‘Comparable Evidence’ in the Valuation of Residential Property
When conducting residential property valuations, the most frequent valuation method used by RICS Registered Valuers is the “Market Approach” valuation method. This is where the Valuer would obtain and analyse market data of comparable properties, making appropriate adjustments (for example: size of property, plot size, condition of property, location, condition of property) before arriving at their Valuation figure.
As outlined in the RICS Guidance Note 1st edition: Comparable evidence in real estate valuation (October 2019), comparable data used by Valuers should be:
- comprehensive – there should be several comparables rather than a single transaction or event
- very similar or, if possible, identical to the item being valued
- recent – i.e. representative of the market on the date of valuation
- the result of an arm’s-length transaction in the market
- consistent with local market practice, and
- the result of underlying demand – i.e. comparable transactions will have taken place with enough potential bidders to create an active market.
The above ensures that a higher degree of accuracy can be applied to the Valuation provided.
For property valuations undertaken on more ‘traditional’ properties (i.e. terraced houses or semi-detached dwellings), sufficient relevant comparable evidence can usually be obtained.
For more obscure properties in more rural locations that often attract higher asking prices, it is much more challenging to find sales data that is directly comparable. In this instance, more onus is placed on the Valuer’s skill and judgement to make appropriate adjustments in order to provide an accurate Valuation.
It is also important to acknowledge that the COVID-19 pandemic, and the resultant downturn in property transactions, may create additional dilemmas for identifying relevant comparable data for all properties. This could mean that there is likely to be a growing importance for purchasers to instruct independent Surveys/Valuations to be carried out prior to completion.
At Lea Hough Chartered Surveyors we provide a range of Valuation services, which are carried out by Chartered Surveyors / RICS Registered Valuers. For more information please call 01772 458866 or contact us.BACK TO NEWS