RICS define comparable evidence as an ‘item of information used during the valuation process as evidence to support the valuation of another, similar item’.
What makes a good comparable?
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Comprehensive, i.e. ideally a valuer needs more than one transaction. At least three, if not five plus, would be even better
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Very similar or identical
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Recent
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Result of an arm’s length transaction
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Verifiable
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Consistent with local market practice
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Result of underlying demand, i.e. sufficient bidders to create an active market
Where can I find comparable evidence from?
This is the process that Jen follows when researching comparable evidence:
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Use published online databases, such as CoStar or EIG, to identify potential comparables
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Look for done deals, such as lettings, lease renewals, rent reviews and regears. Consider the weight allocated to each under the hierarchy of evidence (i.e. to what extent is the transaction at arm’s length?)
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Look for investment or auction sales (completed deals or properties being marketed), where you may be able to extract details of key leasing events. Some may be historic so ensure you keep a close eye on any transaction dates
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Look for properties that are available to let. Although not done deals, these may give an indication of ceiling (quoting) rents and the market dynamics in a specific location. Speaking to the agents involved may give you further leads on completed deals nearby
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Speak to active local and national agents in the area. Some online databases have a search function to identify which agents have done deals in an area recently. You are likely to identify evidence not published on the online databases this way, including rent reviews, regears and off-market transactions
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Use a database such as The Requirement List to identify active requirements in the area and the level of rents that the market might pay
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Look at nearby properties in the area that could be potential comparables and use the Land Registry to identify landlord or tenant contacts, or to download any leases that may be available
Do I need to verify the information?
What details should I record?
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Address
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Type of property
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Tenure, i.e. freehold or leasehold
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Location
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Lease terms, if applicable
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Brief description
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Floor areas
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Transaction type and date
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Value and any incentives
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Analysis
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Parties involved
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Source of information
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Any issues relating to reliability
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Date the evidence was verified
Having a simple template proforma to record key details is best practice. This can then be saved on your file for future reference.
What do I do with the evidence?
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You will then need to analyse your comparable evidence:
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Analyse the net effective rate, i.e. taking any incentives into account
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Collate evidence in a schedule or matrix
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Adopt a common measurement or comparison standard
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Adjust quantitatively and qualitatively using the hierarchy of evidence and other key considerations (including your own knowledge and experience)
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Analyse the evidence to form your opinion of value
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Stand back and look to sense check the final valuation figure
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Report your opinion to the client, including any negotiation strategy or quoting terms, depending on the instruction in hand
About the author - Jen Lemen BSc (Hons) FRICS
Jen has extensive experience in providing training services to students, RICS AssocRICS, APC and FRICS candidates and corporate clients, together with academic experience as a Senior Lecturer at the University of the West of England, Lecture at the University of Portsmouth and Associate Tutor at the University College of Estate Management. Her RICS assessment experience includes sitting on final APC interview panels, APC appeal panels and being a lead APC preliminary review assessor.
She has also written published articles in Property Week, ACES Terrier, RICS Modus and the RICS Property Journal. She also writes a regular APC column in Estates Gazette Brick & Mortar podcast series with Sarah Jackman and is a contributing author to the Health & Safety section on RICS iSurv.