Property Valuations FAQ
We understand that Property Valuations can be confusing, therefore we have prepared a Valuation FAQ page which confirms some of the common Property Valuation phraseologies or terms used by Valuers.
Hopefully, these will help fill in the gaps and assist in your better understanding of the Property Valuation Procedures.
This is the date the valuer visits the property to undertake the inspection and in many cases the measured survey. It is worth noting that this date is often different from the actual valuation date.
This is the date the valuer values the property and determines their opinion of the property price. The valuation date will vary depending upon the instruction of the client or required date of value.
This is the date the valuer will value the property in a probate matter. The date of probate tends to be the deceased true last testament or date or death. HMRC will require the deceased assets to be valued on this date.
Gross Internal Area
The Gross Internal Area which is commonly abbreviated as (GIA), is the area of a building measured to the internal face of the perimeter walls at each floor level. This measurement doesn't take into account the thickness of external walls.
Gross External Area
The Gross External Area which is commonly abbreviated as (GEA), is the area of a building measured externally at each floor level. Commonly this measurement can be undertaken externally and to the perimeter of the building.
Net Internal Area
The Net Internal Area which is commonly abbreviated as (NIA)is the usable area within a building measured to the internal face of the perimeter walls at each floor. This measurement will be determined through careful internal measurement.
The Valuer's Instruction
The Valuer's Instruction will be the specific activity that he or she has been asked to undertake. For example this could mean to value the entire property, or a specific element of it. It is important to fully clarify this before the valuer's visit.
The Inspection Conditions
These are the weather conditions on the day of inspection. These can often have a bearing on the valuation, for example defects with the dranage may not be noted on a dry day, however may be visibly apparent on a wet day.
Code of Measuring Practice
The RICS Code of Measuring Practice was first published in 1979 and went through a number of natural revisions. The code provides guidelines for measuring buildings and land to avoid any disputes arising.
International Property Measurement Standard
The IPMS replaced the RICS Code of Measuring Practice, it is a consistent methodology for measuring industrial, office, residential and retail buildings around the world.
The Metric System
The metric system is the measurement unit that valuers will use when measuring length. In the metric system the units of measurement are the millimeter (mm), the centimeter (cm) and the metre (m). You will be sure to see these referrals within our reports.
Price Per Square Metre
This is the price of the property per metre of space. One square metre of floor space – an area about the size of a red phone box. In areas of London this can be upward of £20,000 so getting the measurements correct is imperative.
The Valuation Currency
This is the currency at which the property is being valued. If the property is being valued within England or Wales this will be in pound Sterling (£). Unless otherwise specified this will be the preferred currency.
Limitations to the Report
These are the limitations that the Valuation report contains. Commonly this will include points such as; who can rely on the report and advice, the valuation approach and the what has been valued.
Arm’s Length Transaction
An Arm’s Length Transaction, is the estimated amount for which the property should exchange for between a willing buyer and a willing seller, after properly marketing and where the parties had each acted knowledgably, prudently and without compulsion
The Comparable Evidence
Comparable evidence is at the heart of virtually all property valuations. It is the process of identifying, analysing and applying comparable evidence to the property that is being valued. It is fundamental to producing a sound valuation.
The Estimated Amount
The Estimated Amount, refers to a price expressed in terms of money payable for the property in an arm’s length market transaction. As confirmed above this will commonly be in pound Sterling (£).
The Market Value
Market Value, is the most probable price reasonably obtainable of the subject property in the market on the valuation date. It is the best price reasonably obtainable by the seller and the most advantageous price reasonably obtainable by the buyer.
Asset or Liability should Exchange
An Asset or Liability should Exchange, refers to the fact that the value of an asset or liability is an estimated amount rather than a predetermined amount or actual sale price.
A Willing Buyer
A Willing Buyer is motivated, but not compelled to buy a property. This buyer is also one who purchases in accordance with the realities of the current market and with current market expectations, rather than in relation to an imaginary or hypothetical market that cannot be demonstrated or anticipated to exist. The buyer would also not pay a higher price than the market requires.
A Willing Seller
A Willing Seller, is neither an over eager nor a forced seller prepared to sell at any price, nor one prepared to hold out for a price not considered reasonable in the current market conditions. The willing seller is motivated to sell the property at market terms for the best price attainable in the open market after proper marketing, whatever that price maybe.
After Proper Marketing
After Proper Marketing, means that the subject property has been exposed to the market in the most appropriate manner to affect its disposal at the best price reasonably obtainable in accordance with the Market Value definition. The only criterion is that there must have been sufficient time to allow the asset to be brought to the attention of an adequate number of market participants.
Knowledgeably and Prudently
Where the parties had each acted knowledgeably and prudently, presumes that both the willing buyer and the willing seller are reasonably informed about the nature and characteristics of the asset, its actual and potential uses, and the state of the market as of the valuation date. Each is further presumed to use that knowledge prudently to seek the price that is most favourable for their respective positions in the transaction.
Without Compulsion, establishes that each the willing buyer and the willing seller are motivated to partake in the transaction of the property. However, neither is forced or unduly coerced to complete it. The sale is therefore impartial, at an arm's length and imperatively between a willing buyer and a willing seller after property marketing and knowledge of market understanding.
An Insurance Valuation
An insurance valuation or rebuild valuation is a thorough assessment of the rebuild cost of the property. Insurance Valuations take into account everything from the size to the internal finishes. We recommend having an up to date valuation prepared every 3 years.
A Retrospective Valuation
A retrospective valuation is a valuation of the property at a date that predates the Surveyor’s inspection. The valuation will provide you with an accurate price at the specified date, for example; you may require a valuation for the property in the 1960’s, 1970’s, 1980’s, 1990’s etc.
A Matrimonial Valuation
A matrimonial valuation will provide you with an accurate value of the property which you can then take forward with your separation proceedings. Matrimonial valuations not only comply with the rules and guidelines of the RICS Red Book, if required they can also be undertaken in accordance with complying with part 35 of the Civil Procedure Rules (CPR) 1998.
A Valuation for Probate
A Valuation for Probate will be required for Inheritance Tax Purposes (IHT) for any property that is worth more than £325,000. The Chartered Surveyor will be tasked with valuing the deceased’s property at the date of death. It is important to note that even if the beneficiaries do not intend to sell the property, a probate valuation will still need to be undertaken for tax purposes.
If you own a leasehold property you will only own the property for the term of years that is specified within your lease. However, under the Commonhold and Leasehold Reform Act 2002 you do have the legal right to extend your lease. Any tenant that extends their lease will not only add a further 90 years to the term, but they will also have their ground rent converted to a peppercorn (zero).
Marriage Value is the increase in the property value post extension of the lease The value will reflect the added market value that the property now has with the increased lease length. The added value, or profit only comes about as a result of the landlord granting the new longer lease. The law required the profit to be shared equally between the tenant and landlord.