How much does it cost to rebuild your home? The chances are that your surveyor is unlikely to know your home reinstatement value because this is not their specialist area.
The problem with home reinstatement values
We come across many home survey reports that do not provide reinstatement values and will only do so upon request and even then they clearly state they cannot be held liable for any miscalculation, as they are not construction cost specialists! The Royal Institute of Chartered Surveyors provides an online cost calculator but readily admits the potential inaccuracy of the figures provided.
So why don’t we just ask an expert?
It seems obvious and it would be relatively simple to do if this advice was given earlier on in the purchase process and not just hours before exchange of contracts, where the buyer is more often than not rushed into purchasing buildings insurance to enable the contracts to be exchanged. With little time available, the mortgage valuation or home survey report is the only source of information available to the client and the solicitor.
What is the ideal outcome?
For those properties with a reinstatement value of less than 1 million pounds, the chances are that these properties will forever remain underinsured or sometimes even over insured. Drawing on years of data provided to us by our clients, surveyors typically undervalue rebuild costs because they do not possess enough relevant data on costs and simply adhere to RICS guidelines which are based on the “standard” UK home and actually calculate build costs on number of rooms rather than square foot.
Only when an individual owns either a residential or commercial property over 1 million and now more typically over 2 million, can they expect to receive a visit form a professional insurance valuation surveyor.
The good news is that when they do visit, the cost of this is typically provided by the insurance company. The bad news is that your sums insured are more likely to increase (see above) and therefore you will have to pay an additional premium as a result. Nobody likes being asked to pay more for something than they were originally quoted for and quite rightly the client feels let down by the entire process.
How to ensure your home reinstatement value is correct
Ideally when a home survey is carried out, the correct reinstatement value should be provided at the first time of asking. Insurance and quantity surveyors have all the data required but for whatever reason, this data has not been made available to or requested by surveyors.
Banks, estate agents and surveying firms could outsource the reinstatement cost analysis to the construction specialists. We are sure the major banks would be alarmed to realise that the assets that they are providing lending against are sometimes grossly undervalued and in the event of a claim, they could be seriously out of pocket.
However, if the cost of outsourcing is too prohibitive, then surely there should be some sort of data share between all relevant parties? This perhaps would be the most cost effective and viable solution for all concerned, especially the client.
Until that time comes, for residential properties only, Stanhope Cooper is able to provide solicitors, estate agents and clients with a desktop valuation, free of charge if purchased in conjunction with an insurance policy, prior to exchange of contracts. An on-site valuation, typically paid for by the insurer, will then be arranged post completion.
Please do contact us for any enquiries you may have.
Or call us on 0207 776 9790