Banks, agents, solicitors and accountants will be familiar with red book valuations, but often their clients are not. We thought it would helpful to give an explanation.
Formal valuation reports are always needed for bank security valuations, divorce and litigation and are very often required for capital gains tax, inheritance tax and probate.
These formal valuations are carried out by Registered Valuers who are professional members of the Royal Institution of Chartered Surveyors (RICS). The valuations have to comply with the RICS Valuation-Professional Standards 2014. Historically these were produced in a large red ring binder known as the “Red Book”. The name has stuck ever since, even though the current standards haven’t got much red on at all!
A “Red Book” valuation is designed to ensure that high standards of inspection, investigation, analysis, definitions, justification and presentation are met. The end product should therefore be a well considered and robust document that the intended parties can rely upon.
The process of undertaking a red book valuation involves the following:
- Confirming instructions and valuation requirements, including caveats, reservations and assumptions with a Terms of Engagement Letter. This needs to be signed and included within the valuation report.
- Ensuring there is no conflict of interest
- Inspection of the property
- Further research into matters that might affect the property e.g. planning, land designations, contamination, title & tenure, rights of way etc.
- Gathering, analysing and recording comparables
- Undertaking valuation calculations
- Pulling everything together into a concise report.
The “added value” that Butler Sherborn provides over and above the production of the report is making the time to understand the clients wider situation and valuation requirements as the need for a valuation is usually a part of a wider matter that is important to understand. This often involves working with the clients legal and tax advisors to ensure the best outcome.