There is a big and often overlooked difference between the two main types of valuation, a market appraisal and a formal ‘Red Book’ valuation. It is important to know the difference, as the same property can be valued very differently for different purposes.
Market appraisals are often carried out before putting a property on the market to give the vendor an idea of what is possible in terms of selling price. They can also be used as a general guide and for negotiations or for general decision making and planning. They are not necessarily rigorous or supported by detailed evidence so can’t be relied upon as they might not be a true reflection of what the property is actually worth, but they are a good starting point.
Formal ‘Red Book’ valuations
By contrast, formal ‘Red Book’ valuations are more thorough, evidence-based opinions. Red Book valuations are produced by comparing market data of similar properties and are usually combined with a detailed inspection of the property and extensive background research. All of this is incorporated into a final valuation report applicable to a specific date.
Red Book valuations are used for a variety of official purposes such as tax and probate, secured lending, matrimonial, charities, expert witness, partnership dissolutions and charity valuations.
As such, when comparing a market appraisal with a formal valuation, you will find that the market appraisal – based on hope – is likely to be a higher figure than the formal valuation – based upon evidence.
RICS registered valuers
To be able to produce a Red Book valuation, the valuer must be an approved ‘RICS registered valuer’. Such valuers have had to demonstrate their training and qualifications before they are given the registered valuer status.
All valuations are arrived at by considering a variety of subjective factors, so inevitably there will be variation between valuers, but provided you are using a RICS registered valuer, you can expect valuation figures from different valuers to be largely similar. Strict professional guidelines have to be followed to produce a Red Book valuation and you can be assured that the valuer has adequate training and experience. They are also obliged to have appropriate professional indemnity insurance in case the worst happens.
Purchasers, lenders, sellers and insurers can instruct an independent RICS registered valuer in the knowledge that they will receive an honest, accurate, independent and reliable valuation of the property in question.
If you would like any assistance with valuations, please do not hesitate to get in touch – 01684 325215 / 07814 033449 firstname.lastname@example.org