A red book valuation is generally requested by someone like a solicitor, accountant, lender or another professional adviser. It goes beyond the normal estimate that you might get from an estate agent, and it’s not always completely obvious why it is needed.
ARed Book valuation is a formal property valuation prepared in accordance with standards set by the Royal Institution of Chartered Surveyors (RICS). It is an independent and professional valuation that is arranged for a specific purpose.
That makes it quite different from asking an estate agent what they think your property could sell for.
Why Is It Called a Red Book Valuation?
The name comes from the RICS Valuation – Global Standards.
These set out how RICS valuation work should be carried out and reported. They cover areas such as professional competence, independence, conflicts of interest, terms of engagement, investigations, and the information that must appear in a formal valuation report.
You might be surprised to learn that banks, mortgage providers, courts and even accountants don’t want to take anyone’s word when it comes to valuing a property. The point of a Red Book valuation is that it is provided by an established professional framework rather than something more informal.
- A Red Book valuation must be undertaken by an appropriately qualified valuer in accordance with RICS requirements.
- RICS Registered Valuers are subject to the organisation’s Valuer Registration scheme, which provides additional professional oversight of valuation work.
How Is It Different from an Estate Agent’s Valuation?
When you are considering selling a property, your estate agent can be useful in gauging its value. Unfortunately, not all are qualified or experienced enough to evaluate value as a chartered surveyor would. The agent will look at recent transactions, local demand and their experience of the market before suggesting an asking price or likely selling range.
A Red Book valuation performs a different role. First of all, it is more formal. Secondly, it is supported by evidence, professional judgement, and experience. It’s a difference that matters a great deal, especially to buyers, lenders and other interested parties.
That difference matters where somebody other than the property owner is going to rely upon the figure.
An accountant preparing a financial report or a lender considering a particular property as collateral is unlikely to base an important financial decision on what amounts to an informal appraisal. They require evidence and reasoning before they will commit.
Is a Red Book Valuation the Same as a Building Survey?
A Building Survey is primarily concerned with the condition of a property. The surveyor looks for defects and advises on matters such as deterioration, maintenance and repairs.
A Red Book valuationfocuses almost entirely on the property’s value. The condition and age of the property are, of course, important, but the inspection is not intended to provide the same detailed assessment of defects as a Building Survey.
When You Need a Red Book Valuation?
A formal valuation is needed in more circumstances than you might think. Here are the main areas:
- Secured Lending:Banks and other lenders require a professional valuationwhen property is offered as security for a loan.
- Accounting and Financial Reporting: Businesses and organisations may need property assets valued for accounts or financial reporting.
- Taxation: Property valuations can be required in connection with various tax matters.
- Legal Proceedings and Disputes: Property values sometimes become part of litigation, including divorce and succession proceedings.
- Property Purchases and Disposals: Investors, businesses and property owners may commission an independent valuation before buying or selling.
What Does a Red Book Valuer Look At?
This will vary depending on the type of building and what is being considered. A residential building will be different from a commercial one. Land sales have their own particular nuances.
In general, the inspection may consider:
- Location and surroundings
- Size and accommodation
- Construction and general condition
- Tenure and occupational arrangements
- Property use
- Relevant leases
- Marketability
- Comparable sales or lettings
- Market conditions at the valuation date
Once the data has been gathered, it is the valuer’s job to form an opinion. This is based not only on the bricks and mortar but also on the surrounding area, market value, local knowledge, and a whole host of other factors.
What the Report Includes
It will include information about the property, the basis of value, relevant assumptions, the extent of the inspection and investigations, the valuation approach and the valuer’s conclusion.Any mitigating factors that affect the valuation should also be included.
Choose Wignalls for Your Red Book Valuation
Wignalls Chartered Surveyors provides RICS Red Book valuations as part of its wider property surveying and valuation work.
There can be a variety of reasons one is asked for, including accounting and taxation purposes, ongoing litigation such as a divorce, property or land acquisitions and secured lending arrangements.
It’s important not only to have experience and the relevant qualifications but also to understand the local market. Valuations can be a lot more complicated than bricks and mortar and the surrounding value. Intended use plays a vital role and can impact how much a property is valued for.
Wignalls takes a practical approach to valuation, combining local market expertise with professional judgement. That includes being more than happy toexplain to clients the factors that have influenced their conclusion.
Each valuation is independent. The purpose is not to produce the highest or lowest figure in competition with anyone. Our team arrives at a clear opinion based on the property. This is based on evidence available and the purpose for which the report has been commissioned.