Valuations come in all different shapes and sizes. From commercial to domestic properties, and for a range of purposes. A ‘Red Book Valuation’ is one such category of valuation. However even this could cover a multitude of variants. So what is a Red Book Valuation, why is it necessary and in which situations are they most frequently used?
What is the Red Book?
The ‘Red Book’ refers to a set of best practice guidelines issued by the Royal Institute of Chartered Surveyors (RICS). The document lays out “Valuation Professional Standards” and is updated every two or three years. The current edition was published in 2017, followed by an addendum issued in 2018 for valuations within UK territories. It details mandatory rules and guidelines for RICS Registered Valuers to follow when they are undertaking valuations.
What is a Red Book Valuation?
For a valuation itself to be a Red Book Valuation, it must first be undertaken by a RICS registered surveyor. The report should assess the current market value of a commercial or domestic property. It must adhere to the rules and best practice guidelines, including the following:
• The surveyor must be a member of the Valuation Registration Scheme. In addition they should be registered with RICS as an associate member, a member, or a fellow.
• Three comparable properties must be selected to rationalise the valuation.
• These properties should have been sold in the six months prior to valuation and be within the same or a similar area.
• The valuation is valid for three months. However it can be extended, if requested, within two weeks directly following the initial three months.
What is the purpose of a Red Book Valuation?
The guidelines do not dictate what valuation methods should be used. However, the Red Book sets out best practice standards that should be followed. Most importantly in the most recent edition, these include ethical standards and duty of care. There is a focus on transparency within the 2017 Red Book update that keep relevant valuations in keeping with modern legislative demands.
By issuing a Red Book Valuation, you are also guaranteeing the qualifications of the valuer and the minimum content of a valuation report. A client can therefore be certain that they will receive a properly researched valuation prepared by a qualified and independent Valuer. In addition, the final document will adhere to a set of accepted and consistent standards.
The Benefits of a Red Book Valuation
The standards which ensure the quality of assessment mean that these valuations are ideal to use in circumstances that are subject to legislative requirements. The documents should display a clarity that can be referred back to and understood in the future. In this way, Red Book Valuations can be especially useful in inheritance tax and capital gains tax situations. Banking institutions also employ Red Book Valuations to ensure that a property taken as security is worth enough to cover a loan. The valuation will be fully researched and the figures supported by relevant evidence. In this way, the valuation figure can be justified in negotiation with another party. Non-Red Book valuations, undertaken by non-RICS qualified valuers, are not generally accepted in court.
When to choose a Red Book Valuation?
There is a difference between advisable and essential. When you choose the chartered surveying services of an established organisation like Curchod & Co, RICS standards are intrinsic to the service. However, in some situations, you should check that the valuation taking place meets RICS Red Book standards:
• Loan security assessment
• Divorce cases or other legal disputes
• Company accounts
• Tax planning and liability
• Partnership dissolution
• Compulsory Purchase
Red Book Valuations offer reliability and clarity that means that they can be applied to a wide range of circumstances. So the real value in the service is in its quality. Talk to Curchod & Co to understand how a Red Book Valuation could benefit you.