In this article, we explore the concept of “red book valuations”. We’ll discuss what they mean, who offers them and how to go about obtaining one.
We’ll also explain why a service like this may be necessary, as opposed to a simpler estate agent or auctioneer property appraisal, and how this type of valuation applies to legal and accounting-related property matters.
Table of Contents
What is a Red Book Valuation?
If you need a professional and legally valid property valuation, an online estimate is not sufficient. A Red Book Valuation is a survey done by an experienced surveyor who is registered with the Royal Institute of Chartered Surveyors (RICS) and the Valuation Registrations Scheme.
This process has been nicknamed “red book valuation” due to the red binders which RICS surveyors used to present their results. To ensure the process conforms with RICS’ rigorous standards, it is updated every 2-3 years.
Red Book Valuation vs Market Value
Red Book Valuations are extremely precise and impartial. For a surveyor to make sure that the figures they produce are “Red Book Compliant”, they must conduct a meticulous inspection, investigation and analysis.
They must also provide their valuation results in a well-defined manner, logically justified and effectively presented.
In comparison, estate agents often give “market value” estimations that are based on conjecture and securing business. This is why there can be such vast differences between the valuations that professional surveyors and estate agents make.
The Red Book Valuation Process
To calculate a property’s current market value, a RICS certified surveyor needs to:
- Send an official letter to confirm the “terms of engagement”;
- Verify if there is any conflict of interest regarding the valuation, as well as the sale or purchase of the property;
- Review title and lease documents;
- Inspect the property’s condition;
- Confirm size and property valuation;
- Examine three “comparable” properties from the same or a similar area, which must have been sold in the last 6 months;
- Research current and historic planning consents for the property (and for properties/buildings/land sites in the vicinity);
- Check rights of way (easements), restrictive covenants, flood risks, chancel repair liability, land contamination and other mortgage ability factors;
- Assess the efficiency of utility services;
- Calculate a suitable valuation and present it in an official report.
Of course, RICS provide detailed official guidance to assist with each step.
Therefore, it is essential that only suitably qualified and trained professionals, who have an in-depth understanding of the property industry, can undertake a red book valuation.
How Much Does a Red Book Valuation Cost in the UK?
Despite the demanding standards and thorough processes involved in a red book valuation, it is possible to get one for as little as £150. However, the cost depends on the property’s value, location and size. Surveys of this kind can range from £150 to £800, or even more.
It is important to remember that red book valuations are only valid for three months. To keep the figures up-to-date, they need to be renewed before the initial expiry date (within two weeks).
Red Book Valuation vs Market Value
Surveyors do not consider factors such as supply and demand or the influence of the larger market during a Red Book valuation.
Nonetheless, these issues will still have some effect on the conclusions of an RICS surveyor, especially when looking at the sale prices of comparable properties. Market value, however, is based mainly on the current behaviour of the property market and does not meet RICS standards.
How to Arrange a Red Book Valuation?
Organising a red book valuation is a simple procedure. Just reach out to a RICS-certified chartered surveyor and explain your needs. They’ll be able to tell you the cost of the process and what it entails.
When Do You Not Need a Red Book Valuation?
When the law requires formal valuation figures, the red book process is vital, especially in legal or accountancy-related processes such as:
- Probate or other inheritance-related requirements,
- Divorce proceedings,
- The calculation of Capital Gains Tax (CGT) or Inheritance Tax (IHT),
- The valuation of the bank,
- Mortgage and lending institutional securities, properties sold by not-for-profit organisations and charities, pension-related proceedings,
- Property disputes,
- Partnerships and other asset-backed company dissolutions,
- Compulsory Purchase Orders (CPOs),
- Shared ownership
- Social housing (Registered Provider) purchases.
However, it is not mandatory to use the entire red book valuation process. For instance, when selling or buying a property, one may opt for an estate agent’s value appraisal instead.
It is worth noting that if the property is sold for less than the market value, the remainder is considered a “gift”, and is accompanied by legal implications.
How can we help?
If you’re looking to sell and want to know the value of your home, contact Property Saviour. We’ll give you a free property valuation report and help you out with any advice or assistance you may need.
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- The price we’ll offer is the price that you will receive with no hidden deductions.
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- These valuations or surveys result in delays and price reductions later on.
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