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In property terms, a valuation is an assessment of a given building or site’s monetary worth at a particular point in time. The valuation figure is based on certain assumptions, is related to current market conditions and must take into account the varied factors that have an impact upon capital, projected market, or rental value.
Valuation is not an exact science. A formal valuation is an evidenced based opinion formed from the comparison of relevant market data relating to the sale of similar property in the area and is often combined with a detailed inspection of the address.
To assess the unique characteristics that make up the property value a surveyor will usually inspect all rooms and out buildings at the premises. Detailed measurements, notes and photographs are taken and referred to when reaching a conclusion of value within their report.
As with all matters of opinion, an element of subjectivity is expected but you would expect valuation figures from multiple professionals to fall within a close range of each other as formal valuations are carried out by the Royal Institution of Chartered Surveyors (RICS) registered valuers, who are governed by the same strict professional rules and procedures.
Unrealistic estimations of the property’s worth can be generated from the estate agents asking price and buyers are often disappointed when the formal valuation they require to secure a mortgage doesn’t meet the price they’re willing to pay for the property.
When a valuation is required for secured lending purposes, such as mortgages, valuers are ultimately employed to satisfy a lender that the loan requested against a property is in line with the value of the property they’re lending against. This ensures that they don’t lend significantly over its value. This protects against financial loss should repossession and sale of the property be required to recover the outstanding loan if the borrower defaults on their repayment.
Before putting a property on the market an estate agent will usually conduct a market appraisal for the seller which gives an idea of what is possible in terms of selling price. This appraisal essentially sets out what a potential buyer could be willing to pay in the current market but it may not be what the actual property is worth.
Estate agent appraisals are not valuations and as such are not suitable for a lender’s loan security assessments. For loan security purposes, lenders require a formal valuation report from a RICS registered valuer that considers the both the property and comparable market evidence in detail.
Sale prices can easily be swayed by market demand, personal preferences and the emotions of the buyer – for example, it could be a dream property in a perfect location so they are prepared to pay over the asking price.
For these reasons, sale prices or estate agent appraisals may not be representative of the property’s actual value and thus can’t be relied upon by the seller, buyer or indeed the lender to judge the actual value of the property.
Valuers governed by the Royal Institution of Chartered Surveyors, follow strict professional guidelines, one of which is the provision of adequate professional indemnity insurance and they must be able to defend his/her market evidence used in the report to reach the end valuation should a claim be made against them.
This means you can be confident that the opinion of value provided by a RICS registered valuer can be relied upon subject to any qualifications in the valuation document.
In conclusion, purchasers, lenders, sellers and insurers can instruct an independent RICS registered valuer with confidence that they will receive an honest, accurate and reliable valuation of the property and/or land in question.
Kempton Carr Croft conduct valuations for a wide range of lending institutions including High Street clearing banks, building societies and short term lenders and regularly acts for private clients and investors.
We have one of the largest independent valuation teams operating throughout London and the Thames Valley to provide assessment of commercial and residential property, including development sites, across the region.
The firm were nominated as “best bridging valuer 2015” in the Bridging and commercial awards and were highly commended based on the feedback on the quality of our work from our clients.
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