Mortgage Valuations, Property Surveys and Defects for CeMAP MRT1

The homebuyers survey, the mortgage valuation and property defects make up three learning outcomes of CeMAP® MRT1, the first unit of CeMAP 2 (MORT) set by Walbrook (LIBF). LO9 covers defects (AC9.1–9.4), LO10 the factors affecting value (AC10.1–10.6) and LO11 valuations and surveys (AC11.1–11.3). The survey levels and defects below apply across the UK; Scotland uses a seller-provided Home Report instead of buyer-ordered surveys, and we flag where that matters. For the module, see the CeMAP 2 (MORT) hub, and for the whole unit, the MRT1 unit guide.

The official criteria, from the CeMAP qualification specification, Appendix 3:

Criterion	Official wording (shortened)
AC9.1	Main property defects
AC9.2	How property defects may affect the lending decision
AC9.3	Possible remedial works and actions lenders may take
AC9.4	Guarantee schemes for new homes
AC10.1	Principal factors affecting property values: type, location, building materials, restrictions, age
AC10.2	When customers should seek advice on property values, including reinstatement value
AC10.3	Implications for lenders, including multiple use, vacant possession and buy-to-let rental income
AC10.4	Legal issues: easements, rights of way, covenants, tenure, planning consent, building regulations
AC10.5	Insurability
AC10.6	Flooding, subsidence and heave, contract guarantees, listed and heritage
AC11.1	Forms of valuation and survey (basic valuation and RICS Home Survey reports)
AC11.2	Requirements of lenders
AC11.3	Rights of the consumer

What is the difference between a mortgage valuation and a homebuyers survey?

A mortgage valuation is the lender's limited inspection to confirm the property is adequate security for the loan, under MRT1 AC11.1–11.2. A homebuyers survey, the RICS Level 2 survey, is commissioned by the buyer to report on the property's condition.

	Mortgage valuation	Homebuyers survey (RICS Level 2)
Who it is for	The lender	The buyer
Who orders it	The lender, through its panel valuer	The buyer, from an RICS surveyor
Purpose	Is the property worth enough to secure the loan?	What condition is it in, and what needs repair?
Depth	Limited walk-round, or a desktop or automated valuation	Visual inspection of accessible parts, with condition ratings
Output	Market value, sometimes a reinstatement figure, any conditions	Condition ratings, repair advice, optional valuation

A lender values the property for one reason: if the borrower defaults, the sale must repay the debt. So the valuer looks at saleability and value, not at every crack. For a low loan to value remortgage, a lender may use an automated valuation model with no visit at all. Our loan to value guide shows why the valuation figure, not the price, drives the LTV.

In Scotland the seller must provide a Home Report, required since 1 December 2008. It combines a single survey with a valuation, an energy report and a property questionnaire, so buyers rarely order their own survey.

Key fact: A valuation is for the lender, not the buyer. Treating a satisfactory valuation as proof that the property is in good condition is the classic MRT1 trap.

What are the three RICS Home Survey levels, and where does the homebuyers survey fit?

The RICS Home Survey Standard, in effect since 1 March 2021, sets three levels of residential survey. Level 1 is a basic condition report, Level 2 is the survey formerly called the HomeBuyer Report, and Level 3 is the full building survey, the most detailed.

Level	Name	Best suited to	What it gives
Level 1	Condition report	Newer, conventional homes in good condition	Condition ratings, no repair advice, no valuation
Level 2	Survey (the homebuyers survey)	Conventional homes in reasonable condition	Condition ratings, advice on repairs and further investigation; valuation and reinstatement cost as options
Level 3	Building survey	Older, larger, unusual, listed or much-altered homes	Detailed inspection, description of defects, likely causes and repair options

All three use traffic-light condition ratings: 1 for no repair needed, 2 for defects that need repair but are not serious or urgent, and 3 for serious defects or those needing urgent attention. Elements the surveyor could not inspect are marked "not inspected". The RICS home survey standard page describes the standard; RICS is working on a second edition, which it aims to publish in 2027.

None of the levels is intrusive: surveyors do not lift fitted floors or open up walls. If they suspect a hidden problem, they recommend a specialist report.

Exam tip: Match the property to the level. Old, unusual, listed or extended means Level 3. A typical 1990s semi in fair condition means Level 2.

Which property defects must CeMAP candidates know?

The property defects CeMAP candidates must know under MRT1 AC9.1 are structural movement (subsidence, heave, landslip), damp, timber decay, wall-tie failure, roof spread, invasive plants such as Japanese knotweed and problem construction types. Each affects value, insurability or both.

