As part of our Thrive in ’25 campaign, we are offering lower rates on residential bridging to help property investors with the purchase of a single residential investment property. There are strict criteria for borrowers to meet, as you would expect, and one is the property valuation.
When applying for short-term property finance, we require a comprehensive valuation to help our underwriters assess the security and risk of the loan.
One of the most trusted and authoritative valuation reports in the UK is the Full Red Book Report, which follows the guidelines set by the Royal Institution of Chartered Surveyors (RICS). But what exactly does this report include, and why is it crucial in our lending decisions?
What is a Full Red Book Report?
A Full Red Book Report is a detailed valuation report compiled by a RICS-registered valuer, adhering to the RICS Valuation – Global Standards 2021 (the ‘Red Book’). This report provides an objective, professional valuation of a property, ensuring consistency, transparency, and reliability in property finance transactions.
A Full Red Book Report consists of several essential elements that provide an in-depth analysis of the property’s value and risks.
The executive summary, provides an overview of the valuation, including the property’s address, type, purpose of the valuation, and the key figures such as market value and reinstatement cost, which is the estimated cost of rebuilding the property.
The inspection – the report outlines how the valuation was conducted, which starts with the date and scope of the property inspection. The methodology used will be detailed, such as comparable sales analysis, income approach, or cost approach. Any assumptions made during the assessment (e.g., that the property is free from legal disputes or hidden structural issues), will also be listed.
Market analysis – the valuation considers wider market conditions and looks at recent comparable property sales in the area. If it’s relevant, the same assessment will be made of rental demand and yields for similar local properties. The valuation will also consider economic or political factors affecting property values, along with local supply and demand trends that could influence future values.
Short-term property finance providers like Signature, will scrutinise the details of the market analysis closely, to understand whether the property value at the time of the loan is stable, rising, or at risk of decline.
Property description – a Full Red Book Report includes a detailed breakdown of the property’s physical characteristics, such as its size and layout, including the number of rooms, floor area, and usability. The assessment of the property’s condition and state of repair will be critical, including any visible defects, structural concerns, or maintenance issues. What construction materials have been used and the overall build quality will also be included. We also need to know whether the property complies with local planning regulations and permitted uses.
Valuation figures – the report provides key financial indicators too, such as the estimated price the property would fetch in an open market transaction and the potential rental income the property could generate. There will also be a forced sale value, which is what the property is estimated to worth if it had to be sold very quickly – we will cover valuations in more detail. The most crucial figure to us, is the market value, as it determines the loan-to-value (LTV) ratio we can offer the borrower.
Legal and title issues – the valuation report will highlight any legal concerns that could affect the property’s value. There might be title deed issues, such as leasehold restrictions or ownership disputes. We need to know about any easements or covenants limiting how the property can be used, planning permissions pending or granted and enforcement notices. This section highlights legal issues that could complicate repossession or resale in case of default.
Environmental factors – we also now consider environmental risks when financing a property. The Full Red Book Report may include assessments on flood risk and contamination, both of which could impact future resale value. Energy efficiency is of growing importance, which may again impact the resale value. We also need to understand if future developments close to the property might affect its desirability.
Special assumptions – valuers will sometimes include special assumptions, such as the property being refurbished to a certain standard or their expectation regarding the stability of the local or national market. Any limitations affecting the property, such as restricted access to parts of it, are also typically disclosed in this section of the report.
Why Signature requires a Full Red Book Report
The accuracy and detail of a Full Red Book Report are essential for the lending decisions we make. Unlike informal or desktop valuations, this report provides an in-depth, regulated assessment of a property’s value, helping our team make informed decisions.
We use this valuation to:
- Determine loan amounts based on reliable market data.
- Assess risk – ensuring the property is a viable security.
- Plan exit strategies – considering the potential resale or refinancing value.
In short, the Full Red Book Report provides the transparency and security needed for short-term property finance, ensuring Signature and our borrowers can act with confidence. It covers aspects such as market value, legal concerns, property condition and environmental risks – all of which we need to understand to ensure we can make informed in-house lending decisions.
If you need short-term property finance for your next project, please get in touch and don’t be surprised when you see the need for a Full Red Book Report listed in our lending criteria.