Residential Property Appraisal

Volume 1 - Valuation and Law

Chris Rispin, Fiona Haggett, Carrie de Silva, Phil Parnham, Larry Russen

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000505863
• Edition: 2
• Topic: Architecture
• Subtopic: Architecture General

Residential Property Appraisal, Volumes 1 and 2 are essential handbooks not only for students studying surveying but also for surveyors and others involved in the appraisal of residential property.

Volume 1 has been updated and covers the valuation process as it relates to residential properties, particularly when valuation is undertaken for secured lending purposes. It addresses the basic skills required, the risks posed in a valuation, the key drivers of value, emerging issues that impact valuation and the key legal and RICS Regulatory considerations that a valuer needs to understand.

Volume 2 of the book goes on to address the inspection and survey of residential properties, covering new technology, modern methods of construction, problem plants and pests, damp in new builds, and modern building services. New challenges for the surveyor to consider include the health and well-being of building occupants, the Party Wall etc. Act 1996 and schedules of condition, energy and building performance, and owner-occupied and tenanted properties.

An essential book for students studying to enter the residential survey and valuation profession and for existing practitioners who wish to improve their knowledge of industry practices.

1Introduction

DOI: 10.1201/9780367816988-1

1.1 Context

In this first part of the twenty-first century, the pace of change in valuation has been incredible. We have experienced a property market crash, the likes of which we had never seen before, and the rise of technology, which is now influencing all aspects of a surveyor’s life. The surveying profession was slow to respond to these technological changes but has now become aware of the threats and opportunities that technological progress is bringing.

Various catalysts continue to influence the direction of the profession. In respect of residential property, in particular, they include:

• continuing government intervention in the property market, as it seeks to make home buying easier and more affordable;
• a drive to address housing shortages through increased house building targets and new construction techniques;
• various changes to the regulatory and professional support provided by the Royal Institution of Chartered Surveyors (RICS) and the potential rise of competing trade bodies;
• the increasing pace of technological advances that has seen Big Data playing a greater role in the industry and the large software suppliers becoming more influential players in the market;
• ever-increasing consumer standards driving a more litigious industry, where the profession needs to respond with a quality service or succumb to rising insurance costs.

This book analyses the core skills that a surveyor needs to carry out appraisals of residential properties in a fast-changing world. It is not targeted exclusively at experienced surveyors but is also intended to inform and encourage the student/trainee (from whatever background), to develop the skills associated with inspecting and valuing residential properties.

Looking back over the last two decades, it is clear to us why there is a need for this book. As we emerged from the financial crisis and property crash of the early 2000s, and dealt with the issues that this raised, the profession had to re-evaluate its practices and evolve to ensure we would never again be exposed in the way we found ourselves after the crash. Surveyors are adapting to new requirements and are generally eager to learn from past mistakes.

Attendance at continuing professional development (CPD) events and courses has increased, reflecting the need to maintain knowledge and understanding of technical and procedural changes. There is a new drive to bring fresh blood into the profession to replace the professionals lost in the crash and the ageing workforce who are close to retirement.

The drive to increase technical skills has come not only from a desire to keep pace with change, but also for other reasons, such as:

• The focus of the knowledge and experience of many professionally qualified surveyors has been closely associated with the valuation of property, and not just its physical state. On the other hand, the building surveyor or other similar qualified professional’s focus is on the property. Few courses have catered for the equal combination of skills.
• Many educational courses lack a sound technical grounding. The professional institutions often call for broader, more flexible surveyors armed with business and commercial skills. As a consequence, a number of traditional disciplines have disappeared from the curricula. Building studies and building defects are two such subjects for the residential practitioner.
• Technical advice and guidance that are currently published have a broad audience. A lot of the literature is specifically written for those who carry out in-depth surveys and investigations of residential property. It is often difficult to identify which part of this advice is best suited to the professional practice of residential valuation and appraisal.

Court cases in the 1980s fashioned many of the surveyors’ working practices and RICS Guidance followed to clarify what was required. The court cases have not ceased, although many now refine existing thinking or re-emphasise certain practices, where perhaps Guidance has not been as strong as it could be, or some surveyors just needed a reminder of how crucial the core skills really are. To try and meet this demand and plug the skill gaps, the authors have had to re-write, interpret or specially create training materials that match the professional role of the participant surveyors. There is a weakness in any written material as it cannot be updated speedily, therefore we have tried to develop a series of benchmark measures which the practitioner can use as a basis for good practice, but also develop techniques to adjust to the changes. Regular CPD is, however, still required to develop that process.

