Valuation profession: risks and rewards
A common vision
3 October 2014
Jennifer Watson looks at how the industry is addressing the issues raised by Dr Oonagh McDonald's report into the risk and reward challenges facing the UK valuation profession
RICS' aim for the Independent Commission on Valuation was to ensure that valuation professional services continue to underpin confidence in property lending and investment, and that the market works to support the right conditions for their delivery. The balance between risk and reward for the service provider lies at the heart of this, as does the provision of a high-quality client service.
In compiling her report, Dr Oonagh McDonald worked through a large number of written submissions and interviewed lenders, insurers, regulators and lawyers, and commercial and residential valuers. The result is 12 recommendations, which if implemented, McDonald believes would alleviate some of the challenges that have forced many surveyors to exit the often high-risk valuation arena towards lower-risk survey and building work.
Some of the recommendations may be seen as contentious; for example, introducing the Scottish Home Report to England and Wales, which some suggest would be a rerun of Home Improvement Packs. Others focus on so-called 'per click' insurance, where valuers would be insured for a specific piece of work, thereby negating the need for run-off cover. Whatever your view, the report has started a debate across the industry that is now speaking with one voice about the need to develop workable outcomes to the challenges highlighted.
RICS initiated two roundtable events in February, soon after the report was published, to bring together key industry players to discuss the findings from commercial and residential perspectives.
The commercial group concluded that McDonald's report was more focused on residential issues and that there was a need for a separate follow-up work around conflicts of interest and terms and conditions of engagement/instructions, seen as key to ensuring that lenders receive the quality of service they require and that valuers are better able to manage their exposure.
Both roundtable groups agreed that smaller, sub-groups of cross-sector representatives including surveyors, panel managers, lenders, insurers, lawyers and regulators should be established to develop realistic and workable solutions to the issues faced.
Teresa Graham CBE is chair of the commercial cross-sector group. She has a background in finance and regulation and was previously chair of the RICS Regulatory Board. She believes this work will help tackle challenges that have faced the valuation profession and forced many to look for less risky work.
'McDonald’s report and recommendations tackle complex and emotive issues, but there was more of a focus on residential valuers. My group is helping to redress the balance,' Graham explains.
'We are meeting on a "task and finish" basis forcing us to concentrate on getting the right solutions delivered within a specific timeframe. Because these issues are so complex and impact on people's way of working, there can be a tendency to talk them through rather than come up with practical solutions,' she adds.
'l want to find recommendations that all stakeholders will buy into so that risk and reward, problems with getting professional indemnity insurance and concerns about the level of quality of valuations for clients will be alleviated.'
Chair of the residential cross-sector group is Mike Dailly, working group chair at the Financial Conduct Authority Consumer Panel and Principal Solicitor at the Govan Law Centre. He says the first meeting proved there was a remarkable consensus for change to tackle the complex problems identified in McDonald's report.
'Everyone wants to see the challenges facing residential valuation resolved in a robust manner that will ultimately benefit not just consumers but other sectors of our economy, and hopefully lead to much better outcomes for homebuyers and the industry,' he explains.
'The group has already made significant progress on practical reforms that would go some way to achieving this. There is considerable optimism and goodwill among group members, who represent a wide range of sectors across the country.'
Substantial outputs are expected from both cross-sector groups, with participants committed to developing potential solutions for the sector over the coming months. As it progresses, we will update the website on this important work, which has the potential to deliver a more sustainable future for the UK valuation profession.
Jennifer Watson is RICS Regulatory Policy Manager