Within the mortgage industry there is often confusion between the function of a valuation and a survey - There is in fact a distinct difference between the two however.

A standard valuation is often the very minimum requirement that a lender will wish to have carried out in order to confirm that the property offers an adequate security for the loan advance. A standard valuation attempts to simply measure the market value (amongst other things). Other than obvious property defects, the valuation will not usually assess any specific faults which might be present. A survey on the other hand will investigate and report on the physical and structural condition of the property, outlining any defects and possible remedies.

As there are a wide range of valuation types, The Royal Institute of Chartered Surveyors (RICS) has published guidelines for mortgage professionals. The following list summarises the different types of valuations:

• Open Market value - This figure will be of the greatest concern to the lender when assessing the property as suitable security. The open market value will be based on a number of factors including the taking into account of what other similar properties have sold for in the same area.

• Estimated realisation value - This is the valuer's subjective estimate of what the property would sell for in the current market. There are a number of factors that this figure will be based on, including the property's location, the way in which it is used, supply and demand in the area for similar properties and market rents.

• Existing use value - This reflects the value of the property as it is currently used. This figure does not take into account that by putting the property to another use might change its value.

• Estimated restricted realisation price - This is generally considered as the forced sale price - In the event that the property needed to be sold without sufficient time to market it sufficiently.

• Depreciated replacement cost - This figure specifically applies to specialised properties where there is no obvious open value. Many valuer's will come to this figure by assessing the value of the site combined with the cost of rebuilding for such properties.

• Reinstatement cost - Every lender will wish to see the figure for the reinstatement cost, it is used for insurance purposes and estimates the cost of rebuilding the property in the event of damage or destruction. Often the figure will be lower than the market value although this will not always be the case.

Commercial valuations differ in a number of ways from a residential valuation. In respect to commercial, a number of additional considerations will affect the value:

• Is the property to be sold as freehold title?

• Is the property to be sold with vacant possession?

• Where there is a tenanted property, the lender may view each tenant company differently; perhaps looking more favourably upon a larger well established one.

• The purpose of the valuation, with assets such as machinery to be included, the length and type of lease including any restrictive covenants.