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What is a property valuation

There are multiple reasons you might need a valuation when buying or selling a property, and there are different types of valuations available. Here we breakdown what’s included in a property valuation, why you meet need one, and how to choose the right service for you.

What is a property valuation

What is a property valuation?

A property valuation is an assessment of your property’s value, based on the location, condition and multiple other factors. Your valuation will be carried out in person by a professional surveyor who will take notes and photographs, and then send you a valuation report.

You could use this when you price your property to put it on the market, if you are separating from a partner who owns part of your property, or when dealing with probate.

Who carries out a property valuation? 

A surveyor will carry out your valuation, as they’ll consider elements like the storage, age, size, wear and tear and room layout in approximating an appropriate figure. They’ll also look at similar properties in the area and consider what the market is like.

Is this different from my mortgage lender’s valuation?

A mortgage lender valuation is often carried out by someone with surveying experience who works for the bank, building society or lender. The purpose of that valuation is to determine whether it is in the lender’s best interests to give you a mortgage on that property. It will be more of a general consideration and will be about 2-3 pages long. You will probably have to pay for this as part of your mortgage fees.

There are certain properties lenders are less likely to approve a mortgage on, like those in a state of structural disrepair, above shops or restaurants, or sometimes to do with cladding or build with certain materials.

The lender’s valuation may be completely different from the price you are paying for a property – for example, if you have agreed to pay £300,000 for a home, and your mortgage lender valuation says it is only worth £250,000, you will have to find a way to pay the remaining £50,000, as they will not lend it to you.

What’s the difference between a surveyor’s valuation and an estate agent’s?

If you’re looking for a valuation in order to know how to price your own property sell, you might think of asking for an estate agent’s valuation. These are free when an estate agent comes around to view your home in the hopes you might use their services to sell the property. 

This is one option, but it’s important to remember that a surveyor’s valuation will be unbiased – they have no stake in how much your property costs. They also have experience in carrying out surveys that consider the structure, quality and cost of improving properties. 

An estate agent’s suggested valuation can be inflated in the hopes of you choosing them to sell your property. If they say they could sell your property for £20,000 more than you expected, you may put your trust in them over another estate agent. They may then have no buyers at that price, and you will be forced to lower the asking price to get interest.

A surveyor’s valuation is based on the facts of the property and the location without any external influences.

What’s the difference between a property valuation and a Red Book valuation?

A Red Book valuation is a RICS-approved property valuation. Just as Chartered Surveyors who are accredited by the Royal Institute of Chartered Surveyors (RICS) follow particular code when it comes to what is included in HomeBuyer Reports and Building Surveys, the same is true of valuations.

This means you can trust that the person carrying out the valuation is RICS accredited, and following best practice and procedures in accordance with International Valuations Standards.

When might I need a valuation? 

There are multiple times you may need a valuation, it’s not just about getting an idea of price to sell, or justifying a price to buy at. 

Probate valuations

If you are the executor of an estate that includes property, you may need it valued. This will affect reporting the estate to the HMRC, and has an impact on Inheritance Tax. If you are an inheritor of a property, valuing it by probate allows you to make an informed choice about selling it on, and how you would organise splitting the estate to multiple inheritors.

Shared ownership valuations

If you have a shared ownership property, you will own a portion of it, and pay rent on the remaining portion. Some people try to buy a little more of the property whenever they can, which increases their equity and reduces their bill. This is called ‘staircasing.’

Every time you try to increase your portion of your property, you’ll need a valuation on the current value. This is so you are paying the most current market rate when you buy the next portion.

Matrimonial valuations

If you are divorcing, you’ll be organising your settlement, or working out how you separate your assets. Your property is likely to be the most expensive item you own, so getting it valued by an unbiased Chartered Surveyor means you can come to a fair agreement based on what the property is actually worth, rather than it being approximated by either side.

Help to Buy valuations

If you bought a Help to Buy property, when the time comes to sell it, you’ll need a valuation. The Help to Buy Equity Loan requires you to repay the 20% equity loan they provided when you bought the property. When you sell the property, you will pay back 20% of the current value.

Similarly, if you aren’t selling your home, but want to pay off your help to buy equity loan, you can either pay the whole 20% or half of it. Whenever repaying, you will need a valuation to determine just how much the equity loan value will be.

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