Defect	What it is	Typical signs
Subsidence	Downward movement of the ground under foundations, often from shrinking clay, tree roots or leaking drains	Diagonal cracks wider at the top, sticking doors and windows
Heave	Upward ground movement, for example when trees are removed and clay swells	Cracks, lifting floors
Landslip	Movement of ground down a slope	Cracking across the building and grounds
Settlement	Normal early movement of a new building under its own weight	Fine cracks that stabilise; rarely serious
Rising damp	Ground moisture rising through walls with no working damp-proof course	Tide marks low on walls, salts
Penetrating damp	Water coming through walls or roofs from defects	Damp patches after rain
Condensation	Moisture from inside the home on cold surfaces	Mould, often in bathrooms and bedrooms
Dry rot and wet rot	Fungal decay of timber; dry rot spreads through masonry	Soft or cracked timber, fungal growth
Woodworm	Beetle larvae boring through timber	Small flight holes, dust
Wall-tie failure	Corroded ties in cavity walls	Horizontal cracks in mortar beds
Roof spread	Rafters pushing walls outward	Bowing walls, sagging ridge
Japanese knotweed	Invasive plant that can damage paving and drains	Bamboo-like canes; needs a management plan

Construction types lenders treat with caution

Non-standard construction, such as some prefabricated reinforced concrete (PRC) houses built after 1945, timber-frame properties with defects, buildings with high-alumina cement or reinforced autoclaved aerated concrete (RAAC), and flats whose external walls need an EWS1 form, can all restrict lending.

Key fact: Subsidence is the ground moving down; heave is the ground moving up. Both are structural movement, and both appear by name in MRT1 AC10.6.

How do defects affect the lending decision?

Defects affect the lending decision in five ways under MRT1 AC9.2–9.3: the lender may lend normally, hold back a retention until repairs are done, ask for a specialist report, reduce the valuation, or decline because the property is unacceptable security.

Lender action	When it is used
Lend in full	Defects are minor or already reflected in the price
Retention	Essential works are needed, such as a new roof; part of the advance is held back until they are complete
Undertaking	The borrower agrees to complete specified repairs within a set period after completion
Specialist report	Structural engineer, timber and damp, drainage or knotweed reports before deciding
Reduced valuation	The defect lowers the market value
Decline	The property is uninsurable, structurally unsound or unsaleable

Worked example: a retention

Ella is buying a terraced house for £200,000 with a 15% deposit of £30,000 and a mortgage of £170,000, an 85% LTV. The valuer reports that the roof needs replacing and recommends a retention of £9,000.

1. The lender approves £170,000 but retains £9,000.
2. At completion it releases £170,000 − £9,000 = £161,000.
3. Ella needs £200,000 − £161,000 = £39,000 on completion, not £30,000: an extra £9,000.
4. She must also pay for the roof, then the lender re-inspects and releases the £9,000.

The retention protects the lender's security, but it means the buyer needs extra cash twice over until the money is released. That is why advisers discuss defects before an application, not after.

Exam tip: A retention is released after the work is done and re-inspected, not at completion. The buyer must fund the gap.

What factors affect a property's value?

The factors affecting a property's value, in MRT1 AC10.1–10.6, are its type, location, materials, age and condition; legal issues such as covenants, easements and tenure; planning and building regulation compliance; insurability; and risks such as flooding and subsidence.

For the customer (AC10.1)

• Type and location: detached houses, flats, ex-local authority homes and properties near commercial or noisy sites sell to different markets.
• Building materials and age: non-standard construction and older homes may need more maintenance and suit fewer lenders.
• Restrictions: restrictive covenants (for example no business use) and listed status limit what the owner can do.

For the lender (AC10.3)

• Multiple use: a flat above a shop or takeaway is harder to sell and insure.
• Vacant possession: a property with a sitting tenant is worth less as security, because the lender may not be able to sell it empty.
• Buy-to-let rental income: for investment lending, the rent supports the loan as well as the value. Our buy-to-let mortgages guide explains the rental tests.

Legal issues (AC10.4)

Easements and rights of way, outstanding disputes, covenants, planning consent and building regulations approval all affect value. Missing approval for an extension or loft conversion can delay a sale or need indemnity insurance. Tenure matters too: a short or onerous lease reduces value, a topic covered in our conveyancing process guide.

Insurability and risk (AC10.5–10.6)

A property that cannot be insured at a reasonable cost is poor security. Flood risk is the main example. Flood Re, the government-backed reinsurance scheme, helps keep cover affordable for eligible homes built before 1 January 2009, according to its eligibility criteria; newer homes are excluded. Contract guarantees, such as damp-proofing or timber treatment guarantees, add value only if they can be transferred to the buyer. Listed and heritage properties need consent for alterations and cost more to repair.

Key fact: Flood Re covers eligible homes built before 1 January 2009. A home built in 2015 on a flood plain cannot rely on it.

What is reinstatement value?

Reinstatement value is the cost of rebuilding a property from scratch, including demolition, site clearance and professional fees, but excluding the land. It is the basis of the buildings insurance sum insured, under MRT1 AC10.2, and it is often lower than market value.

The two figures answer different questions. Market value is what a buyer would pay for the home and its land. Reinstatement value is what it would cost to rebuild the structure after total loss. A Victorian house in central London may have a market value far above its rebuild cost, while a listed cottage built of rare materials can cost more to rebuild than it would sell for.

