What is a Red Book valuation and when do you need one?
A Red Book valuation (otherwise known as RICS Valuation Global Standards) is a publication of the Royal Institution of Chartered Surveyors (RICS). It is a valuation manual and code of practice designed to be followed by Institution Members in all valuation work, both in the UK and overseas.
The valuation manual is updated regularly to reflect changing standards on issues such as sustainability and incorporates the International Valuation Standards developed by the International Valuation Standards Council.
Purpose of the Red Book
The purpose of the Red Book is to ensure that RICS members have a detailed process. It provides a consistent, accurate and professional valuation service with an audit trail, measurable against applicable Red Book standards. It details all the factors considered and all the assumptions made in reaching a value.
Why would you need a Red Book valuation?
Most of a Chartered Surveyor’s work is about land and buildings. Different clients however need different types of valuation which include:
- Market value – the price a buyer would be prepared to pay in a free market.
- Investment value – the calculation of likely income plus capital appreciation over a given period.
- Marriage value – where the combined value of two or more assets/properties is more than the sum of the separate values.
The Red Book covers all of these and more which provides their own unique benefits over a standard survey.
How is a value estimated?
Estimating a value is not a precise science – it involves many variables which need to be assessed and considered by your surveyor. The Red Book forces its users to take a considered, objective view of each variable and makes the valuation process as near to scientific as possible.
How does a Red Book valuation compare to other valuations?
When compared to a valuation completed by an estate agent or letting agent, they may not be able to provide a detailed, reasoned explanation like a Chartered Surveyor.
What’s more, there is always the possibility that valuations submitted by an estate agent or letting agent may be challenged by government agencies, banks, or other large institutions. The chance of this happening to a Red Book valuation, backed by the professional integrity of RICS, is minimal.
Why might you need a professional property valuation from a Chartered Surveyor?
As executor responsible for obtaining probate, you need a professional valuation for Inheritance Tax purposes. When selling a property other than your main residence, a professional valuation is required to determine any Capital Gains Tax payable.
Similarly, in a divorce settlement, a property valuation is needed to apportion fair shares for both parties. For house insurance, an accurate figure for rebuild costs is required by insurers. And when buying or selling property, it is in the interests of both buyer and seller to have a Red Book valuation to confirm the selling price is at or around market value.
Do I need a Red Book valuation or a survey?
Red Book or otherwise, any sensible valuation must take a view on the condition (good, average or bad) of a property when assessing its worth. With a Red Book valuation, glaring defects like rotten window frames or missing roof tiles would be documented in the process, and disclosed to the client.
But as the Red Book terms and conditions will make clear, a valuation is not a survey. So if you need peace of mind that there is nothing major wrong with the property you are about to buy, we strongly recommend a Level 2 or Level 3 RICS Building Survey.
A Red Book valuation may suggest there are issues, but will not go into detail. If those issues are of concern, you will either walk away or need a detailed survey. Having first gone for the valuation, and then commissioned a survey is an unnecessarily expensive way round, because it involves a large element of duplication in the assessing condition process.
If you have any questions about Red Book surveys, get in touch by calling 01273 031646. We’d be glad to help.
