In recent months we have, on more than one occasion, been asked to undertake reviews of valuations undertaken by other valuers following concerns raised by the clients as to their accuracy. In these circumstances it’s not unusual to find that the valuation under scrutiny leaves something to be desired. It is also not unusual to find that the report has not been prepared by specialist valuer, and was almost concerningly cheap (sometimes less than a couple of hundred pounds).
The over-riding theme in these cases appears to be that the valuation has been undertaken without sufficient skill or without the required time being allocated to compiling, considering and analysing the comparable evidence. So, in this post I’m going to take a look at what goes in to producing a professional valuation report.
At the enquiry stage we need to properly understand the client’s circumstances, the purpose of the valuation and the nature of the property being valued in order to determine the scope of the work required and provide a realistic yet competitive fee proposal.
If they are happy with the fee proposal we send out formal terms of engagement. The RICS and IVSC (the bodies that accredit and regulate valuers) require valuers to have written terms of engagement for all instructions, covering aspects including the scope of work, purpose of the valuation, extent of investigation and format of the report etc. Beware of any valuer operating without written terms of engagement in place, and of contracts which seem inadequate or nondescript.
In most cases a site visit will be required so that the valuer can familiarise themselves with the property. The valuer will take measurements and make notes on factors such as location, aspect, amenities, layout, accommodation, construction and condition. The time on site will depend on the purpose of the valuation and the type of property – a small 1 bedroom flat being valued for a lease extension might be inspected in 15 minutes, whereas a large 6 bedroom detached house in poor repair being valued for Inheritance Tax purposes could easily take well over an hour.
Comparable research and analysis
Almost all residential valuations will be undertaken using the comparable method, which means the valuer will assess the value of the subject property with reference to the sale prices of other similar properties in the local area. The valuer will need to review all of the available evidence (which will often comprise 100 or more transactions) and select those considered most relevant (typically 3-6). Using that evidence the valuer will then come to an opinion of value via a process of analysis and comparison. Property is heterogeneous (no two properties are the same) so this can be a complicated process, often taking a number of hours, depending on how similar or dissimilar the comparables are to the property being valued.
Once the valuer has settled on a valuation figure they will need to write a report detailing (amongst other matters) the purpose of the valuation, the scope of work and level of investigation undertaken, the evidence relied upon and the way in which the valuer has arrived at his opinion of value. Again, the RICS and IVSC set minimum requirements for the contents of valuation reports, so beware of reports that seem very short and lacking in detail, or those presented in ‘letter’ form (they almost certainly won’t comply with the requirements).
At Peter Barry we pride ourselves on producing quality surveys and valuations and are mindful of the serious financial implications the work we undertake can have for our clients. We undertake valuations for almost all purposes, including lease extensions, freehold enfranchisement, matrimonial, inheritance tax and shared ownership purposes. If you require a residential property valuation you can contact the team on 020 7183 2578 or by email