The Building
Surveys and Valuations
A message to Estate Agents - I ask you all to review your Buyer's Advice. 99% of those that I read on the web or in the brochures stress all the important matters concerning the acquisition processes, but so very few mention the house, the thing that all the money is being put into and which is to be the answer to all the hopes and dreams of the buyers. Once it's bought, people are unlikely to be sitting over the years thinking of the pleasures that a proper legal process gave them. No they want to be enjoying the house, the 'bricks and mortar' that they have bought. To ensure that they can do so and don't just have a trail of troubles and possible litigation they should know what they are buying.
A prospective client asked recently why he should get a survey of a relatively new house when he could just depend upon the 10-year structural warranty insurance. As I explained to him, if there were faults he would just be taking over somebody else's problems and many problems are not structural. Life really is too short to have the stress of pressuring the agent, the lawyer, the developer and the insurance company to live up to what he imagined as a comprehensive policy that would cover all the repair costs. Nothing compensates for the worry and uncertainty at the beginning; and the hassle of dust, noise and discomfort when the work, eventually, is being carried out. Surprises like this can be avoided by having the building surveyed prior to buying. At least then the buyer knows what he is taking on. If there is nothing there, he has the satisfaction of knowing that. Usually though, there are some matters that need attention and these can be taken into account in the whole 'dream buying' experience.
So why is a survey needed when, as I mentioned before, there are insurances that cover 'eventualities'? Incidentally, in addition to the 10-year structural warranty, the developer of a new property also has liability for generally everything that goes wrong or defects found in the first year. For the next two years, making three in all, the developer also has a duty to repair matters that affect the quality of living in the property, such as water penetration, bad electrics, etc. Even the seller of an older property is liable to the buyer for at least 6 months and some authorities state that it can even be for up to 4 years, for defects that are hidden at the time of purchase. So caveat emptor doesn't apply absolutely.
Surveys are a way of avoiding other's problems. Even the best intentioned developer is at least going to query any claim that is made and insurance companies appear to survive increasingly these days by making the claim process so difficult that some claimants give it up as not being worth all the hassle. It's better for the buyer to know and plan for a problem, either by getting the buying price reduced in compensation or budgeting for the cost when calculating the offer that is to be made. Or alternatively, deciding that they are buying to enjoy a property, 'What it can do for me rather than what I can do for it', and will walk away to look for something trouble free.
PROPERTY SURVEYS
There are a number of types of survey that people can request and need for particular situations.
Mortgage Survey - which is carried out on behalf of a bank or other mortgage lender. These surveys, though paid for by the borrower, really have the lender as the client and are merely to ensure that the lender's money is safe. A mortgage survey in Spain, unless it is carried out on behalf of a UK or Gibraltarian bank, has to be carried out by a tasador acting on behalf of one of the Sociedades de Tasación approved by the Bank of Spain. These companies have to place a substantial 'bond' with the central Bank, which I understand to be a kind of indemnity fund where lenders can be compensated in case of gross error by the tasadores . This central control can lead to the Sociedades being used to influence the market such as recently where they were instructed to undervalue in an attempt to reduce mortgage lending and slow the rise in values. So their valuations deliberately may not actually reflect the price that the property could fetch on the market.
They also tend to be more of a 'box ticking' exercise rather than the more subjective building survey by a Chartered Surveyor. However, I have to say that I am impressed by their reports as far as they go. We at Survey Spain do work in conjunction with tasadores where we incorporate their report within our own, thus satisfying the requirements of the Spanish law, whilst our explanation of the tasadores report and our comprehensive defects report is of more direct use to the buyer.
Building Survey - the most useful kind for house buyers, where the surveyor takes on the role of the buyer and inspects and reports on all those matters that might not have a major influence on the mortgage value, but undoubtedly could affect the buyer's equity and quality of enjoyment of the house.
