What Is A Red Book Valuation?
Join us as we break down what a red book valuation is and why you would use one.
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When it comes to assessing the value of your home, accuracy, transparency, and credibility are paramount. In the United Kingdom, one term that consistently emerges as the gold standard is the Red Book Valuation.
The comprehensive set of guidelines ensures that valuations are carried out consistently, transparently, and in compliance with professional standards. It is widely recognised and trusted by mortgage lenders, investors and professionals throughout the property industry.
In this article, we will delve into all things Red Book Valuation, exploring its purpose, the valuation process, and why it holds significant relevance in property transactions.
What Is A Red Book Valuation?
A Red Book Valuation in the UK is a property valuation conducted in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation – Global Standards. These standards are commonly known as the Red Book due to the colour of their cover.
The RICS Red Book is a set of guidelines that outline the best practices for property valuations and provides consistent, transparent frameworks for valuers to follow when assessing a property.
Red Book valuations will be carried out by a qualified chartered surveyor who has received training and is a member of RICS. This type of valuation is often required for various purposes, including property transactions, mortgages, financial reporting, taxation, and legal proceedings.
As a homeowner selling your home, you may not directly need to commission a Red Book valuation yourself.
But it may still be beneficial for you to be aware of Red Book valuations and how they work because they can help you set a realistic and competitive asking price for your property and have a stronger negotiating power later in the house selling process.
Most estate agents will handle the Red Book Valuation for you if it is necessary for your property, but not all will pay for it.
What Is The RICS Red Book Valuation Criteria?
The RICS Red Book valuation criteria covers everything from duty of care, to ethics, to the minimum content of a valuation report, to the valuer’s qualifications.
The criteria also structures which of the five valuation methods the surveyor should adhere to, which will vary depending on the type of property.
When Would You Need A Red Book Valuation?
Red Book valuations are needed any time you require a formal valuation for legal proceedings or tax purposes, which must be done by a RICS Registered Valuer.
Some circumstances in which you will need a Red Book valuation include:
- Tax planning purposes.
- Calculating Capital Gains Tax or Inheritance tax.
- Transferring assets into a Self-Invested Personal Pension (SIPP) Fund.
- Any property being sold by a charity or that is probate.
- Court proceedings, like during a divorce case.
- Landlord rent reviews.
- Compulsory Purchase Orders (CPOs).
- Shared ownership and social housing (Registered Prover) purchases.
- Disputed under resolution via mediation or arbitration.
Red Book valuations are only valid for three months, and must be renewed for a further three once lapsed if data is still recovered.
How Much Does A Red Book Valuation Cost?
Red Book valuations in the UK can cost as little as £150, but as they are based on the property’s location, value and size, this can vary significantly.
At most, you could be looking at £1200, or more.
What Is The Red Book Valuation Process?
By following the Red Book valuation standards, a RICS certified surveyor will:
Confirm the terms of engagement using an official letter and check for any conflict of interest regarding the valuation, as well as the sale or purchase of the property in question.
Next, they will check title and lease deeds and then inspect the property’s condition, confirming the size and property valuation.
They will inspect three comparable properties from the same area, which have been sold in the 6 months preceding the valuation.
Undertake a check on current and historic planning consents & permissions for the property as well as checking the rights of way, restrictive covenants, flood risks, chancel repair liability, land contamination and other mortgageability factors.
Check the efficiency of utility services.
And, finally, calculate a suitable valuation and present these findings in an official report.
How Do You Arrange A Red Book Valuation?
To arrange a Red Book valuation, you should determine the purpose for which you require the valuation; whether it’s for a property transaction, mortgage financing, taxation or legal proceedings.
Next, you should look for a qualified and experienced chartered surveyor who is a member of the Royal Institution of Chartered Surveyors (RICS).
You can search for RICS surveyors on the RICS website, but you should ensure that the surveyor has experience with Red Book valuations.
When instructing a surveyor, you should first request a quote from them which will vary in cost depending on the scope of your house.
Once you agree on the terms, including the fee, timeframe and scale of the survey then you can schedule an appointment for the surveyor to inspect the property.
On the agreed-upon date, the surveyor will visit the property and conduct a thorough inspection. You will need to make sure that the entire property is easily accessible, and remove any obstructions to doorways.
After the property inspection, the surveyor will undertake the necessary research, analysis and valuation calculations to prepare the Red Book valuation report. Once it is ready, they will send you the report, and your estimated market value.
What’s The Difference Between Red Book & Market Valuations?
Red Book valuations ensure that the valuation process is conducted in a professional and consistent manner, with transparency and compliance with recognised industry standards.
Market valuations on the other hand, refer to the broader practice of determining the market value of a property which can be conducted using various methods and different professionals including those who may not follow the specific guidelines of the Red Book.
Red Book Valuations
Red Book valuations refers specifically to any property valuation conducted in compliance with the RICS valuation – Global Standards (Red Book) which provides a set of guidelines and practices for valuers, ensuring consistency, transparency and professionalism.
The Red Book valuation is therefore far more accurate and unbiased than the Market Valuation. But, Red Book valuations do not factor in market conditions like supply and demand into the valuation.
During a Red Book Valuation, the RICS surveyor must produce defined and justified valuation results.
Market Valuations
A Market Valuation on the other hand is a broader term that encompasses any valuation of a property’s market value, which could be done by an estate agent, chartered surveyors and independent property valuers.
Market valuations refer to the process of determining the estimated worth of a property in the open market, considering factors such as supply and demand dynamics, recent comparable sales, location, condition and other relevant market factors.
When Do You Not Need A Red Book Valuation?
Although Red Book Valuations are preferred for their adherence to professional standards and recognition within the industry, there are a few situations where strict compliance with Red Book valuations is not necessary, such as:
- Personal financial planning.
- Simply curious.
- You only need a rough estimate of your property.
- Non-market value assessments like property insurance surveys or assessments for specialised assets (solar panels).
- Unregulated property transactions, like transfers between family or to a charity.
However, it’s important to note that even if you don’t require a Red Book Valuation, you should still seek financial advice.
You also don’t legally need to have a formal valuation in order to buy or sell a property, instead you could do an estate agent’s value appraisal.
If you are looking to know your home’s valuation due to wanting to sell your home, then please fill out our sign up form and one of our property consultants will get in touch with you and provide you with any advice you require.
At The Property Selling Company, we can help you sell your house in as little as twenty eight says. We will take the hassle out of the house selling process for you, arrange all surveys, negotiate with buyers and handle conveyancing — while covering all costs usually associated with selling your house.
That includes your RICS Red Book Valuation, if needed. Want to get started today? Click get offer below.
