Valuation is a core or optional technical competency for a wide variety of APC pathways, including Commercial Real Estate, Corporate Real Estate, Planning and Development, Property Finance and Investment, Residential, Rural and Valuation.
The APC competency guide confirms that valuation is ‘about the preparation and provision of properly researched valuation advice, made in accordance with the appropriate valuation standards, to enable clients to make informed decisions’.
In this article, we will look at the underlying process behind a valuation instruction. This will take candidates from start to finish, including common difficulties you may encounter, and finally our tips for ensuring a high standard of professional service is maintained in valuation work.
There are four key stages to undertaking a valuation instruction, each of which we will consider in turn.
There are eight key preliminary questions that a valuer should ask before accepting a valuation instruction. Some of these can be covered in an initial telephone call or meeting with the client.
These are as follows.
If all of these questions can be answered satisfactorily and any issues addressed, then the valuer can proceed to the next stage; agreeing terms of engagement.
The next key stage is for the valuer to agree written terms of engagement with the client. If the valuation is to comply with the Red Book Global, then these should include the minimum requirements set out by VPS 1, e.g. name of the client, property address and valuation date.
The valuer should ensure that a copy of the signed terms of engagement are held on file to create a clear audit trail. It is also sensible to liaise with the client to ensure that they understand and are happy with the agreed terms.
VPS 2 of the Red Book Global provides guidance on the valuation process, including inspection, due diligence and verification of information
Typically, a valuer will undertake the following.
Finally, the valuer will need to complete a VPS 3-compliant valuation report. This will include the minimum requirements such as the client, purpose of the report, interest, basis of value (VPS 4) and valuation date.
The valuer also needs to step back to review the valuation figure and context of the instruction as a whole. This is because valuation is both an art and a science.
Peer reviewing at this stage is extremely helpful to identify potential errors or areas of concern, where additional research or consideration is required.
The valuation report should then be issued in final form to the client. Ideally this will be in hard copy or PDF format, which cannot be amended by the client or any third party. A Red Book valuation report should be signed off by a RICS-registered valuer, providing the client with assurance that it meets the highest standards and thus promoting trust in the profession.
A follow-up telephone call is also helpful to answer any queries the client may have and to seek feedback on the service provided. This can be accompanied by the valuer’s fee invoice for payment by the client within defined payment terms.
The final responsibility of the valuer is to ensure that the valuation file is complete and coherent. This provides clear justification for the valuer’s final valuation figure and report, ensuring a clear audit trail in the event that a complaint or future negligence claim is received.
APC candidates will be required to provide examples of valuations they have been involved with (level 2) or undertaken from start to finish (level 3, which is likely to be under supervision of a registered valuer). This requires a robust understanding of the logical and methodical process of carrying out a valuation from start to finish.
To ensure that candidates are well-versed in avoiding potential valuation pitfalls, here are five tips for success.