We frequently get questions about property valuations. Individuals are often confused about why a valuation is needed, what the different types of report are, and what’s involved.
Here, we’ve compiled a list of frequently asked questions, with answers provided by our RICS Registered Valuers.
There are a number of different reasons why you might need a valuation report.
If you’re buying a property with a mortgage, your bank or building society will insist upon a valuation report. They will often instruct a Chartered Surveyor from their own panel to do this, you will just have to pay the fee!
Other reasons you might need a valuation report include:
There are a number of stages involved in producing a valuation report. Firstly, the Chartered Surveyor or RICS Registered Valuer will undertake an inspection of the property or land. If valuing a property, this will include both an internal and an external inspection.
The surveyor will make note of the condition of the property along with any other factors which may affect the value such as contamination or planning issues.
The next stage is desk based.
The methodology used to establish the value will depend upon the type of property and purpose of the valuation.
For example, development land is usually valued using what is known as a ‘residual’ calculation. Commercial property is often valued using the ‘investment method’.
The most commonly employed methodology is the ‘comparative’ method, used to value residential houses and flats. The surveyor researches recent sales in the market, identifying transactions of similar properties. The surveyor compares these ‘comparables’ with the subject property, and makes appropriate adjustments to derive the Market Value. Experience and a strong knowledge of the market is vital to establish an accurate valuation.
The final stage is compiling the report using the information gathered. A typical valuation report on a residential property will be several pages long and will include both text and photographs.
An estate agent’s property appraisal is provided to guide the vendor on a suitable asking price and what price they would aim to achieve for the property. Whilst some agents know their market well and provide honest advice, this is not always the case.
An RICS valuation report is prepared by an experienced and qualified professional who acts objectively and whose only motive is to provide as accurate a valuation as possible, with no other agenda.
For this reason, banks will appoint an RICS Valuer to ensure that they are not lending significantly over the value of a property.
Likewise, many purchasers choose to instruct their own independent RICS Homebuyers Survey and Valuation, which provides them with an informed and objective view on the price they should be paying for a property.
The Royal Institution of Chartered Surveyors (RICS) is the regulatory body for the Surveying industry. Firms and individuals that carry RICS Chartered status must follow strict professional guidelines and have attained a minimum level of qualification. In the current climate, there is a general lack of RICS Registered Valuers in the industry. Lea Hough currently has 4 RICS Registered Valuers on our team, so we’re well-placed to serve property owners and buyers in Lancashire.
It is worth noting here that a Valuation Report is different from a Survey Report. A RICS Homebuyer Report or a Building Survey Report provides a much more thorough investigation into the condition of the property than a Valuation Report is able to. When purchasing a property, it is therefore always recommended that a survey report is commissioned so you can be fully aware of any issues before proceeding with the purchase.