The concept of property valuation may seem confusing and complex, yet it is inevitable when you are selling or buying a house. Even then, when you understand property valuation basics you will be able to understand how much your house is worth before putting it up for sale. On the other hand, if you are buying a house you will also be able to determine whether you will get value for your money. Here are some four property valuation questions that serve as a summary of property valuation basics:
What is valuation?
Valuation refers to the assessment that is carried out on a building or site to determine its monetary worth at that particular time when it is done. The valuation figure is usually based on various assumptions as well as the prevailing market conditions. It also must take into consideration a variety of factors that have an impact upon projected market, rental value as well as capital.
Why the difference in valuation figures?
It is important to begin with the understanding that valuation is not a science. Thus, a valuation is simply evidence based opinion from a comparison drawn from relevant market data that relates to the sale of similar property within the area and is usually combined with detailed inspection of the address.
To evaluate the exceptional characteristics that comprise the value of your property, a surveyor will carry out an inspection of the rooms as well as the exterior surrounding of the premises. Detailed measurements, photographs as well as notes are then taken for reference when drawing a conclusion of value within the report.
As with all the matters that are opinion based, it is expected that an element of subjectivity will creep in. Even then, it is expected that the valuation figures from multiple professionals will fall within a close range of each other as the valuation that are carried out by valuers that are registered with the Royal Institution of Chartered Surveyors (RICS) and are governed by the same strict professional procedures and rules.
Why is the sale price different from the valuation?
It is not uncommon to get unrealistic estimations of the worth of your property from estate agents asking price. Consequently, buyers are usually disappointed where the formal valuation they need in order to secure a mortgage fails to meet the price they are ready to pay for the house.
When a valuation is requested solely for the purposes of lending like mortgages, valuers are usually employed to satisfy the lender to give the assurance that the loan requested against a property is in line with the value of the property they are lending against. This is a way of ensuring that they do not lend more than the value of the property. Besides, this is an excellent way of protecting against financial loss in the event that of repossession and sale of property is required to recover the outstanding loan when the borrower has defaulted on repayment. Ultimately, you need to keep in mind that estate agent appraisals are not necessarily valuations hence are not suitable for the loan security assessment.
In fact, for loan security purposes only a valuation report from RICS will do as it takes into account comparable market evidence and the property. Remember, the sale prices may be swayed easily by demand, the emotions of the buyer and personal preferences. Thus, sale prices or even the appraisals from estate agents are likely not to be representative of the value of the property and cannot be relied upon.
Why should you get your valuation done by a RICS registered valuer?
Valuers the are registered by the Royal Institution of Chartered Surveyors are governed by strict professional guidelines that include the obligation to provide sufficient professional indemnity insurance. In addition, they must also be able to provide evidence and defend the report they offer at the end of the valuation in case a claim is launched against them.
Thus, you can be confident that the opinion of value that is provided by a valuer who is registered by RICS can be relied upon. In summary, insurers, sellers, lenders and even buyers may confidently instruct a RICS registered valuer because they have the guarantee of receiving a valuation that is reliable, accurate and honest.