For what it’s worth: Valuations vs Market Appraisals
We all know that everyone values things differently. For example, an old car that is worth its weight in gold to you as transportation, is probably not worth that much to a car dealer. The monetary value is far outweighed by its usefulness and convenience as a vehicle for your personal use. Property is very subjective too. For example, regarding old property, one person’s opportunity for improvement is another’s money pit to be avoided. But when it actually comes to putting a monetary value on a property or premises, people value things differently and quantifying its worth definitively can be tricky.
Valuing what’s important to you
There are different types of property valuation and they can cause confusion and even inaccurate figures. For example, there are some crucial differences between a market appraisal and a valuation – which is often referred to as a Red Book valuation. The differences are such that two individuals carrying out each appraisal can provide wildly different opinions of value. We’ll try and explain, as we’re often asked how this can be the case – how can two different figures be reached for the same property?
A market appraisal is where an estate agent values your property for sales purposes and provides a guide price based on what is hoped for – i.e. what an individual considers the property may be worth on the open market. It provides a good opportunity for an agent to get to know the seller, their needs and wants, and get a feel for the property itself. Many different factors feed into the market appraisal and these can fluctuate, depending on demand and the economic climate. Amenities in the vicinity and the condition of the property are aspects of the property that can change over time. The availability or demand for similar properties are also key factors. Crucially, an appraisal is not a formal valuation and cannot be used for borrowing or mortgage purposes.
By contrast, formal valuations are evidence-based opinions, formed by comparing transactional data relating to the sale of similar properties or land in the area. They are formally carried out by a qualified expert – such as one of our registered valuers – and provide an unbiased, realistic figure of what the property is worth as an asset, for sale and resale. The valuation will include the property’s construction and features, and the official transaction data is usually combined with a detailed inspection of the property. During the survey of the property, measurements, notes and photographs will be taken as supporting evidence and are referred to when providing the end report. These ‘Red Book’ valuations can be used to secure funding, such as mortgages and loans. They offer a more formal figure that is recognised as being an accurate reflection of what the property and its constituents are worth.
Insight and true worth
It’s important to ensure you engage a fully-qualified person to carry out your survey, who is registered with a recognised industry body. RICS registered valuers are regulated by the Royal Institution of Chartered Surveyors. The organisation provides strict professional guidelines to be followed and mandated levels of professional indemnity insurance, to cover the valuations.
If you are thinking of valuing your property, then please contact our experts today. They can arrange to visit and survey your property, or a property you’d like to buy, to provide a valuation and insight into its true worth.