Property valuation types

We're here to help - available until 10pm

Free Valuation
Back to latest news
6 Jan 2017

9 types of property valuation you need to know about

Author: Antony Gibson

When you go through the process of valuing your home to put it on the market, or finding out the value of a property you’re looking to buy, you may have noticed that the valuation process does not involve just one monolithic figure called ‘the price.’

The asking price is usually the most important figure, the one that the house ends up on the market with, but during the buying or selling process you may end up looking at several different types of valuation each with their own purpose. Your estate agent, an independent valuation company, a building surveyor, an insurance company, and a mortgage lender can all at one point give you a number based on their particular roles in the buying and selling process.

This is all standard practice, but it can be confusing to get different numbers. In this article we break down exactly what each kind of valuer measures and why they come up with the numbers they do.

The difference between the asking price and the agreed price

The asking price is what the sellers hope to achieve for the property. It’s the advertised price for the property, worked out with advice on the local property market from the seller’s estate agents. The asking price is the price at which the house enters the market – it’s also known as the market price.

Sometimes the asking or market price of a property might differ from its theoretical market value*. The market value is the likely price a property would bring in a fair sale: 'The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion**'. A professional surveyor may be able to identify the market value of your chosen property.

When the vendors agree to a sale, the price at which they sell the house is called the agreed price. This can be more, less or the same as the asking price.

It’s important to note that even if both parties agree to a price, the seller is within their rights to accept a higher offer from somebody else throughout the selling process. The vendor is only committed to the agreed price once contracts have been exchanged and the sale becomes legally binding.


How the asking price is worked out

A property valuation tells you how much your home is worth if you were to put it on the market. The process itself is typically very straightforward for residential property – you can do it through an estate agents, or you can get an independent valuation from a professional (or chartered) surveyor.

A professional surveyor will establish the value of your property by comparing it to what similar properties have sold for and considering all the features of your property that could affect its price. This will include its size, location, condition and how quickly the sellers want to make a transaction. The surveyor will value your home while the estate agents will guide you to a suggested asking price based on, among other things, their extensive knowledge of the area, current demand from buyers and existing competition from other property for sale.

This method is common for residential sales, but for investment purposes a slightly different method might be used. This kind of valuation, known as the income method, looks at how much money the property could make in the future if it’s bought now. Naturally, investors find this a highly useful sum.

Viewing property

The different types of valuation

  • Mortgage valuation

When you’re applying for a mortgage, the lender will make their own estimation of the value of the house you want to buy. From that figure they can make a provisional decision on how much they’re willing to lend you for a mortgage – but most importantly, it can give you a very rough idea of how much you should be paying.

A mortgage valuation, otherwise known as a basic valuation, usually involves a quick half-hour survey of the property that covers any obvious problems without going into too much detail. It’s typically handled (commissioned) by your mortgage provider as a mandatory part of a getting a loan from them, and often costs around £150.

This is not an in-depth survey – the valuers are only interested in working out how much security the property provides. When you are selling or buying property, it’s essential to complement the mortgage valuation with a proper building survey from a professional surveyors, along with a RICS HomeBuyer’s report.

The reality of any mortgage is that the lender may repossess and sell your home to recoup their losses in the event that you cannot make your payments. A mortgage valuation, then, looks at any issues with the property that might affect its value in the eventuality that they have to sell your home.

  • Insurance valuation

When a surveyor assesses your house, they may also carry out an insurance valuation. The purpose of this is to establish the insurance value of your property based on whether your property would cost more than the average market construction price to re-build if it was bulldozed, burnt down or damaged beyond repair.

Surveyors will look in detail at the physical features of the building, such as its size, the construction of it (solid brickwork or concrete), the height of the rooms, the landscaping, its location, the condition of the land it’s on, and so on. Depending on the property, the insurance value can differ from the asking price – an old house in difficult surroundings might be valued at £400,000, for example, but have an insurance valuation estimate of £500,000.

If you’re buying your property leasehold, most good leases will include an insurance valuation paid for by the leaseholders.

  • Online valuation

It is possible to get an online valuation at home. These are usually calculated by a computer (not a person) based on your location, property type and current market prices. They can be used as an extremely rough guide to give you some more information when you’re selling your home – but bear in mind that this is highly likely to be inaccurate.

  • Matrimonial valuations

Matrimonial valuations are used in divorce or separation proceedings – the courts use them to determine how the couple’s assets will be divided. These are usually carried out by a qualified surveyor or valuer who has been jointly chosen by the divorcing couple, and they supply their report directly to the court.

  • Probate valuations

After a death, you may need to get a probate valuation of any property or assets the deceased owned so that inheritance tax can be calculated. The government (through HMRC) strongly recommends using a professional surveyor for this.

  • Tax valuations

If your transaction is subject to capital gains tax, a tax valuation will help you work out how much you need to pay. Understanding what you owe in capital gains tax can get very complex, so many people need a professional valuer. The Inland Revenue may also require a professional tax valuation to be supplied in writing in order to work out stamp duty.

  • Retrospective valuations

A retrospective valuation – literally establishing the value of your house on a specific date in the past – may be necessary for tax purposes, if you are involved in legal proceedings, or if you need to establish a value for probate.

  • Expert witness valuation

If you’re involved in litigation of a property dispute, expert witness provides a professional, credible survey that can be submitted to or relied upon in court. This includes a valuation as well as a record of any issues or defects with the property, and also information about your lease.

  • Building reinstatement valuations

This is part of your insurance valuation – working out the price of rebuilding your property in the event it’s damaged beyond repair, including any insurance risks involved.

Property valuations are part and parcel of the buying and selling process, and now you should be prepared for the different values you may be offered. For more information on getting a free property valuation from Romans call 01344 985 666 or talk to the team at your nearest branch.



Ask The Expert

Get answers to your property questions

View experts

Follow Romans

Like Romans on Facebook

Latest News Stories

Efficient, professional and hassle free service from putting the house on the market to exchange." N. Forrest