Apr 26, 2024

Property Valuations: What You Should Know

Property valuations play a crucial role in real estate transactions, serving as a cornerstone for decision-making...

Property valuations play a crucial role in real estate transactions, serving as a cornerstone for decision-making processes. However, recent experiences have highlighted the importance of ensuring valuations are conducted with precision and expertise. Here, we discuss the intricacies of property valuations, shedding light on what constitutes a professional valuation report and the key steps involved in the process.

Importance of Accurate Valuations

In recent months, we have encountered numerous instances where clients raised concerns regarding the accuracy of valuations conducted by other valuers. Often, these valuations were found to be lacking in quality, with reports hastily compiled and crucial aspects overlooked. One common thread among these cases is the absence of specialised valuers, coupled with surprisingly low fees that raise doubts about the thoroughness of the valuation process.

A professional valuation report is the culmination of a meticulous process that begins with the initial enquiry and extends to the final report writing stage. Let's break down the key components:

1. Initial Enquiry

At the outset, it is imperative to understand the client's requirements, the purpose of the valuation, and the unique characteristics of the property in question. This information forms the basis for determining the scope of work and providing a competitive fee proposal.

Written terms of engagement, mandated by regulatory bodies such as RICS and IVSC, outline the scope of work, purpose of valuation, extent of investigation, and report format. Clients should be cautious of valuers operating without proper terms of engagement.

2. Inspection

A thorough site visit is essential for the valuer to acquaint themselves with the property. Factors such as location, amenities, layout, and condition are carefully assessed during the inspection.

The duration of the site visit varies based on the purpose of valuation and property type. While a small one-bedroom flat may require a brief 15-minute inspection, a sizable detached house could necessitate over an hour of scrutiny, particularly if it's in poor repair.

3. Comparable Research and Analysis

Residential valuations primarily rely on the comparable method, wherein the valuer assesses the property's value by referencing sales prices of similar properties in the vicinity.

Extensive research is conducted to gather data on relevant transactions, typically comprising over a hundred records. The valuer then selects the most pertinent comparables (usually 3-6) and analyses them meticulously to form an opinion of value.

4. Report Writing

The final step involves synthesizing findings into a comprehensive report that articulates the purpose of valuation, scope of work, evidence relied upon, and the valuation methodology employed.

Valuation reports must adhere to minimum requirements set by regulatory bodies to ensure transparency and accuracy. Reports lacking detail or presented in an inadequate format should raise red flags for clients.

Ensuring Quality Valuations

The process of property valuation demands meticulous attention to detail and expertise to deliver accurate and reliable results. Clients must prioritize engaging specialized valuers who adhere to industry standards and regulations, ensuring that valuation reports are comprehensive and credible. By understanding the intricacies of property valuations and the key components of a professional valuation report, clients can navigate real estate transactions with confidence and clarity.