“I just need to get an estate agent’s valuation” is a request we regularly hear, often in scenarios unrelated to the prospective sale of a property. It could be probate, an inter-family transfer or divorce, but when questioned, people are often unwavering: “an agent’s valuation is fine”. But is it?
Firstly, an agent’s valuation is not a valuation. It is a market appraisal, which is a recommendation of guide price or – rather – advice on how to market the property in question. The wording of these documents generally makes this clear. It is not to say a market appraisal is not an indication of value – it is (or should be), and when people obtain several together there is often a correlation which can be helpful in supporting this indication.
However, a valuation it is not. For starters, it is possible that an agent is employing a certain pricing strategy in the advice they offer. For example, at times when buyers are known to be offering under guide prices, estate agents may build in a certain margin for negotiation, or there may be consideration for the ways in which certain portals have price brackets.
There is also the question of time. A market appraisal is a no-obligation free document designed to showcase the capabilities of the agent, but is unlikely to have taken significant time to produce. It is not to say the recommendations are not carefully considered, but there is not the same onus on reaching a specific conclusion: the agent is pitching the property for listing on the market, and the market can do the rest.
As can often be the case, attempts to persuade an agent to tailor a market appraisal for a specific purpose (or date) risks meddling with the appropriate approach for the market at a given time. This can result in questionable results and trouble down the line with the likes of the District Valuer’s office and HMRC.
This is not to do the market appraisal a disservice. It should just be seen for what it is – an introductory interaction with the agency and an invitation to use our services, and to reassure a property owner that we are best placed to achieve the highest price on their behalf.
So what is a valuation?
In formal terms it is a statement of ‘market value’ in accordance with the definition produced by the Royal Institution of Chartered Surveyors (RICS) within their Valuation Standards (the so-called ‘Red Book’). Although differing slightly for certain purposes, that definition is generally:
“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”
So, there is a requirement for specificity here: a specific amount on a specific date, which in the case of tax valuations, may be in the past. The valuation is intended to play out the operation of the ‘open’ market at the valuation date.
This valuation will usually come in the form of a report in a prescribed format, with comparable evidence and rationale, and details of the property. It can be formally relied upon because it is provided by a chartered surveyor who will also be an RICS Registered Valuer and who carries suitable professional indemnity insurance. It will also confirm neutrality and will be undertaken with the necessary due diligence (into tenure, for example) to ensure the reported value is suitably robust.
We would advise that this type of valuation should be obtained for any ‘formal’ purpose - or where a specific value is required - for a tax computation (past, present or future), financial settlement or decision making.
Such valuations are not free of charge, but carry a fee, which will depend on the value of the property and the complexity of the job in question. However, these fees can often be offset against agency fees if a property is sold in the future. It is worth bearing in mind that paying a proper fee means getting a proper professional job: a surveyor’s valuation should add value, and not just be a formality. And this ability to add value (and clarity) to a given situation should be considered by people when deciding between a market appraisal and a surveyor’s valuation.
In summary, the term ‘valuation’ has become common parlance in the estate agency industry, and we are no exception to its use and, arguably, misuse. When searching online or using a portal, this is the term people encounter. Undeniably this leads to some of the confusion, but it is important to appreciate the distinctions.
At John D Wood & Co. we have an in-house team of chartered surveying specialising in valuations for tax, litigation and leasehold enfranchisement, please click here for further information or please email: firstname.lastname@example.org
Alex Ingram-Hill MRICS
Head of Valuation & Surveying
To get a free market appraisal by one of our agents in your local area please click here.