Vendor surveys are undertaken by private and commercial property owners prior to selling a building. They are objective surveys of properties intended to satisfy the due-diligence requirement of potential purchasers in commercial buildings, avoiding the need for them to conduct their own surveys, and to make sure the vendor is not surprised by a purchasers survey in a domestic purchase.
Traditionally in the commercial arena, a Technical Due Diligence (TDD) report would be commissioned, usually by the preferred bidder, during the final stages of a purchase deal. Such reports would often highlight issues relating to the structure, fabric and the mechanical and electrical aspects that would then impact on the price, which would usually have to be lowered in order to prevent the sale from being delayed.
The Investment Property Forum states that ‘the most effective way of streamlining real estate transactions is for the intending seller and its advisors to have familiarised themselves thoroughly with the property and its title before putting it on the market’.
Domestically, the vendor in a home sale is made aware of issues that may influence a potential purchaser in trying to reduce the perceived market value which will have been calculated without knowledge of any influencing issue. It also gives the vendor a clear idea of achievable value of their current property when trying to assess what they can budget in their next purchase.
Vendor surveys have become increasingly common as they can help to speed up the sale process. In particular, when the property sector was hit hard by the economic downturn of 2008 many companies trying to sell assets began to commission surveys to speed up the sale and as a means of getting an edge over competitors.
Vendor surveys can include:
- A review of relevant technical and legal documentation.
- A full internal and external survey.
- A survey of, and advice on, building services systems.
- An assessment of deleterious materials.
- An assessment of environmental and energy performance matters.
While vendor surveys aim to facilitate the negotiation and transaction process, they have come under criticism from some property companies, funds and owner/occupiers. There has sometimes been a perception or experience of poor quality or biased reporting which, regardless of how professional the survey undertaken may be, is understandable since the vendor’s overall aim is to achieve a sale of the property. As a result, vendor surveys conducted by independent surveyors as opposed to ‘in-house’ surveyors have become increasingly popular as they are seen to be a neutral party to the transaction.
Some of the advantages of conducting a vendor survey include:
- By highlighting issues at an early stage, the vendor has more time to take remedial steps which could save money.
- Both parties to the negotiation are better informed at an earlier stage, helping to establish trust and better decision-making.
- The need for separate inspections by multiple prospective purchasers can be avoided.
- The need for the vendor to conduct their own survey to confirm the findings of a prospective purchaser can be avoided.