Residential Valuation Types Explained

“Market Value”

• The value of the property in the open market with no time restrictions to sell the property.
• The value will be based on similar unit house/flat sales nearby and rental comparable for buy to let.
• New homes often have a premium which some lenders will discount.

“Investment Value”

• The investment value is based on similar units sold as investments usually on a yield basis (this is the annual rent divided by a percentage according to comparable investment property locally).
• This method is typically used for blocks of flats, multiple properties on one title, C4 HMOs and sue generis HMOs.
• Some lenders will request the surveyor considers a discount for sale to an investor when lending on these types of investments and may also deduct costs associated with running of the property that are not passed on to the tenants.
• Small C3 HMOs and C4 HMOs in an article 4 area can be considered on the hybrid valuation which sits between the market value and investment value. To be considered on an investment value the property needs to have been materially converted into an investment i.e., it would cost a considerable amount to convert back.

Assisting Your Valuation

Speak to your local agents and get your own list of sold and ‘let’ comparables.

Investment Property:

1. Make a list of comparable sales/lets comparing to your own property in terms of size and location to demonstrate investor demand.
2. On newly completed property it’s good to get the units let before valuation. This gives the surveyor clear evidence of the rental in today’s market.
3. Provide any leases or licences associated with letting.

Development Finance Valuation Types Explained

“Residual Value (RLV)”

• This is the value of the land that a developer would pay for the site or property and is usually based on all costs, including finance costs, where the profit is expected to meet 20% (ideally) with a minimum of 10% profit.
• Detailed or outline planning needs to be in place unless the works fall within permitted development rights.
• Properties that will be an investment on completion can also be valued on their estimated rental value with the surveyor using a yield-based valuation and similar property values nearby.

“Gross Development Value (GDV)”

• The value of the units sold on an open market basis at practical completion, together with the value of the freehold.
• Values are based on similar property being sold, under offer or on the market, typically being shown on a pound per square foot basis.

Other Lending Factors

Lenders will often ask that the values above are also considered within a time frame of sale.

“180 Day Value”

• You would not expect a difference in the open market value on straightforward properties, however we often see a difference on commercial property, high value residential property or complex/unusual properties.

“90 Day Value”

• This is commonly known as the forced sale value (for example sale at auction). Most lenders don’t lend off this figure as it is considered a worst-case value.

Assisting Your Valuation

Speak to your local agents and get your own list of sold and ‘let’ comparables.

Investment Property:

1. Make a list of comparable sales and lets comparing to your own property in terms of size and location.
2. Provide the surveyor with a detailed breakdown of costs, warranties/architects certificate and all professionals costs on the scheme.
3. Provide relevant planning documents.
4. Detail the proposed completed specification of the property and show them other projects you have undertaken.

Commercial Investment Valuation Types Explained

“Open Market Value”

• The valuation of the property sold on the open market in a reasonable time frame.
• For investment property when let to a strong tenant(s) a premium is added for the length of lease without break and the quality of the company e.g. Tesco on 15-year lease.
• For multi let units the surveyor will look at the average age of the remaining lease lengths, the quality of the tenants and how much each tenant accounts for which determines any premium above the vacant possession value.
• The value will be based on similar investments transactions, length of remaining leases minus any tenant breaks and tenant quality.

“Vacant Possession Value”

• The value of the property when vacant.
• Surveyors will value against the comparable market rents in the area and sold comparables of other local property.
• The value may be further reduced; a) if there are any incentives required to let the property (for example reduced rent), b) together with the time it would take to let to a new tenant.

Assisting Your Valuation

Speak to your local agents and get your own list of sold and ‘let’ comparables.

Investment Property:

1. Make a list of comparable sales/lets comparing to your own property in terms of size and location to demonstrate investor demand.
2. On newly completed property it’s good to get the units let before valuation. This gives the surveyor clear evidence of the rental in today’s market.
3. Provide any leases or licences associated with letting.

Trading Business Valuation Types Explained

“Open Market Value”

• This is the value of the property sold in the open market with the benefit of at least 3 years trading accounts together with good will associated with the business.

“Open Market Value Closed”

• This is the value of the property sold in the open market however the business has been closed but there are available accounts.
• The surveyor will work off the previous accounts, projections and what they believe to be the fair maintainable trade levels.
• This type of survey is typically used by an existing business buying another trading property where they have experience of owning and managing similar assets (for example hotels).

“Vacant Possession”

• The value of the property closed with no trading accounts.
• The surveyor will work off projections and what they believe to be the fair maintainable trade.

Assisting Your Valuation

We always advise speaking to your local agents and doing market research to get your own list of sold and ‘let’ comparables comparing to your own property in terms of size and location.