A red book valuation is the name that is given by practitioners to a valuation report that adheres to the Royal Institution of Chartered Surveyor’s Valuation Professional Standards, also known as the Red Book.
The valuation standards are a set of mandatory rules and guidelines for RICS Registered Valuers to follow when they are undertaking valuations. They do not tell a Valuer how to value a property – that is left to the individual Valuer to use his or her training, experience and judgment – but they do set out the standards that should be followed.
The standards cover such subjects as ethics, duty of care, the qualifications of the valuer and the minimum content of a valuation report. Their aim is to ensure that the report received by a Client is prepared to the highest possible professional standards, that there are no conflicts of interest and, as only RICS Registered Valuers are permitted to undertake red book valuations, that it has been prepared by a suitably qualified practitioner.
Red book valuations are the preferred form of valuation report for banks when contemplating secured lending, by HMRC for taxation, lawyers that are dealing with property disputes, accountants for capital accounting and charities that need to meet statutory requirements. These parties, organisations and institutions know that when they receive a red book report, the valuation figure is well considered, backed with robust commentary and evidence and will stand up to scrutiny.
Clients often ask what the difference is between a red book valuation and the free ‘valuation’ an estate agent provides prior to sale. Strictly speaking, these are not valuations and instead should be considered as marketing appraisals and are generally not sufficient for taxation, secured lending or accounting purposes. The reason for this is that the recipient cannot be entirely sure of the qualifications, objectivity and independence of the person undertaking this work, whereas with a red book valuation, the recipient knows that the party is a Registered Valuer and is required to undertake a set number of hours training every year and must adhere to the RICS’s high ethical standards.