07/11/2011

Are property valuations really only worth the paper they’ve been written on?

I have been buying and selling properties in London for myself and many others for the last 30 years. During this period, I have come across many property professionals that provided good advice to their clients and others that definitely did not.

To illustrate, in the early 80’s I had the pleasure of knowing an old school estate agent by the name of Mr Scott Dalgleish. Mr Dalgleish knew all the properties in Knightsbridge personally. He knew which properties would get better morning sun, which ones were noisy because they were tube effected and he even knew which buildings had good or bad porters/caretakers. Mr Dalgleish’s extensive knowledge of the market and his many years of experience working in Knightsbridge enabled him to provide advise that was accurate and could be relied upon.

In contrast, on 18th January 2011, I instructed one of the leading firms in the UK to provide a valuation for a freehold building that we wanted to buy in Knightsbridge. Ten days later, I received a draft valuation report. The report contained pages of useless copied information that frankly could have been put together by my 8 year-old daughter. This leading firm charged thousands of pounds to conclude that the property was only worth an absurdly low figure of £805 per square foot.

However, once I challenged the valuer who had put together the report, he was adamant that his valuation was correct. His argument was that he had followed all the correct procedures and had considered all the facts. However as the conversation progressed, it become obvious that he did not really understand the uniqueness of the Knightsbridge property market and when I asked to be shown any other freehold in Knightsbridge that could be bought for less that £1000 per square foot, of course he could not come up with anything as there was no such property in Knightsbridge.

Unfortunately, over time, the idea that only large firms are capable of producing valuation reports that could be relied upon, has taken hold. Today, almost all of the property advice and valuations for large properties are provided by a handful of large well-known firms. However, as the above example shows, these firms often lack local experience, knowledge and the basic common sense required to provide property advise that is accurate and reliable.

In my opinion, the idea that large firms are better in giving property advise than smaller firms with experience and intimate knowledge in their own area of expertise, is absurd. No two properties are ever exactly the same and no amount of formulas or paperwork can ever replace local experience and knowledge.

Many, including banks, have found to their cost, that some of the impressive, glossy valuation reports prepared for them by well-known firms are only worth the paper they’ve been written on. As they say, never judge a book by its cover. In the case of a valuation report – never judge the accuracy of a valuation report by the name of the firm on its cover

Mamad Kashani- Akhavan