In normal market conditions and in the valuation method considered and defined for the purpose of this Help to Buy valuation, namely the Market Approach (comparison), comparable evidence is drawn from market transactions. This is an integral requirement for not only our professional services but also a requirement for Target and your Help to Buy valuation.
Due to the onset of COVID-19 and subsequent restrictions, which include restrictions in the housing market, we have no updated comparable evidence during the lockdown to consider how the market is reacting. The only evidence we can consider is pre COVID- 19. We do not have the ability to predict what will happen and how COVID-19 will affect values going forward. On this basis you need to consider whether this is the right time for you to request a valuation. It may be prudent to consider delaying the valuation until there is more definitive evidence of COVID-19’s effect on the residential market.
If you continue to proceed with the Help to Buy valuation then this valuation is provided with a Special Assumption. This is defined as follows:
VPS 4 (Valuation Practice Statement), section 8 – “An assumption is made where it is reasonable for the valuer to accept that something is true without the need for specific investigation or verification”.
VPS 4, section 9 – “A special Assumption is made by the valuer where an assumption either assumes facts that differ from those existing at the valuation date or that would not be made by a typical market participant in a transaction on that valuation date”.
“Where special assumptions are necessary in order to provide the client with the valuation required, these must be expressly agreed and confirmed in writing to the client before the report is issued”.
VPS 4, section 9.4 – “A special assumption may be appropriate for a situation where the interest being valued cannot be offered freely and openly in the market”.
VPGA 2, section 5.3 – A special assumption may be appropriate if there is “a constraint that could prevent the property being either brought or adequately exposed to the market is to be ignored” – in this case the effect of COVID-19.
VPGA 10 – 2.4, 3.2, 3.3
2.4 – “Markets can be disrupted by relatively unique factors. Such disruption can arise due to unforeseen financial, macro-economic, legal, political or even natural events. If the valuation date coincides with, or is in the immediate aftermath of, such an event there may be a reduced level of certainty that can be attached to a valuation, due to inconsistent, or an absence of, empirical data, or to the valuer being faced with an unprecedented set of circumstances on which to base a judgement. In such situations demands placed on valuers can be unusually testing. Although valuers should be able to make a judgement, it is important that the context of that judgement is expressed clearly.
3.2 – “Where material uncertainty exists, it will normally be expressed in qualitative terms, indicating the valuers confidence in the valuation opinion offered by use of a suitable form of words. Indeed, this may be the only realistic way in which to do so, given that the very conditions that create valuation uncertainty will frequently mean there is an absence of empirical data to inform or support a quantitative estimate”.
3.3 – “In most cases it is either inappropriate or impractical to reflect material uncertainty in the valuation figure quantitatively, and indeed, any attempt to do so might seem contradictory”.
In summary we are providing you with a valuation within a market place which is in effect in suspension. We have no evidence to determine how COVID-19 will affect the market place and we may not have this evidence for some time.
On this basis, in order to provide you with the valuation you require for your redemption, we have to make a Special Assumption that we are within a market place pre COVID-19. It is not possible for us yet to assess the impact of COVID-19 on valuation.