Worked example: underinsurance

Sam's house has a market value of £320,000 and a reinstatement cost of £200,000. He insures the buildings for £150,000. A fire causes £40,000 of damage. His policy contains an "average" clause, common in buildings insurance.

1. Proportion insured: £150,000 ÷ £200,000 = 75%.
2. Claim paid: £40,000 × 75% = £30,000.
3. Sam bears the remaining £10,000.

The sum insured should be the reinstatement cost, not the market value or the mortgage. Lenders require buildings insurance from completion, and many show a reinstatement figure in the valuation for this purpose. Our mortgage protection guide covers buildings insurance in the CeMAP 3 context.

Exam tip: Buildings insurance is based on reinstatement value. Insuring for market value usually over-insures; insuring for the loan amount may under-insure.

What guarantees cover new homes?

New homes are usually covered by a 10-year structural warranty, the subject of MRT1 AC9.4. NHBC's Buildmark, for example, gives deposit protection before completion, a 2-year builder warranty period, then an 8-year insurance policy against physical damage caused by failure to meet NHBC standards.

Those details come from NHBC's Buildmark page. Other warranty providers offer similar 10-year cover. What matters for the exam is the structure:

Period	Who is responsible	What is covered
Before completion	Warranty provider	Loss of deposit if the builder becomes insolvent
Years 1–2	Builder, backed by the warranty provider	Defects caused by the builder not meeting the standards
Years 3–10	Warranty provider's insurance	Physical damage from specified defects, mainly structural

Most lenders will not lend on a new build without a recognised warranty. For self-builds and some conversions, lenders may accept a professional consultant's certificate from an architect or surveyor who supervised the work. Lenders also usually ask the builder for a disclosure of any incentives, such as paid legal fees or a cashback, because incentives can inflate the price and so the valuation. A warranty does not cover wear and tear, and the builder's two-year period is the main route for snagging defects.

Key fact: A typical new-home warranty lasts 10 years: 2 years of builder responsibility, then 8 years of insurance cover.

What rights does the borrower have over the valuation?

The borrower's rights under MRT1 AC11.3 are limited because the valuation belongs to the lender, though many lenders share it. A valuer can owe the buyer of a modest home a duty of care, as the House of Lords held in 1990.

In practice:

• Paying for it. The borrower usually pays the valuation fee, which must appear in the lender's fee disclosure, but paying does not make the report the borrower's.
• Seeing it. Lenders' policies differ. Many send a copy or a summary.
• Challenging it. The borrower or broker can ask the lender to reconsider, usually with comparable sales evidence. The lender does not have to change it.
• Suing the valuer. Under the 1990 case Smith v Eric S Bush, a negligent valuer can be liable to a buyer who relied on a mortgage valuation of a modest home, not only to the lender.
• Complaining. A complaint about how the lender handled the valuation goes to the lender, then to the Financial Ombudsman.

Worked example: a down valuation

Mo agrees to buy a flat for £250,000 with a £25,000 deposit, applying for £225,000 at 90% LTV. The valuer values it at £235,000.

1. New LTV: £225,000 ÷ £235,000 = 95.7%, above the 90% product limit.
2. The maximum loan at 90% of the valuation: £235,000 × 90% = £211,500.
3. Shortfall against the price: £250,000 − £211,500 − £25,000 = £13,500.

Mo can find £13,500 more, renegotiate the price, try a 95% product or another lender, or withdraw. Lending on the lower of price and valuation is standard practice and protects the lender if the borrower defaults.

Exam tip: Lenders lend on the lower of price and valuation. A down valuation always raises the LTV on the same loan.

Your MRT1 property study plan

Your MRT1 property study plan covers LO9 to LO11 in about four sessions: valuation versus survey, then defects and lender actions, then value factors and reinstatement, then timed questions until you score 85% or more three times in a row.

1. Session 1. Take the free MRT1 diagnostic. Learn the valuation and survey comparison and the three levels.
2. Session 2. Defects and lending decisions. Drill them with the MRT1 defects topic practice, and rework the retention example with your own figures.
3. Session 3. Value factors and reinstatement. Use the property value topic drill and practise the underinsurance calculation.
4. Session 4. Valuations, surveys and consumer rights with the valuation and survey topic drill, then rework the down valuation example.

Print the MRT1 worksheet with an answer key for revision away from a screen. When LO9 to LO11 feel secure, sit the free MRT1 mock 1 under the real timing: 50 standalone questions in 60 minutes, 35 to pass.

The sample questions below come from our MRT1 bank. Topic drills and mocks 2 to 10 are part of Pro, at £6.99 a week, £11.99 a month or £22.99 for three months, covering all five units. Our readiness rule matches the app: three mocks in a row at 85% or more, with every topic at 80% or more. It is a guide to readiness, not a pass guarantee.