Whats the difference?
When it comes to having a property appraised, there are two main options available to you; a market appraisal or a valuation. To be clear; a market appraisal is not a valuation and cannot be relied upon.
A market appraisal is an agent’s opinion as to what level a property should be marketed at that, based on market research into sale prices of similar properties and current demand in the area. It’s a guide price of what the property could possibly sell for and is usually optimistic to maximise the market that the property is exposed to, and also the commission that the agent can earn. It’s also usually free of charge; most agents provide the appraisal without a fee, in the hope of securing the instruction to market the property. An appraisal cannot be relied upon and does not take into consideration a number of factors that can seriously impact the value of a property.
A valuation, on the other hand, is a surveyor’s evidence-based opinion of the Market Value of a property – namely the estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion. The surveyor that carries out the valuation must be qualified as a Chartered Surveyor and most mortgage lenders insist that the surveyor is also a Registered Valuer with the Royal Institution of Chartered Surveyors. This gives consumers confidence that the valuation can be relied upon, subject to any qualifications or assumptions included within the report. A valuation can be relied upon and a fee must be paid for it to be carried out. The surveyor will carry out a detailed inspection of the property and identify any potential areas of concern that may require further investigation by a building or structural surveyor.
We have summarised the key differences here:
Market Appraisal
Can be carried out by an estate agent or a surveyor
Provides a guide price to market the property
Can take into account recent market sales, current supply and demand, but there is no obligation to do so
Brief property inspection
Cannot be relied upon
Agent holds no liability
Doesn’t necessarily take into account all value factors
Valuation
Can be carried out by a surveyor only
Provides an accurate evidence-based opinion of the market value
Takes into account recent market sales, current supply and demand
Detailed property inspection that can identify any potential areas of concern
Can be relied upon and can be used for lending purposes if agreed by the surveyor
Surveyor holds liability and professional indemnity insurance
Does take into account all value factors
No risk of bias
So, when and why are the two different appraisal methods appropriate? A market appraisal is usually all you would require if you are looking to sell your residential property on the open market. You are selling the property for your own benefit and a market appraisal will give you a guide price for what the property may achieve. It is unlikely you are going to want to pay a fee for a full RICS Red Book property valuation for a simple residential property sale. You can also have a market appraisal for a commercial property if you choose, but by its very nature there are a lot more risks with commercial property, for which you may want a formal valuation report.
As for a valuation, it is required in any circumstance where the market value determined has to be relied upon. This may be a for a mortgage, a homebuyer report, a help to buy/shared ownership purchase, tax or legal purposes or for reinstatement costs.
At Proudley Associates, we carry out both market appraisals and RICS Red Book valuations. Olivia Proudley is both a Fellow of the National Association of Estate Agents, and a Chartered Valuation Surveyor and RICS Registered Valuer. We have extensive experience in carrying out market appraisals of residential and commercial property to give an early indication of value in personal and corporate insolvency instructions and also formal Red Book valuations where required. A market appraisal can give an estimate of value to indicate whether a formal valuation is required.
If we can be of assistance to you or any of your clients, please do not hesitate to get in touch on 01425 200366 or op@proudleyassociates.com