Understanding Property Valuation: A Complete Guide
Property valuation plays a critical role in real estate transactions and legal situations. Whether you’re buying or selling a home, managing an estate, or navigating a divorce, knowing a property’s true value enables more informed and confident decisions.
This guide explores everything you need to know about property valuations—from what they are and who conducts them to the different types available and how to prepare.
What Is a Property Valuation?
A property valuation is the process of estimating a property’s current market value. This assessment is carried out by a qualified surveyor or valuer, who takes into account factors like location, condition, size, and recent comparable sales in the area. The outcome is an informed estimate of the property’s worth at a specific point in time.
What Is a Property Valuation Report?
The valuation report is a detailed document summarising the surveyor’s findings. It includes the estimated value of the property along with an analysis of the elements that influenced the valuation—such as the property’s condition, market trends, and recent sales in the area.
Who Conducts Property Valuations?
Typically, a chartered surveyor or professional valuer performs the valuation. These experts are certified and often affiliated with professional organisations like the Royal Institution of Chartered Surveyors (RICS). Their assessments are trusted for being accurate, objective, and compliant with current market standards.
What Happens During a Property Valuation?
During the inspection, the surveyor will examine both the interior and exterior of the property. Inside, they assess room sizes, layouts, fittings, fixtures, and the overall condition—including structural integrity and issues like mould or damp. Outside, they review features like vehicle access, garages, and outbuildings, while photographing key areas. Expect a thorough process and feel free to ask questions during the visit.
How Should I Prepare for a Valuation?
To ensure your property is presented in the best light, follow these four steps:
- Do Your Research: Check online platforms such as Rightmove and Zoopla to compare local property prices and gauge where your home fits in.
- Organise Key Documents: Gather materials like floor plans, title deeds, and your Energy Performance Certificate (EPC).
- Highlight Unique Features: Prepare a list of noteworthy aspects—e.g., recent renovations, solar panels, or future development potential.
- Know the Area: Be ready to discuss local amenities and developments, as well as both positives and negatives of the neighbourhood.
Types of Property Valuation
There are four common types of property valuation, each suited to different needs:
- Desktop Valuation
Conducted remotely using online tools and market data, desktop valuations are quick and cost-effective but less detailed. Ideal for initial estimates or standard properties.
- RICS Valuation
Performed by RICS-accredited professionals, these are formal and highly reliable. RICS valuations use one or more of the following methods:
- Comparative Method: Based on similar nearby property sales (common for homes).
- Profits Method: Used for commercial properties with income potential.
- Residual Method: Applied to development land, factoring in potential and costs.
- Contractor’s Method: Estimates rebuild costs minus depreciation.
- Investment Method: Evaluates rental properties based on income yield.
- Mortgage Valuation
Ordered by lenders to confirm the property is worth the agreed price and to calculate the loan-to-value (LTV) ratio. Usually brief and focused on value rather than condition.
- Market Appraisal (Estate Agent Valuation)
An informal valuation offered by estate agents to suggest an asking price based on current market trends and comparable properties. These are not legally binding but useful when selling.
What’s Included in a Property Valuation?
The valuer’s assessment typically includes:
- Whether the property is of standard or non-standard construction.
- An overall condition check, including visible defects like damp or structural issues.
- A review of recent improvements or renovations.
- Accuracy of advertised features like bedroom count.
- Comparisons with local market listings and recent sales.
Note: Valuers identify obvious problems but do not recommend repairs—unlike building surveys.
How Much Does a Property Valuation Cost?
Costs vary depending on the type:
- Desktop valuation: £50–£150.
- RICS HomeBuyer Report (with valuation): £350–£900.
- Estate agent valuations: Usually free as part of their sales service.
When Might You Need a Property Valuation?
Valuations are required for many situations, including:
- Buying a Property
Ensures you’re paying a fair price and helps secure a mortgage.
- Selling a Property
Helps set a competitive price to attract buyers and facilitate a smooth sale.
- Probate
Required to determine the value of an estate for inheritance tax and distribution purposes.
- Divorce or Separation
Provides a fair market value of jointly owned property for asset division.
- Bridging Loans
Lenders need a valuation to determine how much to loan based on the property’s value.
Additional Scenarios:
- Tax Purposes: For calculating capital gains and other tax liabilities.
- Insurance: To determine appropriate coverage.
- Help to Buy Scheme: Needed to repay equity loans based on current market value.
