In property valuation practice, risk management does not begin at the inspection or research stage, nor the moment a report is signed. It begins much earlier—the instant a valuation instruction is received. That seemingly administrative step of deciding who should receive the instruction is, in many cases, the most decisive risk-related action a firm will take.
Every valuation instruction carries with it a set of inherent risks that need to be identified and understood before the work begins. The first task is to ask the right questions:
- What type of property is involved?
- What is the valuation purpose?
- Who is the client, and what is known about their reputation, business model, or sophistication?
- Is this a new client, and what due diligence has been undertaken or should be undertaken?
- How complex is the valuation likely to be?
- What time constraints exist?
These early critical considerations shape not only the technical approach but the risk profile of the entire matter. In cases where these considerations have not occurred, the firm exposes itself to heightened risk.
Identifying who within the practice is best suited to undertake the work is just as critical a question. It is easy to assume that any registered valuer is competent to handle any instruction, but experience proves otherwise.
Competence is multidimensional; it includes understanding the relevant legislation, market familiarity, technical valuation skill and knowledge , professional judgement, and the maturity to identify when further guidance is needed. The consequences of assigning the wrong valuer to the wrong job can be career changing for the individual valuer and professionally devastating for the firm. Few cases highlight this more clearly than RAP Pty Ltd v Watkins Tapsell & Anor (2004) 1 DCLR (NSW) 245, (RAP) a case that all within the valuation profession should take heed.
In this case, Bellrock’s own Lindsay Joyce acted in the defence of the valuer after a valuation went “wrong”. The assignment involved six lots containing demountable manufactured homes—factory-built structures specifically designed to be moved between locations. Importantly, these structures were not fixtures and therefore did not form part of the mortgage security. An inexperienced, newly registered valuer—unfamiliar with both the local market and the legislation governing manufactured homes—was given responsibility for the valuation. When the borrower defaulted, the lender discovered that its security extended only to the land. Litigation ensued against the solicitor, the valuation firm, and the valuer.
The judge’s assessment of the situation was unambiguous. The valuer had been registered for only eight months, practising independently for just five. He had received no internal guidance, no supervisory oversight, and no training on appropriate methodology for this atypical property type. The court found that the valuation firm had effectively “sent a boy on a man’s errand,” placing an inexperienced practitioner into a situation where professional misjudgement was almost inevitable. The allegation that the firm was negligent in allocating the instruction was accepted.
Considerations for valuation practices
This case illustrates that valuation risk arises not only from poor processes, but also assigning work which is beyond an individual’s capability. Here, the valuation firm was the creator of their own negligent outcome bringing down an “inexperienced valuer” in the process. A tragic start to his career.
To mitigate risk effectively, valuation practices must embed robust systems that encourage thoughtful and proper instruction, allocate those instructions to the most appropriate valuer and ensure continuous professional communication. Junior valuers or those early in their career should be made to feel empowered to ask questions, seek clarification, and raise uncertainty, if in doubt as to whether they are the “appropriate valuer”.
Supervision and peer review form another critical layer of protection. For complex, unusual, or potentially high risk valuations, senior oversight must be the standard. Methodology must be checked, assumptions tested, and data sources scrutinised. Senior signoff should not be seen as a courtesy but rather a professional safeguard.
Expectations of peak bodies
The professional bodies governing valuation practice for their members reinforce these expectations. Under the Australian Property Institute’s (API) Rules of Professional Conduct, valuers must operate within the confines of their skill and ensure appropriate supervision is provided when others act on their behalf. The Royal Institution of Chartered Surveyors (RICS) imposes similar responsibilities on its members. These frameworks are API/RICS membership professional standards, designed to prevent the exact failures seen in the RAP case.
Ultimately, effective risk management is inseparable from professional identity. The consequences of poor practice management can result in financial loss, reputational damage, litigation, and personal stress and can linger for years. Conversely, strong risk management promotes confidence in the valuation product, through accepted professional conduct and integrity. The lesson of the RAP case is unmistakable: risk is not managed once the job is underway, risk can start from the moment an instruction arrives.
