitive although the service we provide is better than other local surveyors.
The RICS has created helpful guidance notes for any purchaser considering their reporting options. If you are considering which report, we would be delighted to discuss these options with you and will be able to provide the RICS guidance notes to help select the correct report for you and the property.
Gary Naftel BSc(Hons) MCIArb MRICS
The information in this Coffee Break article is intended for guidance only. The authors cannot accept any liability for any loss or damage which may result from the use of this article.