Structural Survey - only really carried out to investigate the cause of a problem found and can involve, for example, breaking into the structure or foundations to test their construction
Valuation Survey - often combined with a building survey. A market valuation of anything is described as much more of an art that a science. There is no secret magic formula handed down by from generation to generation in secure rooms by people with trouser legs rolled up. No, it's a matter of gathering as much evidence, knowledge and information of what's happening in an area and its economy, the influences on people and places. This I have to say is extremely difficult in Spain in relation to finding reliable comparative evidence of what price properties have actually sold at - the full money paid. So many envelopes passing around the notary's table and that's not counting those at the unknown meeting in the neighbouring bar before! Sometimes even the escritura descriptions can be a 'work of art', with the sizes and accommodation bearing no relation to what is actually on the land. Yes, one can create appraisals, work out all the details of a property and apply equations and statistics, but at the end of the day the valuer has to look at the result on his computer screen and say to himself, "is that a realistic value?" That's why it's always stated as an Opinion of Value. Nobody can say exactly down to the last centimo what anyone unknown will pay for a property after negotiation.
That's perhaps where I can criticise the tasadores, as they DO have to apply formulas to the statistics of a property, its neighbourhood and location and stick with the results. Whatever comes out of the machine at the end is the stated value. They are bound to do so by detailed laws and regulations which, whilst ensuring standardisation as all properties are treated in the same way, it removes the subjective element, the 'art', and, as I'm sure we've all found to our frustration, can result in figures far from market reality. Having said that, I've found their reports very useful and thorough in considering the facts of a property.
Home Sellers' Packs - it can pay to be prepared!
The facts of a property. How many times have agents and sellers worked hard building relationships with buyers only to find these dashed by suspicion when its found that the property they are praising has major physical, legal or administrative flaws? Everything goes 'down the drain' - or not if that's what is the problem! What a waste of time for all concerned. It has to be assumed these days that most buyers and their professional advisors will carry out due diligence. Check who are the owners; what liabilities there are in the title; what are the costs and outstanding debts against the property; and so on. Once a client has decided to buy everyone wants it to go through as quickly as possible, but very often problems only surface when the paper gathering is being carried out. Here I have to speak in defence of lawyers! Their job is to ensure that everything that should be is legally transferred and anything that shouldn't be is avoided. Owners and agents can brush problems under the carpet, put heads in the sand and hope that they find a buyer daft enough to pay their money without any checks - and depressingly we know that there are many out there! But these problems will inevitably surface at some time and will cause hassle, anger, grief, worry and much wasted time.
Isn't it better to get them identified and cleared if possible prior to or during the marketing period? What I'm referring to is the preparation of a Home Sellers' Pack. This is just a simple matter of getting all the essential papers together - the escritura, the last five IBI and community receipts, the minutes of the last community AGM, electricity, water and telephone receipts. All that stuff that should be requested by a sensible buyer. If any problems are found, they can be dealt with or at least known as being there, before time and expense is wasted on marketing. And of course included within that should be a building survey report. Again, if problems are found they can either be dealt with by the seller or accepted as being there and the price modified accordingly. It's likely to happen anyway during the purchase negotiations. Having all that available to pass to potential buyers is a great reassurance for them and will certainly mark out that property and the people associated with it, as being above the mass in a market where information comes in dribs and drabs and may not be given at all. Packs such as these are, I understand, the norm in most Scandinavian countries and perhaps the Netherlands. So again,
by providing them you take away some of the barriers that can be created by the strangeness of different conventions in a foreign land.
There are trials proceeding with these in the UK. In Scotland and in Bristol in SW England, agents have reported a 50% reduction in sales falling through. 50%! That would certainly influence the conversion rates on those I.F's. They were found to reduce the price renegotiations and speed up the transactions. Especially important when you have a keen buyer and you don't want him to go off looking elsewhere whilst people take weeks finding 'lost' papers or getting quotes for work. Yes, their have been reports of seller's being reluctant to cover the cost of these packs, but all the work is going to have to be done at some time anyway and its just that it comes up front rather than being a scurry around and panic at the end.
Horror Tales of a Surveyor
In doing our work, what horrors have we found? Well water - cold and damp - is probably the biggest problem. I have to put in my reports that 'generally, throughout Costa del Sol, but especially in higher mountain areas, there is a need to remember that whilst the three to four summer months are dry, the remainder of the year has a 'normal' climate of occasional rain and wind. Unfortunately, many architects and owners appear to ignore this, thus leading to ventilation, water penetration and draught problems. Especially so with older properties where I think that the attitude has been to put up with some damp discolouration in the winter and huddle round the small table with the basin of coals underneath getting 'corn-beef' legs, then redecorate as things dry out in the spring and summer and do the same again next year. With there being so little wood in the construction, rot is not a major problem. Build like that in the UK and dry rot would be galloping through a building like a cancer within a few years.
