There are different types of valuations and appraisals when it comes to properties, businesses and assets. Whether you own a company or asset or are interested in buying a property, it is important to understand what a red book valuation is and how it differs from market value.
What is a red book valuation?
Recognised globally as one of the most rigorous sets of standards for valuations, a red book valuation is a formal evidence-based valuation using well-thought-out and researched market data and extensive knowledge and experience.
Red book valuations must be conducted by a certified and qualified surveyor who has been awarded the title RICS Registered Valuer by the Royal Institution of Chartered Surveyors (RICS). The name of this type of valuation comes from the red binders in which registered surveyors previously presented their results.
With the first edition published in 1976, the Red Book Global Standards lays out the mandatory practices for RICS members undertaking valuations and provides a useful reference for surveyors. It’s updated regularly to reflect developments and market changes, supporting the institute’s commitment to high standards and future-proofing practices.
Why would I need a valuation?
There are a range of areas valuations can cover, including property, asset and business valuations. In the commercial space, there are a whole host of circumstances it’s beneficial to get a red book valuation, such as for:
- Financial reporting
- Buildings and property insurance
- When a property is an asset
Valuations can help you make more informed decisions that better protect your investments, serve as a powerful negotiation tool or reassure you or other relevant parties.
Certain situations may even require you to get one. For example, red book valuations can be mandatory for a range of tax purposes, legal proceedings or when applying for a mortgage.
Red book valuation vs market value appraisal
There can be huge discrepancies between a red book valuation and market value appraisal. A market value appraisal is an informal opinion on a general estimate or price, instead of value, and is largely based on current behaviours in the market.
As fully researched and documented valuations, red book valuations are impartial and much more accurate and thorough than market value appraisals.
Property valuations and appraisals
In the property sector in particular, valuations and appraisals are often used interchangeably, but they are very different. Market value appraisals are based on speculation, some working knowledge of a local property market and an estate agent winning business.
Through these, agents give a feel for average sale prices locally with an aim of marketing and selling your property for you. While these have a place, it is often relied on too much, especially from a commercial perspective.
When getting a red book valuation of a property, you will receive a valuation from an expert that is based on market data, experience, local knowledge and the property’s condition. It crucially also comes with a detailed building inspection, which can offer valuable insights on the condition and potential pitfalls of the property.
What does a RICS valuation involve?
A RICS valuation must follow the Red Book Global Standards, which sets out the professional standards valuers must follow. The stringent measures ensure high standards are met throughout the entire valuation process from inspection, investigation and analysis to definitions, justification and presentation.
RICS valuation services must illustrate clearly defined and expertly justified and presented valuation results in a high-quality and credible document. These standards should give you confidence, clarity and peace of mind that you’re receiving an honest and professional valuation that can be relied on.
While red book valuations come at a cost, these can provide a lot of value to an individual or business. All too often property and business owners only realise the value of a RICS valuation once they find out they could have benefited from already having one on hand.
RICS valuation near me
As a RICS-regulated firm, Eddisons can provide red book property valuations or commercial valuations of businesses and assets across all sectors and specialisms. With some of the most experienced RICS registered valuers, we provide tailored, insightful and credible valuations that can enhance your decision making.
Our reach spans the UK with more than 30 offices, so we can help you find the right professional who can undertake RICS valuations near you. Get in touch to find out more about our red book valuations.
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