Property valuation may seem complex and confusing especially if you are not trained in this area. In fact, it is generally assumed that property valuation is a preserve of surveyors and property experts dealing in residential and commercial property. However, as a property seller you need to understand what valuation entails so that you know what you are giving up your property for.
- What is property valuation?
The best place to begin is by understanding what valuation is all about. In simple terms, property valuation involves carrying out an assessment of a site or building with the view of determining its monetary worth at that particular time. The figure quoted is based on a number of assumptions as well as the prevailing market conditions and various factors that have an effect on the projected market, capital and the rental value.
- Why the difference in valuation figures differ?
It is not unusual for different property surveyors to quote a different value for the same property. This is because valuation is not a science rather an opinion that is based on evidence from the comparison of appropriate market data that relates to the sale of related property within the area.
This is usually combined with a detailed inspection of the property to assess any unique characteristics that add up to the value of property. Thus, the surveyor inspects all the rooms as well as other buildings within the surroundings.
In particular, detailed measurements, photographs and notes are taken are referred to when drawing a conclusion of the value of the property in the report. As an issue that is opinion based, there is also an element of subjectivity.
Even then, valuation figures from multiple professionals should fall within a close range of the formal valuations conducted out by valuers who are registered with the Royal Institution of Chartered Surveyors (RICS) that are governed by a strict set of procedures and rules.
- Why is the sale price different from the valuation figure?
Although property valuation is crucial when selling or buying property, the estimations of the worth of property do not translate to the sale price. Hence, you are likely to sell or buy property at a different price from the one derived during valuation.
It is also important to keep in mind that some valuations have unrealistic estimations of the worth of property especially those that are generated by estate agents. In fact, many buyers that rely on estate agent valuations get disappointed when the formal valuation that they need to secure a mortgage falls short of the price they are prepared to pay for the property.
Remember, for valuations that are done for the purposes of lending the valuer is determined to please the lender as well as give an assurance that the loan being requested against property corresponds to the value of the property.
This way, financial institutions are safeguarded from lending beyond the sale value of property should there be need to recover outstanding loans or the borrower has defaulted on repayment.
Estate agents usually carry out an appraisal of property before putting it on the market. While this gives an idea of the possible amount a buyer may be willing to pay at the time, it cannot be taken for the actual worth of the property.
In fact, property appraisals done by estate agents are not valuations hence unsuitable for the lender loan security assessment that require a formal valuation report from valuer who is registered with RICS as they take into account both comparable market evidence and the features of the property in detail.
Moreover, the sale prices of property may be swayed by other factors that include personal preferences, market demand as well as the emotions of the buyer. Thus, the buyer may be willing to pay more than the asking price for a dream property that is in a perfect location.
Thus, estate agent appraisals and sale prices may not be representative of the actual value of property and cannot be depended upon by the buyer, seller or even lender when judging the actual value of property.
- Why should you use a registered RICS valuer?
Have you ever wondered why there is a lot of emphasis on the use of a RICS registered valuer. Well, valuers that are governed by the Royal Institution of Chartered Surveyors are guided by strict guidelines that include providing professional indemnity insurance as well as being able to defend the market evidence in the report to attain the end valuation.
Thus, you can rest easy knowing that you can rely on the opinion of value for a given property subject to qualifications in the valuation report.
Overall, sellers, lenders, purchases as well as insurers may instruct independent valuer that is registered with RICS with confidence of receiving a valuation that is reliable, accurate and honest.