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Valuation versus Market appraisal
Understandably, sometimes there is confusion between the use of the words ‘valuation’ and ‘market appraisal’ in estate agency. Below we have defined each item and outlined the difference.
When you apply for a mortgage, a surveyor is invariably employed to carry out a formal valuation on the property. The surveyor must, these days, be suitably qualified and it is usual for mortgage lenders to require valuations only to be undertaken by a RICS (Royal Institute of Chartered Surveyors) Registered Valuer.
This qualified person will have professional indemnity insurance giving consumers confidence that the opinion of value can be relied upon, subject to any qualifications in the valuation document. Therefore, a formal valuation is an evidence-based opinion with an element of subjectivity.
Of course, different Registered Valuers may provide different opinions of value. Over time the courts have been asked many times to decide if a value is correct and have found that provided the valuation has been conducted in accordance with the RICS Red Book (where best practice is set out), an opinion of value cannot be wrong as long as it is within reasonable tolerances of the opinion of the court as to value.
This tolerance depends on the circumstances but has been known to be as much as 17% but is usually up to 10%.
Registered Valuers will be cautious in their opinions and will not take into account the special buyer to whom the property has an enhanced value. Instead, the Registered Valuer will look at what comparable properties have sold for and how prices may have moved on since the date of the sale of the comparable properties sale completions.
In addition, the Registered Valuer will carefully inspect the property and consider its structural condition and repairs necessary to make it a safe place to live and maintain its condition.
Finally, of course, the Registered Valuer will require a fee to be paid for their opinion.
Clearly, this valuation approach is not the approach most sellers will want their estate agent to take when advising them of the asking prices and method of marketing that should be employed to achieve the best possible price for them!
For the above reasons, the Chancellors Group of Estate Agents does not provide clients with formal valuations or indeed valuations of any type. Instead, as marketers, we provide a free service with recommendations as to asking price and marketing strategies that take into consideration the sellers’ individual requirements, our expectations of the market going forward and known interest in the particular property and/or location.
We recommend what actions the seller can take to attract buyers and the best price. This can include de-cluttering, gardening, and redecoration. As we do not undertake surveys we are not qualified to comment on the structural condition and recommend specialist advice is taken where a concern of this nature is identified.
To achieve the best price and terms for our clients, there are many strategies that can be employed. For example, ask a very competitive price to generate a queue. This can lead to a competitive situation where what is paid has little resemblance to a Registered Valuers’ opinion of value. Alternatively, we can ask a full price and be prepared to consider negotiating if the marketing strategy demonstrates that the asking price cannot be achieved within an acceptable timeframe.
The formal valuation has its place but usually not when considering how to achieve the best selling price. A market appraisal is, in our view, the route to go if you would like to know what is possible rather than what can be relied upon as a backstop position.
We, therefore, recommend that, free of charge, we visit your property to discuss how we can market your property to best effect given your circumstances, the timeframes you are working to and the sale price you hope to achieve.