by Jen Lemen
Hot Topic Highlight - RICS Professional Statement - HomeBuyer Report - Survey and Valuation
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This week we are going to take a closer look at the RICS Professional Statement - HomeBuyer Report - Survey and Valuation (5th Edition, 2016).
Who needs to comply with the Professional Statement?
Any surveyor providing a HomeBuyer Report (Survey and Valuation) needs to comply with the RICS Professional Statement. You will also need to have a Copyright Licence to use the RICS report forms for the HomeBuyer service.
When was it last updated?
June 2016, as the 5th Edition.
What does the Professional Statement include?
Part A - Professional Statement
Part B - Documentation
Part C - Report form and checklists
Part D - Appendices
What do I have to comply with?
Any surveyor (i.e. AssocRICS, MRICS or FRICS Registered Valuer) providing a HomeBuyer Reports needs to comply with the Professional Statement and the Red Book.
You also need to hold the appropriate Copyright Licence for the report and associated materials.
What is the aim of the service?
To advise 'lay clients who are seeking a professional opinion at an economic price'.
What properties can it be used for?
Conventionally constructed houses, bungalows and flats, which are in reasonable condition.
If you have sufficient technical skills or experience, then you may decide to report on a wider range of properties, e.g. of unusual or specialist construction.
What are the different levels of RICS Reports?
- Survey level 1 - RICS Condition Report - focusses purely on condition using a traffic light system and does not include a valuation
- Survey level 2 - RICS HomeBuyer Report (Survey) or (Survey and Valuation)
- Survey level 3 - RICS Building Survey - gives more detailed information about the building structure and fabric, but does not provide a valuation
How does a HomeBuyer Report specifically differ from a building survey?
It is not as comprehensive as a level 3 building survey, i.e. the inspection is not exhaustive and no tests are undertaken.
However, if you suspect that a defect may exist, you should take reasonable steps to follow the trail. You may then decide to recommend further testing or investigations, e.g. of services or for structural movement.
If this applies, you should then either:
- Defer providing the advice until you have the test results
- Value on the basis of a Special Assumption, which is dependent on the outcome of the test results
A Special Assumption is defined by the RICS Red Book as an 'assumption that either assumes facts that differ from the actual facts existing at the valuation date, or that would not be made by a typical market participant in a transaction on the valuation date'.
What are condition ratings?
Within your Report, you need to apply condition ratings to external and internal elements, services and the grounds (or common areas for flats).
They are split into three categories:
- No repair currently needed. The property must be maintained in the normal way
- Defects that need repairing or replacing, but are not serious or urgent. The property must be maintained in the normal way
- Defects that are serious or need to be repaired, replaced or investigated urgently, e.g. structural defects, dry rot, defective retaining wall or a safety matter
What elements might I need to apply condition ratings to?
This list is not exhaustive, but includes chimney stacks, ceilings, walls, partitions, fireplaces, woodwork, bathroom fitting, water, water heating and joinery. Make sure you check the full list within the RICS Professional Statement - HomeBuyer Report - Survey and Valuation (5th Edition, 2016).
How do the condition ratings relate to market value?
After assessing the condition ratings, you then need to consider their impact on market value.
Elements with a condition rating of 1 generally do not have an impact on market value.
The same applies for elements with a condition rating of 2, unless 'there is an accumulation of items with this rating that would increase costs to a point where the surveyor judges that there would be an impact on market value'.
A condition rating of 3 generally impacts Market Value. We will discuss residential valuation more specifically in a future blog article.
What does my 'overall opinion' mean in the guidance?
This should be the last section of the report that you write, as it relates to your overall reflection and independent judgement of the property.
In providing this, you should consider four factors:
- Agreed/suggested price
- Key features
- Elements with a condition rating of 3
You will then advise whether or not it is reasonable for the client to proceed with the purchase, e.g. unqualified yes, qualified yes, no or cannot say until further tests/investigations are carried out.
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Stay tuned for our next blog post to help build a better you
N.b. nothing in this article constitutes legal advice.