We have found some spectacular failures. One in Axarquia always comes to mind and I have put the clients in contact with a UK TV company that is preparing programmes on people who have come out and found problems and how they have solved them. Hopefully, a happy ever after story. However, in this case I doubt it. I was called out to check a gap that had appeared between a swimming pool and the house. What I found was that the retaining wall, of huge Casares stones, had just been plonked down on the ground without foundation or internal screen or drainage. The wall was moving and the earth that it was to be supporting was just washing through it with every rain. The house wasn't affected, yet! I was introduced to a neighbour lower down the hillside who, before he had even been able to move into the new house, had noticed major cracking. Over the next few months all the soil under the front of the house had washed away and the entire concrete base had cracked, effectively starting to tear the house in half. Further up the hill, seen from the urbanisation road that had already slid away once, one could look under a house's foundation as the garden retaining wall had slid down the hillside taking all the support with it. The only house that wasn't affected was the one on the flat land at the foot of the hill - but it was in line to receive some of the stuff coming down from above!
A spectacular error by the architect or whoever designed the foundations. More was to come though. In asking about the titles and copies of licences the client said that the developer had promised them, but that "the Ayuntamiento was in touch with Sevilla!" Can it be that there is no permission for the urbanisation to be built at all? I asked what had happened with their lawyer. Had they not helped. Well they had recently changed their lawyer as, at a meeting with the developer complaining about matters, they had understood enough to realise that the developer had said to the client's lawyer that if they didn't shut up and stop complaining they wouldn't pass them any more clients. So the lawyer promptly stopped. And the clients have paid 95% of the price. How that can all be sorted out I don't know, but they now have new lawyers, Architecto Técnicos and engineers preparing reports on their behalf. The friendly selling agent is not often seen in the area now!
AND FINALLY - What is a Chartered Surveyor?
When property surveys are mentioned, the professional described as a Chartered Surveyor often features. The Royal Institution of Chartered Surveyors, is based in London and has about 120,000 members worldwide, the vast majority, of course, living and working in the UK. I am vice-president of RICS España. As we quote in our Survey Spain brochure, it's dedicated to promoting excellence and safeguarding public interest in all property related matters. All Chartered Surveyors have to follow strict rules of ethical conduct, which are enforced by the RICS. Again it's this latter point that the client is reassured by. We have to have professional indemnity insurance so that if we make a mistake and it costs the client money, there is a fund there to recompense him or her. (Incidentally, I find that many surveys are initiated by woman as they, perhaps as the worrier in a relationship, want the reassurance of an independent confirmation of their husband's comment that "of course its alright. Don't fuss!")
Chartered Surveyors have to be respectful of their client's interest and if they are not, or get up to any shady dealings, can be fined or even thrown out of the Institution. And, unfortunately, it does happen with regular disciplinary proceedings being reported in the professions journal.
Chartered Surveyors cover a wide range - QS, land, mining and even specialists in undersea surveys. Most people come across Either Quantity Surveyors (a QS) - who can be very roughly described as being involved in the construction process, such as cost control, project management and the like; OR general practice surveyors who tend to be more involved with existing buildings and their defects or the finance, the market value, created by the building, its land and location. I am a general practice surveyor and have worked on a huge range of property types and values (and with some interesting clients!) over the years.
Oh yes, and one last observation. Professionals have clients who pay their fees. So why is it that the buyer here is called the client when the fees are paid by the seller? It's the cause of some confusion and heart-searching by conscientious agents as, at the end of the day, when push comes to shove in a negotiation, the client, the seller, is not going to be happy to pay somebody who has just negotiated away large amounts off the selling price to the benefit of the buyer. So there must be a reluctance to truly represent the buyer and effectively he is out there on his own. And whom is the white knight coming to his assistance? The Chartered Surveyor of course! There is no Spanish equivalent. |
