The surveyor/valuer will value on the basis of comparable evidence and in accordance with the Red Book guidelines, produced by RICS (Royal Institution of Chartered Surveyors). The Valuer will look to establish the property location in relation to the residential/commercial environment in order to establish open market value. Where a client is considering buying in a mixed-use environment the valuer will establish lender criteria in relation to the use of the surrounding businesses, ie if for instance the property is located over or next to say, a launderette. Some lenders will consider the above business to be unacceptable due to unsocial business hours and noise. Therefore, it is of great importance to determine which lender will except and lend on particular property types. A good broker who knows lender criteria is important.
So how does the valuer reach his valuation figure?
The valuer confirms his/her valuation based on analysis of past transactions and, for residential property, he may use websites such as Rightmove plus, which provides valuation tools for surveyors/valuers. The normal process is to take transactions into account that have completed in the past 3-6 months and within a radius of the subject property – the closer to the property being valued the better. Some reference to the condition, floor area and any additions such as loft conversions in which bedrooms have been added will be taken into account at arriving at a valuation figure.
The comparable method of analysis has the drawback of valuing based on previous transactions and is therefore backward looking. In a steeply rising market this can hamper sales progression and conversely in a market that has started to drop the valuer can over value a property.