- A valuation report can be defined as the calculation or the complete evaluation of a property which can, later on, determine the total value of a property. A valuation report, in other terms, is also known as valuation inspection.
- It is important to note that a valuation report is by no means a survey; hence, it cannot provide you with any information regarding the structural damage of a property. In basic terms, a valuation report can only comprehend the overall monetary value of a property.
- As the name suggests, a valuation inspection of your property can help you determine the right value for which you can put up your property for sale. The procedure of valuation report is initiated by RICS (Royal Institute of Chartered Surveyors) registered property surveyors.
As we have discussed earlier, a valuation report can help you determine and understand your property's overall monetary value. This process is essentially used before putting up a property for sale.
Following are the step by step procedures followed in the process of value inspection of a property:
- Determine the purpose of your assessment: People conduct the process of property evaluation for a number of purposes, the most common of which is for putting up their property for sale.
Before you decide to opt for a complete evaluation of your property, it is important to provide a legitimate reason to the RICS to get the right credentials and notice for a complete property valuation.
Detailed inspection of the property: As the first step of inspection, the RICS department conducts a detailed valuation of the property. They start with an in-depth conversation with the property owner and take into account the logistics of the property's assets.
This process can take several days since the department of RICS examines the overall aspects of the property, which can be considered as an asset such as the furnishings, light fixtures, fixed equipment, etc.
Apart from the assets, the liability factors present in the property are also considered since they affect the overall value of the property. These factors can be mechanisms like electrical heating, the property's plumbing system, etc.
Data collection from online sources: Apart from the data provided by the property owner, the RICS also checks for sources that are available online on the property and its assets.
This makes the valuation process more detailed and accurate in terms of its monetary value and credibility. The data sources provided online are always up-to-date, and most of them can be easily accessed even by the general public since the RTI-2005 Act.
The property inspection and valuation process can essentially be carried out through the following three main approaches:
Value capitalization: In the value capitalization approach, the monetary value of the property is calculated in terms of its current market value and the prospective future value it can incur once it's put up for sale in the market.
Exact Cost: This process ensures that the renter of the property or the property buyer will not have to pay more than the due amount for the property than its estimated value.
Cost comparison: This value evaluation method compares the price of the property being evaluated to the price of similar properties in the market that might have the same value.
Composing a final report of the value: As the last step, by considering all of the data and other components, a final report of the value of the property being appraised is tabulated.
This data shall not be considered a survey report since it does not disclose the list of property liabilities. It is just that the valuation report of a property can only estimate its market value for the owner, which can, later on, be used to put up the property for sale or for renting out the property.
Methods of tabulating a valuation report of a property
There can be different approaches applied to calculate and evaluate the market value of a property. The most important component to keep in mind before deciding to apply for the appraisal of a property is the purpose of evaluating its market value.
The methods that are mentioned below can help you determine the market value of the property, along with providing possible outcomes of the appraisal and the possible reasons for which these methods can be used for the valuation of a property.
There are five basic methods for evaluating the valuation report of a property:
- Evaluation of the assets: Evaluating the assets of a property is one of the most basic steps in the procedure of a valuation report. The property's assets, such as an in-built pool area, garden space, designer porch, etc., add monetary value to the property when it is either put up for sale or rented out.
- Historical valuation of the property: Although this method is not applicable for all the properties that are put up for sale in the market, certain properties have a major history that ultimately raises the market value of the property compared to the regular properties on the market.
History significance of a property plays a major role in determining its market value, and more often than not, such properties are usually not put up for sale.
- Comparison valuation: This method evaluates the value of the property compared to the monetary value of other similar properties available in the market. This gives leverage to the property owner being appraised that they are asking for a legitimate price for their property.
- Profitable assets for the future: There might be certain aspects of the property that might incur a greater value in the future, for instance, the property's value.
Such aspects add a greater monetary value to the property being appraised. Hence, the values of these assets are also considered while estimating the market value of a property.
Discount valuation: There might be instances when the liability aspects of the property might eventually decrease its ultimate market value. Hence, in the discount valuation process, the market value of a property is calculated in terms of its present value.
These are the basic methods and approaches applied in a property's valuation and appraisal process. Now, we shall consider the important things the surveyor looks for before starting the valuation process.
The surveyors look for the following things before starting the process of property valuation:
- The surveyors generally consider that the property was constructed using traditional or non-traditional methods.
- The surveyors then evaluate the present condition of the property.
- The evaluation of the property's present condition includes a thorough inspection of all the assets and liabilities of the property.
- They also make sure that the claims made by the property owner about it before its appraisal are legitimate.
- And finally, they evaluate the local area the property is situated in.