RICS Regulation has been seeing an increase in the number of cases where members have carried out valuation work with insufficient due diligence.
For example, some valuers have:
Valuations prepared without sufficient due diligence can be unreliable, and thus undermine public and consumer confidence in the high professional and ethical standards expected of RICS members and regulated firms.
For that reason, it is worth reiterating how and why RICS expects valuers to exercise professional judgement when carrying out instructions.
RICS Valuation – Global Standards (Red Book Global Standards) may set out the rules – but if members are not following these as they should, a timely reminder can help them make proper sense of our standards.
Rule 3 of RICS' Rules of Conduct indeed demands that members and regulated firms provide a good-quality and diligent service. This includes seeking to understand clients' needs and objectives, and agreeing with them the scope of the service to be provided, its limitations and timescales.
RICS recognises that many valuers work under pressure in terms of time and fees; however, this does not justify curbing professional due diligence in circumstances where it is required.
Professional judgement requires that you make decisions, analyses and evaluations on the basis of your knowledge, skills, training and experience, in accordance with the standards, laws, regulations or principles applicable to your area of work, in the best interests of your client and the wider public.
Consistency, objectivity and transparency are fundamental to building and sustaining public confidence and trust in valuation. This depends on valuers having the appropriate skills, knowledge, experience and ethical behaviour to form sound judgments and to report opinions of value clearly and unambiguously to clients and other valuation users, in accordance with globally recognised norms.
Red Book Global Standards, national supplements and jurisdiction guides contain:
While much of Red Book Global Standards are mandatory, some aspects do not direct or require any particular course of action. Instead, they set out fundamental principles and concepts that must be considered when undertaking a valuation.
A valuer's ability to apply sound professional judgement is critical, and it is therefore fundamental to the integrity of the valuation process that all RICS members practising in this field have the appropriate experience, skill and judgement for the task in question.
Such professional judgement is a key aspect of valuation and involves applying a combination of expertise, experience and sound reasoning to arrive at a reliable, well-informed estimate of value.
It is vital that RICS member valuers have the confidence and willingness to make decisions based on their own professional judgement and not be influenced by the attitude of the client or others.
Red Book Global Standards is being updated through 2024.
The draft timeline for updates is currently early summer 2024 consultation, autumn 2024 publication with an effective date of 31 January 2025.
For summary information as to the proposed nature of the changes, please see here.
Key principles on the way professional judgement should be applied when carrying out a valuation – where the risks of getting it wrong for the client are greatest – are as follows.
It is clear, then, that professional judgement in valuation involves a holistic approach, combining technical knowledge, market expertise and critical thinking to produce accurate and reliable valuation results.
It requires a balance between applying established methods and adapting to the unique characteristics of each asset or liability and its market.
The second article in this series will explain how RICS expects members and regulated firms who undertake valuations to exercise and demonstrate professional judgement, particularly when carrying out physical inspections and desktop investigations.
All four articles in this series are available to read in Property Journal:
PROPERTY JOURNAL
Joshim Uddin MRICS and Nicole Setterfield 03 May 2024
LAND JOURNAL
Dr Peter Defoe FRICS 02 May 2024
PROPERTY JOURNAL
Ludmila Simonova 26 April 2024