survey valuation higher than asking price - isn't that VERY unusual?

[beaglesaresweet]

and is it usually worded as 'reinstatement value' - of what, exactly? meaning insurance type value?

Sorry to sound naive and clueless. On MN people usually complain of lower valuations!

So far I've only bought and sold flats in london and in another relatively expensive city. The valuations were a little lower than asking, or the same but diplomatically saying 'the asking price is reasonable for such size flat in THIS desirable area'. But even in these areas it wasn't higher than asking.

With the house I'm considering in a town (active property market but no sealed bids/craziness of trendy places, prices MUCH lower than in london and surrounds), it seems like the surveyor hasn't taken the exact area into account at all! Did he simply base it on a size? The area is not the best in town, and I went for it just as I was seduced by the size of house you get - even though it's less than a mile from a desirable area where same price would buy a 'not-so-large' terrace, while this is a semi-.

BUT the asking and sold prices in this area are usually lower than this house, quite a bit sometimes even though those are usually in less good condition/decor old etc. I was firmly under the impression that I'm paying over the odds for the area, as I'm in a rush and just like the look of the house. There are no good secondary schools nearby btw, no shops on doorstep.

Is it normal to value a house AS IF it's in a much better area? Is there any (dis)advantage of such valuation, i.e. he is predicting price growth in near future? Could he be a friend of the agents and in doing this, encourages people to buy without any haggling after survey?

Reinstatement value is the estimate to completely rebuild in the event of a catastrophic event such as a fire. It will often be higher depending on materials required.

The report will state the market value too.

We recently had a (what used to be called scheme 2) survey. Reinstatement was 200k or so more than market value. It is an insurance risk.

In an area where land is at a premium (e.g. London) re-instatement will often be much less than cost to buy. Conversely, in an area of cheap land, it could be much, much more. In our case, that means that the re-instatement of our house in London less than the cost (can't remember the exact numbers, whereas our house in a rural northern area (but built in a way no longer feasible, with lots of architectural detail) has a re-instatement value of 5 times what it is worth.

They are both completely different from the value for sale.

when we recently purchased, as we were getting a mortgage, we were required to get a "mortgage valuation report", conducted by the lender's approved surveyor, and separately from that, we also instructed a full structural survey (the building is >500 years old) conducted by a surveyor of our choice.

for the bank valuation report, there were 3 values quoted; a market valuation in present condition, a market valuation with essential repairs completed, and a reinstatement value.

all 3 values were significantly higher than our accepted offer.

when we had our full structural survey conducted, our surveyor also valued the property at significantly above any of the values in the mortgage valuation report. he mentioned at the time that he only rarely comes across situations in which the mortgage valuation is at a level higher than the accepted offer.

i think the bottom line is that if your valuation is coming in at a level significantly above your accepted offer, then you should feel confident that you are getting a good deal. but make sure you are focusing on the market valuation, not the reinstatement value (which is something very different, as others have already stated).

as i understand it, surveyors are bound by a code of conduct to provide honest and fair valuations - the value provided (if indeed a market value is included in your report) is supposed to reflect current market conditions and value, not that of the future market or future development/value of that particular area. probably not worth risking his job as a favour to an estate agent (although nothing is impossible!).

thank you for replying with all the useful info!

There is 'market value' section but it just repeats the accepted offer - isn't that a bit dodgy? I thought he was just stating the accepted offer, rather than a surveyors opinion. It's a bit convenient to put the market value as exactly the offer level, not a pound difference - I'm just worried that in a small town like this they all know each other, and surveyors 'help out' the main agents so that they get recommended possibly by agents.

So is the reinstatement value an official figure that the insurance should be based on and paid out? I'm now worried that insurance will value the house on basis of the price paid and would not cover it to the MUCH higher reinstatement figure by survey - meaning the house can't be rebuilt for lesser amount and then what happens? sorry to sound a bit OTT but I find all this so daunting, don't want to make wrong decisions and no one there to advise in rl.

Market value is the accepted offer, if you think about it! Your insurance will ask the correct questions, just read it carefully, and put the right numbers in the right box.

Then stop stressing.

You have set the market value by your offer so the surveyor will agree qith that unless they think your offer is significantly out.
Reinstatement value is rhe amount the insurance company would have to pay to rebuild your house from scratch if it burned down.
As others have said it does not consider land value so the two figures may not be the same.

The market value is what someone is willing to pay. ..ie what you are paying.

I have bought several houses over the years and the market value has always been exactly the same as the purchase prices.

The only time it was higher was a private sale of our current home from a relative and our mortgage advisor did comment it was the first time she had seen it in 14 years.

I worked for years in a bank mortgage department and only once in all that time did I ever see the market value on a valuation differ from the accepted offer, and that was because there had been a fierce bidding war between two determined (and wealthy!) buyers and they had bid the property up to about 100k more than any other similar house in the area had ever sold for and the valuer concluded that such a bidding war was a freak occurrence, unlikely to happen again, therefore the true value of the house was really much lower than the final bid accepted. Which seemed fairly logical.

As forvthe reinstatement value, I agree with the others, it's the cost of replacing the whole building should it burn to the ground, for example. And it can be a fraction of the market value, or far higher than the market value, depending on the nature and location of the property.

beagles your insurer will be unlikely to care about the market value, only the reinstatement value. They will ask for that figure when you get a quote, and that will be taken into consideration in calculating your premium. Also a lot of insurers offer 'unlimited' or 'total rebuild cost' (can't remember the exact wording' as standard anyway, so you could look for such a policy if you were still worried.

Don't panic, it all sounds normal to me!

As my nn suggests, I have a thatched house for which the reinstatement value was vastly higher than purchase price/market value (over £100k). The house insurance had to be based on the reinstatement value for the purposes of the mortgage. However, now that I have paid off the mortgage, I have the power to insure the house for less, though obviously there is a huge risk in that.

So I still pay an eye-watering amount of insurance (and get very twitchy if DH lights a candle!). But as everyone else has said, multiple values are very common on surveyors' reports. And you clearly have a lovely house that is not easily replaced!