How Are Properties Valued?
If you are in the market to buy a new property, are selling a property, or are thinking about applying to remortgage your current home, you will need to get an accurate valuation figure of the property in question.
For sellers, having an accurate valuation is crucial for making sure that you are pricing the property appropriately for the market and avoiding further problems when you find a suitable buyer. If you are remortgaging your property, then it is worth noting that the value may have changed considerably since you first purchased it, so a professional valuation gives you the option to ensure that you are asking to borrow an accurate amount.
And finally, if you are buying a property, the valuation will typically be provided by means of a valuation survey conducted by an RICS surveyor on behalf of your lender. This provides the lender with further peace of mind and helps ensure that they are not offering you a mortgage that is higher than the property is actually worth.
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How Does a House Valuation Work?
How a house valuation is done may depend on who is conducting it. However, the processes are generally similar whether you are having the property valued by a surveyor or an estate agent. If you want to purchase a new property or are applying to remortgage a property that you currently own, then a valuation survey may be conducted on the property by the surveyor. This is usually an off-site survey that is carried out behind a desk and may involve a quick drive-by of the property to check the external condition and make sure that it is as described. In some cases, the surveyor may need to visit the property, particularly if the property type is of more risk to the lender, or if you are borrowing from a lender who is not familiar with the area.
Driving By – How Property Valuation Works
How does a surveyor value a property without paying a visit? If your lender has determined that there is a low risk associated with the property, a surveyor may not be required to visit and look over the property in person. In this case, a desk valuation is usually conducted. This will involve an analysis of the local property market and house prices using the Land Registry and similar house price indexes. They will also use algorithms and software programs that provide them with an accurate valuation figure. They may or may not drive by the property to finally check it from the street, get a rough idea of the general condition, and make sure that it is as expected.
How Property Valuation is Done in Person
In-person property valuations are typically more likely to be carried out by your estate agent, but there may be some cases where a surveyor will visit and look around the property before determining the valuation figure. Estate agents will usually want to visit the property if you are interested in selling to get a look around and use the opportunity to pitch their services to you. If you are relying on estate agents to sell your property, bear in mind that some may price it higher than it is worth in order to try and maximise their potential commissions, which could cause issues down the line, especially if your buyer’s lender requests an RICS valuation report.
When a property is valued in person by an estate agent or surveyor, this will generally be a short visit. This is because the bulk of the survey is carried out off-site and involves everything that is included in a drive-by type of valuation including research and analysis of local sold property prices recently.
The estate agent or surveyor will typically come to take a quick look around the property and take note of its condition and other factors to finally determine how much it is worth.
If you are buying a property, it’s important to remember that this type of survey only focuses on the overall value of the property and does not go into further depth regarding the property condition, as would a home buyer’s survey, for example.
If you are a buyer, then it is a good idea to have both a valuation survey and a homebuyer’s survey conducted on the property you are interested in purchasing for your peace of mind. The valuation survey will give you a better idea of what the house is worth to ensure that you are not paying more than necessary, while a home buyer’s report is a separate survey designed to help you get a better understanding of any work that might be required or defects that could be potentially expensive to repair in the future.
Property Valuation Criteria
To value a property, your estate agent or RICS surveyor will look at several different criteria. Together, the various aspects of your property that are researched and analysed during the valuation process will enable them to come up with an accurate figure that will help with pricing your property competitively or making sure that you are not paying more for a property than it is worth. Some of the main things that the estate agent or surveyor will look at when valuing your property include:
1 – Local Housing Market
First of all, the surveyor or estate agent will do some research into the local housing market to find recently sold properties that are comparable to the one that you are looking to buy, sell, or remortgage. This will help them get a better idea of what your property could reasonably be worth based on the amount of money similar properties in the area have sold for in the past few months. Generally, they will not go back any further than six months and will only look at properties in your local area to account for house price differences both over time and between locations.
2 – The Basics
The basic specs of your property are usually one of the biggest aspects that contribute to the valuation figure. These include the property’s size, number of bedrooms, number of bathrooms, layout, age, fixtures and fittings, outdoor space, parking availability, and more. They are all considered during a valuation to help determine how much it is worth. As you might expect, the bigger a property and the more rooms it has, the more it will usually be worth.
3 – The Location
The location is often a hugely important aspect in terms of how much a property is worth, so this will also be taken into consideration by your estate agent or surveyor. Not only will they consider the general reputation and desirability of the location, but also any local amenities such as nearby schools and their quality, access to transport links, green spaces nearby, shopping opportunities, nearby healthcare, and more.
3 – Appearance and Characteristics
In some cases, certain property characteristics can also be influential in determining the value. For example, a property might be valued higher if it has retained original period features over time and these are still in good condition. But even if it is not a period property, the general appearance will have some impact on how much it is valued at if the valuation is carried out with an in-person visit.
In general, a property that is in good repair, well-decorated, and has good curb appeal is likely to fetch a higher value compared to a similarly sized and located property that is not clean, has dated and worn décor, and requires a lot of repair work to get it up to standard. In some cases, making small improvements to the property can make all the difference both during the valuation and when it comes to attracting potential buyers.
4 – Potential
Another factor that estate agents in particular will look at when valuing a property is the potential for future expansion or renovations. This can be quite significant when it comes to pricing your property, as buyers are often willing to pay more for a property that they can do a lot to and make their own. However, bear in mind that while estate agents might really focus on the potential for improvements like loft conversions or extensions, the lender’s surveyor might not see things the same way, so avoid boosting your asking price too high based on potential alone.
How the Valuation of a Property is Done When You Sell, Buy, or Remortgage
There are several reasons to have a property valuation carried out, but most of the time it is conducted due to selling, buying, or remortgaging a property. A valuation can help sellers and owners determine how much their property is currently worth, while if you are buying a property, the valuation is typically carried out for the benefit of the lender to minimise risk. The valuation itself can take anywhere from an hour to a day or two and will usually be valid for a limited time.
Since property prices can change drastically for lots of reasons, an up-to-date valuation is important for selling, buying, or remortgaging a property.
