Mandatory changes to the ‘Red Book’ to help valuers capture discounts and incentives when valuing newly-built homes were revealed today by the RICS.
The changes to the ‘Red Book’ – which comprises the rules used by surveyors when making asset valuations – will require surveyors to ask the seller, builder or developer, or selling agents for a copy of any ‘disclosure of incentives’ for the new home property under consideration.
Surveyors will require completion of a form, prepared in accordance with guidance from the Council of Mortgage Lenders, consisting of 12 questions which disclose the full details of all financial and non-financial incentives and also details of any third party interest in the transaction.
The RICS said this change will help restore confidence in the new-build market and help to improve transparency in the new build valuation process.
The changes will not be limited to the valuation process as the Council of Mortgage Lenders will also make changes to the conveyancing process requiring developers to disclose incentives while the Home Builders’ Federation and Homes for Scotland have amended their code to encourage transparency amongst their membership.
These loop holes in the process have been reported as resulting in the increase in the number of frauds, particularly city-centre new-build developments with buyers being left with negative equity immediately after purchase, said the RICS.
RICS spokesperson Barry Hall said: ‘This change to the ‘Red Book’ will protect the new build market from fraudulent activity. Buyer, lenders and valuers have all been victims of the non-disclosure of incentives by developers with many buyers left with a mortgage worth more than the property’s real value.
‘All parts of the property industry are in agreement that standard must be maintained and that the consumer must be protected from any disingenuous practice.’