Market appraisals are used to get an idea of a property’s value if sold on the open market. There are more accurate valuations available, but they are extremely useful in certain situations. Let us find out more about what market appraisals are and whether you might want one…
What is a market appraisal?
A market appraisal is an estimate of a property’s market value i.e. what it could fetch if sold. They are often carried out by estate agents, and while they do not necessarily tell you the best selling price, you will get an idea of average selling prices in the area.
Market appraisals are useful when letting or selling a property or conducting an asset review.
Market appraisal vs valuation
A market valuation might sound like an appraisal, but the former is more accurate. A formal RICS valuation is an evidence-based valuation carried out by an RICS Registered Valuer, taking into account the property’s condition and the surveyor’s local knowledge. It will consider repairs, construction and build, property age, modifications, the local area and amenities.
In addition to this, the valuation will comply with RICS Valuation – Global Standards (often known as ‘The Red Book’) and will consider other factors following a review of relevant information such as EPC rating, planning matters, environmental risks, tenure and title matters.
Market valuations are used when an accurate valuation is essential e.g. for tax calculations, divorce settlements or probate, where the determination of value must be ‘Red Book’ compliant.
Is the market price the same as the build cost?
No. Market price, whether an appraisal or a more accurate valuation, gives an idea of what the property is worth, whether selling or renting. If you want to know the rebuild cost e.g. for insurance purposes, you will need an Insurance Reinstatement Valuation (IRV), also known as a Reinstatement Cost Assessment (RCA). This figure may be very different to market price as it considers how much it would cost to rebuild the property from scratch rather than to purchase it on the open market.
Purpose of market appraisals
Market appraisals are used in different situations including:
- Deciding the sale price
- Deciding the rental price
- Helping owners/investors make decisions about their property
- Reviewing a rental property’s performance
Factors considered in a commercial property appraisal
When appraising a commercial property, the agent or surveyor will review:
- Property type
Office, retail, industrial, mixed use
- Comparable properties
Nearby properties, recent deals, supply and demand
- Market conditions
Economic trends, sector performance
- Location
Including local demand for similar properties, transport links, local economy
- Size and layout
Area, configuration, usability
- Condition and spec
Age, compliance, fit-out quality
- Lease terms
Rent, term length, covenant strength, break clauses
- Planning
Agreed use, restrictions, potential for development/change of use
- Environmental Considerations
EPC rating, flood risk, contamination etc.
How important is comparable evidence?
For appraisals, comparable evidence is extremely important. Any recent local sales or lettings will help the agent or surveyor value your property and get a good idea of the current market. They will of course make adjustments to the value based on the condition of your property or any individual features, but comparable evidence sets a benchmark as they reach their figure and forms the basis of the valuer’s rationale to support their valuation.
The agent or surveyor’s approach
In order to carry out a market appraisal, your agent or surveyor will conduct a site inspection and market analysis before delivering their findings to you. The report you receive will not be as thorough as a market valuation, as it does not go into the same depth or accuracy.
How to prepare for a market appraisal
You do not need to do much to prepare for a market appraisal. It is a good idea to show your property at its best, so cleaning and clearing (so that the valuer can get a good feel for the property) are recommended. It is also helpful to have ready any documents e.g. certificates, warranties and/or contracts relating to works done. Talking with the valuer about any changes you have made, big or small, may also be helpful.
Get in touch
Hopefully, this guide has given you a better understanding of market appraisals, their uses and limitations. At Trinity Rose, our team of knowledgeable Chartered Surveyors and RICS Registered Valuers offer a range of services, including valuations. Whether you are thinking of selling, letting, renegotiating rent or need a valuation for another reason, please get in touch. We will be happy to discuss your requirements and how we can help.