Market Valuations of residential property are required for a wide variety of purposes, these include:
• Purchase (including as a Market Valuation Appendix to a Building Survey);
• Legal dispute;
• Capital Gains Tax, Inheritance Tax,
All these and most other valuations must be compiled in full accordance with RICS Valuation – Global Standards 2017 commonly known as the RICS Red Book.
The 2017 Global Edition reflects changes made to the International Valuation Standards which take effect from 1 July 2017. This revision of the Global section of the Red Book has been necessary to reflect the changes that have taken place to the International Valuation Standards (IVS) 2017.
The UK National Standards (RICS Valuation – Professional Standards UK January 2014 (revised April 2015)) supplement the Global Red Book for valuations carried out in the UK. These are due to be revised shortly.
The Red Book sets out a range of matters that the valuation report must address, what assumptions might be made and it defines Market Value and other valuation bases that might be utilised depending upon circumstance.
Tony Lewis is an RICS Registered Valuer.
Valuation reports are not surveys and should not be regarded as such. They are usually undertaken for a specific purpose. In relation to the purchase of residential property, the Level 2 RICS HomeBuyer Report (Survey and Valuation) includes a Market Valuation as standard; the Level 3 Building Survey does not but a valuation appendix can be added if required.
Market Valuation reports start at around £200 plus VAT.
Inheritance Tax (often called Probate Valuations) these are formal valuations and should be prepared by a qualified Valuer. An estate agent’s market appraisal is not suitable. These valuations are prepared in accordance with UKGN 3 of the RICS UK Valuation Standards. The normal definition of Market Value is not used and the basis of valuation is found in S.160 Inheritance Act 1984, and a bespoke suite of assumptions is applied, there is an important differentiation from ‘normal’ market value concerning the issue of ‘special purchaser’. The valuation is made as at the date of death.
Inheritance Tax valuations start at around £250 plus VAT.
Capital gains Tax. These are again formal valuations. They are frequently retrospective and date back to the point of acquisition or transfer. UKGN 3 again applies but the valuation basis is found in S.272 Taxation of Chargeable Gains Act 1992. These are often complex instructions with several valuation dates with changing physical conditions and occupancy circumstances at those dates. I keep estate agency sales particulars and valuation records dating back to the early 1980’s to assist with this work.
Capital Gains Tax valuations start at around £300 plus VAT
Valuations for reinstatement purposes are required for insurance. They provide advice on the amount for which a dwelling should be insured for Buildings Insurance purposes. It is very common for the reinstatement valuation to be greater than the Market Value. It follows that a dwelling simply insured for the amount that was paid for it can be significantly under-insured – and that could have very serious implications if a claim needed to be made.
The Level 2 RICS HomeBuyer Reports – both ‘Survey and Valuation’ and ‘Survey’ types include a reinstatement valuation as standard, as does the Level 3 Building Survey.
Some home owners concerned over the amount for which their dwelling is insured wish to commission a standalone reinstatement valuation.
A reinstatement valuation is a calculation based upon a wide range of inputs including age, type, floor area, ceiling height, constructional materials, roof pitch, areas of driveway, boundary walls, drainage runs and so on. The Building Cost Information Service provides build cost indices and input rates to complete the valuation amount.
Standalone reinstatement valuations start at around £175 plus VAT.