RICS issues practice on new build valuations
30 May 06
New guidance tackles issue of builders' incentives
New guidance for surveyors on the valuation of new-built houses has been issued by the Royal Institution of Chartered Surveyors (RICS).
Revised rules in the RICS's "Red Book" for valuers aim to deal with the difficulties facing valuers where sales incentives are offered by developers in an often less than transparent manner.
Furnishings and fittings, cashbacks, holidays or even new cars are regularly offered as incentives by developers to encourage people to buy new residential properties. These can have a distorting effect on the market in that the price paid for a house may not reflect its market value.
Valuers have always been required to provide mortgage lenders with an objective opinion of market value. The “Red Book” now emphasises the need for valuers to be on their guard for the effect of any sales incentives which could have a distorting effect on the agreed sale price. Valuers may also need to look for comparable evidence beyond the immediate development.
The guidance follows the recommendations of a joint working party of the RICS and the Council of Mortgage Lenders which was convened to consider concerns over the issue.
Andrew Gooding, RICS Valuation Faculty Director said:
"Valuation of newly built residential property is not always as straightforward as it may appear, especially in situations where localised excess of supply over demand encourages developers to offer sales incentives. RICS valuers need to be wise to these issues."
Jackie Bennett, head of policy at the Council of Mortgage Lenders said:
“We welcome the greater price transparency that this new guidance will help to foster. Lenders will be able to have greater confidence as a result.”