SALES – ANZ NOTE
purpose of this guidance note is to address the issue of providing a
‘forced sale value’ of property and its relation to the
assessment of Market Value for mortgage purposes.
Market Value Policy [Def. Market Value]
is the policy of this Institute that mortgage valuations must be
provided by Members on a Market Value basis. A professional market
valuation of a property will be consistent with the Market Value
definition adopted by the Institute.
Forced Sale Value inconsistent with Market Value
expressions ‘forced sale value’ and ‘distress sale value’ are
considered to be inconsistent with the concept of ‘Market Value’
and represent expressions of property prices achieved under different
May be Provided
may, when requested, provide an estimate of a realisable price when
forced or distress sale circumstances exist. The reporting of a range
of value can be appropriate in these circumstances.
sale’ and ‘distress sale’ are taken to have a similar meaning
for the purposes of this statement. The term ‘fire sale’ has even
less certainty of meaning than these terms and in relation to
property its use should be avoided.
Essential Element(s) Missing
sale of property under forced sale conditions does not meet all the
criteria of a normal market transaction in that there is some element
of undue compulsion or influence affecting the seller. One of the
essential elements of a market valuation is therefore missing.
circumstances surrounding a forced sale usually involve:
owner under some form of duress or pressure, financial or otherwise,
to sell the property; or,
third party such as a receiver or mortgagee in possession of the
forced sale of property may involve:
inadequate exposure to the market;
unreasonably short period in which to achieve a sale;
inappropriate selling method;
vendor with a primary objective of recouping a loan or secured amount
rather than obtaining the market price;
being aware of the circumstances of sale and the seller’s weakened
one or all of the above can have a negative impact on the realisable
Effect of Varying and Various Markets
some market conditions and in certain selling situations there may be
little or no difference between a forced sale price and the market
value of a property. The state of the market, the supply factors and
the strength of the demand will influence each result.
provision of a forced or distress sale ‘value’ in addition to a
market value for a proposed mortgage is considered by this Institute
to be a generally undesirable practice.
it is recognised that some lenders require valuers to provide forced
or distress sale assessments.
Use of Term and Endorsement
these circumstances it is considered prudent for the valuer to use
the term current forced sale price and to include an endorsement
along the following lines:
current forced sale assessment is based on
by the mortgagee (or receiver, etc, as appropriate)
public auction or within a reasonable period
auction having regard to the nature of the
property, after full and proper marketing
it reflects the valuer’s view of the market
prevailing at the date of this report.
Forced Sale Imminent
circumstances when a forced sale is imminent such when a mortgagee is
in possession of a property, a may provide an opinion of a forced
sale expressed realisable price range and/or a most probable price on
the market conditions and the specified selling circumstances at the
Realisable Forced Sale Price Range
realisable forced sale price range and/or most probable forced sale
price is likely to vary in relation to actual selling circumstances
at the time of sale.
Not Generally Indicative
forced realisation of a property will usually reflect the particular
and special selling circumstances of that transaction and a sale
price achieved in these circumstances is therefore not generally
indicative of realisable prices other similar properties under normal
marketing conditions unless it can be viewed as consistent with most
in the market.
legal and/or accounting advice will need to be
the GST implications for this guidance note.