Valuation vs. Building Survey: What’s the Difference?
The core difference lies in the purpose:
- Property Valuation: Focuses on the market value.
- Building Survey: Examines the physical condition and advises on necessary repairs or risks.
Aspect | Property Valuation | Building Survey |
Purpose | To determine the market value of the property | To assess the condition of the property |
Commissioned by (in most cases) | Lenders | Buyers |
Level of detail | Basic | Detailed |
Focus | Market value, comparables, location | Structural integrity, defects, maintenance |
Report length | Surface-level inspection | In-depth inspection, including structural |
Time taken | Typically 1-2 hours | Typically, a full day |
Cost | £325 – £900 (based on RICS) | £630 – £1,200 (based on RICS) |
Outcome | Valuation figure: a mid-level survey that gives a ‘good overview’ of a home’s condition, flagging any problems found. | Identify potential issues and remedial work required. A thorough inspection of the property, both inside the home and grounds (and outhouses). |
Why is it used? | For selling, securing a mortgage, matrimonial, probate, bridging loans and help to buy | Identify issues, plan for repairs, and make a purchasing decision |
Includes valuation? | Yes | No (typically not included focus is on condition) |
Surveyor Qualification | RICS Registered Valuer or Surveyor | RICS Chartered Surveyor |
What Can I Do if My Property Is Down Valued?
If a surveyor values your property lower than the agreed sale price, this is known as a down valuation. It can impact your mortgage or financing plans. Here are three practical steps to address it:
- Examine the Valuation Report Review the report to understand the rationale behind the reduced value. Look for specifics like property condition or broader market influences.
- Talk to the Surveyor Reach out to the valuer to discuss their findings. Clarify any concerns, and ask if providing further evidence or updates might change the outcome.
- Seek a Second Opinion Consider getting an independent valuation from another certified surveyor. This can confirm whether the original assessment was fair or if a revised figure is justifiable.
Addressing a down valuation involves identifying the cause and potentially making improvements or renegotiating terms to move forward.
What Is a Down Valuation?
A down valuation occurs when a surveyor assesses the property’s market value to be less than the agreed price. Since mortgage lenders base loans on the surveyor’s valuation—not the sale price—this gap can affect the amount you’re able to borrow. As a result, buyers may need to increase their deposit, renegotiate the price, or face loan delays.
How Can You Increase a Property’s Value?
Strategic improvements can significantly boost your home’s market value. Here are three high-impact upgrades:
- Modernise the Kitchen Renovating the kitchen with new appliances, worktops, and fittings can raise a home’s value by up to 15%.
- Improve Energy Efficiency Features like double-glazing, solar panels, or improved insulation make your home more appealing and energy-efficient.
- Add Living Space Extensions such as loft conversions, additional rooms, or a conservatory can enhance usability and increase resale value.
Will I Still Get a Loan if My Property Is Down Valued?
A down valuation doesn’t always mean your mortgage will be rejected, but it may change the conditions. Here’s how it could affect your financing:
- Higher Loan-to-Value (LTV) Ratio A lower valuation increases the LTV ratio, which may exceed the lender’s acceptable limits, prompting them to reduce the loan offer.
- Larger Deposit Needed You might have to contribute more cash to bridge the gap between the lender’s offer and the purchase price. In purchases, this could mean negotiating a lower price. For remortgages, you may need to reduce your borrowing.
- Possible Higher Interest Rates Higher LTV ratios often come with steeper interest rates due to increased lending risk.
- Stricter Lending Conditions Lenders may still approve your loan, but with stricter terms—or they could deny it if the risk is too high.
How Long Does a Property Valuation Last?
Valuations are generally valid for 3 to 6 months, depending on market conditions and the organisation involved. Because property prices can change rapidly, lenders often require up-to-date valuations—especially in volatile markets.
For short-term finance products, like bridging loans, valuations may only be valid for 90 days. If your valuation expires, a new assessment may be necessary before proceeding with a transaction.
Conclusion
Different valuation types serve different goals, so knowing which one you need—and when—is crucial. Preparing for a valuation, understanding how it impacts your transaction, and knowing how to respond to issues like down valuations can save time, money, and stress.
Whether you’re buying, selling, refinancing, or navigating probate or divorce, property valuations provide essential clarity. By working with qualified professionals like RICS surveyors and understanding how valuations are carried out, you’ll be well-equipped to make informed decisions about your property.