In addition, there are two other sources of change that have emerged in recent years:

• The structural changes within many lenders have resulted in different business priorities. New technology has revealed opportunities not previously available and exposed different working practices abroad that could be imported for use in this country. The structure of the residential market in countries like the USA, Australia and New Zealand is much less complex and uncertain. As the global economy has a greater influence on the domestic market and more financial institutions operate internationally, pressure will be applied to simplify the process.
• Customer expectations are changing. The typical ‘customer’ is becoming far more sophisticated. They are better educated and used to more customer-focused service in the other products they purchase. Evidence from consumer surveys, media sources and pressure groups suggest that the standard of service that many surveyors provide continues to fall well below current expectations.

This book sets out to meet these challenges.

What is needed is a publication that has a clear technical focus directly related to the professional role of its readership. Because this role is closely associated with value, then this part of the book must acknowledge the actual process of valuation. Because the commercial world is never static, all this must be set against a background of change and increasing expectations from the people who matter – the fee payers!

1.2 Objectives of the book

Based on this contextual review, the aims of this book are as follows:

• to provide surveyors with sufficient practical and detailed information so that those matters that materially affect the value of residential dwellings can be appropriately assessed. In this case ‘appropriately’ would equate to the standard currently expected of the Mortgage Valuation, although we also cover some of the other forms of residential valuation at a high level;
• to help surveyors further develop the skills of report writing and communicating the results of these assessments to their customers;
• to provide an overview of the valuation process with a particular emphasis on how the condition of a property and a multitude of other matters such as environmental impacts affect its value;
• to highlight the changing nature of the residential property appraisal process and initially identify some of the techniques and mechanisms that may help surveyors adapt to this changing environment;
• to reflect the important role that land and property law plays in assessing the value of an interest in property, and this will feature significantly.

1.3 Definitions

Clearer definitions of the principal terms employed in this book may be useful:

• Customer or client In this book, these two terms are used to describe the end user of any survey or inspection report and this person will usually be a private individual.
• Residential appraisal An act or process of estimating the value, worth or quality of a residential property.
• Residential property Any property that is used as, or is suitable for use as, a residence. This book is restricted to single domestic dwellings owned by individuals, rather than a corporate entity.
• Surveyors This generic term has been used to describe chartered surveyors or other suitably qualified practitioners.

1.4 Who this book is for

This book has been written for a broad range of surveyors whose primary interest is the valuation appraisal of residential property. The book makes certain assumptions:

• the reader has already satisfied, or is close to satisfying, the academic requirements of their chosen professional institution. This would have included a course of study that introduced participants into how dwellings are designed and constructed and the principal agents responsible for the deterioration of the building fabric.
• the reader has had some professional experience of assessing a range of different properties.

In terms of qualifications and level of experience, this book should be suitable for:

• student general practice surveyors in the later stages of their academic course or on the sandwich placement or year-out stage;
• building surveyors who are looking for an introduction to the assessment of residential properties;
• students on courses of a more specialised technical nature who need an understanding of how to carry out an appraisal of residential property;
• surveyors who are working towards their professional assessment and need to refer to written guidance and technical information on a regular basis;
• those more experienced surveyors who may be changing their professional emphasis towards residential valuation;
• qualified and experienced surveyors who need to carry around a source of reference so they can refer to standard guidance when novel or unusual situations are encountered.

1.5 The philosophy of the book

The guidance contained in this publication aims to be challenging to the reader in two ways:

• to outline processes and techniques that may potentially take the surveyor beyond the parameters of current standard valuations. This will enable surveyors to more effectively provide those services and better cope with any changes to standard practice in the future.
• to engage with the surveying process and positively advise clients about the suitability of the price for their potential new home.

This book is not a guide to any particular standard form of valuation promoted by any particular corporate body or lender. For something more specific, then the reader should refer to the publisher of the particular product.

1.6 Contents of the book

The book is divided into two volumes:

• Volume 1 starts with an overview of the valuation process itself. Particular emphasis is placed on the role of the condition of the property in determining value. Volume I then moves on to cover the principal elements of law as they affect the property professional.
• Volume 2 covers all the defects normally associated with residential property and outlines a strategy to resolve these problems. In addition, it gives practical guidance relating to good practice in report writing. This includes a number of case studies to illustrate both good and bad practices.

2Overview of the valuation of residential property

DOI: 10.1201/9780367816988-2

2.1 Introduction

Valuation is a key part of the appraisal process for residential property and this chapter covers the most common valuation approaches used in this sector of the market, in particular, the comparable method, supported by the use of benchmarking tools. The adoption of a step-by-step scientific approach in applying comparable evidence removes some of the subjectivity from the process, resulting in more certainty and greater accuracy. Whilst it will never be possible to produce a black-and-white solution to the valuation of residentia...