ENSURING MAXIMUM VALUE FROM YOUR PROPERTY INVESTMENT

Published 5 October 2017

RICS red book

The publication of a new valuation ‘Red Book’ – more properly titled ‘RICS Valuation, Global Standards 2017’ – may at first glance be of interest only to surveyors and other property nerds.  But its publication is a good moment to examine why professional commercial property valuations are important – and why the process may sometimes seem unnecessarily complex.

The Red Book is the ‘bible’ which all Chartered Surveyors and RICS Registered Valuers will turn to, in order to ensure that their valuations are conducted professionally, rigorously and to a consistent standard.  The document itself runs to several hundred pages.  It is thorough, comprehensive and designed to make all valuations carried out under its guidance as objective as possible.

Any valuation will inevitably involve an element of opinion from the individual valuer; the Red Book seeks to ensure that judgement is made on the basis of set criteria.  It means the valuation will as far as possible be an objective view on which the client can make an informed decision.

The 2017 Red Book, which updates the 2014 version, contains a number of changes to ensure that guidance remains as relevant to today’s marketplace as possible.  Most of the changes won’t be noticed by the average consumer, but they will be adopted by RICS Registered Valuers.

To become an RICS Registered Valuer is a long and reassuringly testing process.  The usual route is an RICS accredited degree, followed by a structured period of training (usually at least two years), and culminating in a rigorous interview carried out by an RICS assessment board.  Chartered Surveyors then have to undertake regular CPD to ensure that their knowledge remains up to date.

Whilst ‘market assessments’ carried out outside the strictures of the Red Book can be provided by agents, there are many circumstances in which only a ‘Red Book valuation’ will suffice: where the purchase is dependent on finance, for example, or if the investment is to be wrapped into a SIPP or pension fund.

Cash purchasers may find that they are not compelled to commission such a valuation, however all but the most laissez-faire will understand the benefit.  A relatively small sum saved up-front on a professional valuation may prove to be a false economy later on if the investment is made on the basis of a less than robust assessment of value.

It’s not just at the point of purchase that such valuations have their uses.  In order to maintain the rental income and maximise the capital value, it is prudent to have valuations updated periodically to reflect market changes.  At the same time, it is also beneficial to have a reinstatement cost assessment completed for insurance purposes.

That dry, technical subject is in fact a vital part of helping investors to get the best returns – and that’s a language we can all understand.

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