- discuss and clarify
instruction requirements with client
- confirm sufficiency of
- determine assignment plan
- determine and negotiate fee
- confirm assignment with client
- prepare and provide
instructions to valuers and other professionals.
AND CLARIFY INSTRUCTION REQUIREMENTS WITH CLIENT
importance of this element of the standard is the need for good
communication between the valuer and his/her client. This is of
course, a two way process and there is evidence of little
understanding of valuation and particularly, the concept of market
value by a number of clients. If this is the case, it is necessary
for the valuer to try to educate his/her client in valuation
client should be aware of, and understand the valuation services
available to him/her. This can be achieved by preparing a brochure or
booklet of the services available by the valuer. The available
services should be more than the simple provision of market values
and include broader areas of valuation expertise such as feasibility
and capability studies.
the valuer should understand client needs. This is usually obtained
through experience but it should not be forgotten that your client in
turn has a client who puts special pressures and demands on him/her.
If the valuer understands and realizes this, he/she can better
service the client.
lenders engage in a fine balancing act of trying to provide monies to
their clients based largely, on the valuations supplied so as to
protect the lender's mortgage investment. On the other hand, the
client is trying to obtain as much money as possible from the lender
with as little security as possible. The lender is trying to cover
risk and make a profit without losing their client to another lender
because they were not prepared to lend as much.
client should be made aware of the preferred written format for
valuation instructions as specified by industry standards. This can
be achieved by the valuer sending to the client model instructions.
This is a situation where the client should have some knowledge of
valuer may receive a basic instruction such as "please value
number 3 of Smith Street". In this case it is necessary to have
the client clarify and expand the instruction to include:
- the type of value required,
for example, market value
- whether or not the property is
vacant or tenanted. If tenanted, details of the tenancy.
- details of access to the
property for inspection
- the date at which the
valuation is required
- the purpose of the valuation.
This can be important because the client
- may not know what type of
valuation is required. For example the valuer has a number of valuation
formats or templates approved by the lending bodies. The valuer will
use the form and type of report required and approved by the lender.
lenders are now more inclined to accept the API's Property Pro report
format. This enables the use of a professional and near universal
standard for the valuer to follow. Property Pro will be covered
extent of professional indemnity insurance cover is now a common
matter of negotiation between the valuer and client. This will be
determined largely on the nature and size of valuations. For example,
house valuations for bank lending purposes will not require the same
indemnity cover as that required for hotel and motel valuations.
following is the API's recommendation of the information to be
provided in the instructions and supply of information. The list
below could be used as a pro forma by lenders.
INSTRUCTIONS TO VALUER AND SUPPLY OF INFORMATION
is normal and appropriate for clients requiring frequent reports, to
appoint panel Valuers to whom standing instructions may be issued and
with whom, in some instances, a service contract may be entered into.
Model Standing Instructions can be found in the Client Focus section
of 'Professional Practice' published by the API.
for individual reports are normally provided in "writing".
Any instructions transmitted electronically should be produced in a
hard copy form for retention in the Valuer's file. Any instructions
provided verbally in the first instance should be confirmed in
"writing" by the client, or failing that, it would be
prudent for the Valuer to confirm the instructions in "writing"
and retain a file copy.
a Valuer can in due course produce a report after being provided with
very little information by the client, considerable extra time and
cost will be involved for the Valuer in ascertaining necessary
detail. Where some information is not readily available to the
Valuer, the report may be "qualified" to the extent of that
information. Where necessary information is already in the hands of
the lender, its provision to the Valuer should enhance the
reliability of the report. One of the purposes of the short form
report however, is to facilitate an expedited, cost-effective report.
achieve these benefits, as much of the following information and
documentation as possible should be provided in or with the
instructions for a Residential Valuation and Security Assessment.
Some of the information may be obtainable by the intending borrower
from the selling agent where the property is for sale.
following information should be provided in the instructions:
name of the firm to whom the instructions are addressed.
of request, date required (if applicable and not a contract
name of the instructing organisation, appropriate references and
organisation contact details.
of borrowers) and any reference number(s).
street address, locality name and postcode.
description, copy of search or title document, copy of deposited or
registered plan, strata or unit plan or survey report.
Dwelling, unit, hobby farm
current sale involved (or price and date if recent sale). Extracts
from Copy or Copy of any special conditions, certificates, etc.
residential investment properties, serviced apartments and community
title, access to the contract should be arranged for the valuer. A
special fee may be appropriate for perusal of any substantial extra
no current or recent sale is involved.
name (if property has been sold or leased, the names of any real
estate or leasing agents involved should be provided) Contact's Phone
numbers and whether am or pm.
name, rent being paid and expiry date.
INSTRUCTIONS: If any applicable
proposed dwelling, renovation or extension.
FOR THE VALUER TO RECEIVE
of latest tender or quote with priced schedule of fittings/pc items
of plans and specifications preferably approved.
name and licence details
OTHER RELEVANT INFORMATION
zoning certificate, development approval, pest report, etc.
where and how the report should be forwarded.
SUFFICIENCY OF THE INSTRUCTIONS
valuer should check the instructions to ensure the required
information is clearly specified according to industry standards.
Commonly, the valuer will have to obtain further information from the
client to carry out the valuation. The additional information will
often concern further identification of the site, particularly the
legal description and whether or not the property is occupied by a
tenant and if so, the status of the tenancy. This last point is
particularly relevant in the older parts of Sydney as the property
may still be subject to the remnants of the protected premises
should be obtained from the client in writing and must include an
adequate description of the property otherwise; the valuer may value
the wrong property! Therefore, instructions should include the "legal
description" as well as street address. If there is a time limit
for the valuation, it should be clearly stated in the instructions.
client's instructions are invariably ambiguous or not clear and
therefore, the valuer must clarify them before commencing the
the client asks for the "value" of the subject property
only, the valuer must ascertain whether or not a market value is
required or if the premises is occupied by a tenant, whether or not
the required value is encumbered by the tenancy or should it be under
the assumption of "vacant possession". The courts have held
that the word "value" by itself means "market value".
AND PROVIDE INSTRUCTIONS TO VALUERS AND OTHER PROFESSIONALS.
necessary skills in a large office include the transmission of
instructions and advice to other valuers where the valuation is
assigned. This may be to external valuers.
instructions should be in accordance with industry practice
standards, and agreed client arrangements. The senior valuer involved
in such assignments should be able to make sure that the assignment
is clearly understood and in accordance with industry standards and
practices. Discussions with valuers and other professionals should
be carried out so that they know the client's needs and that the
assignment is covered by professional indemnity.
organizing valuer should make sure the assigned timeline and the fees
are in accordance with industry practice and organisational policies
before assigning the valuation.
TO THE SUBJECT PROPERTY
valuer may not be able to obtain access to the subject property
because he/she is locked out, nobody is at home or a vicious dog
guards the house. Inspection may be further complicated if the
property is subject to a tenancy as the tenant has a right to quiet
enjoyment and may not allow the valuer access. In such cases the onus
is on the owner to arrange adequate access for inspection, clarify
the status of the tenant and obtain permission or make an appointment
with the tenant for inspection. The valuer should not carry out a
valuation without inspecting the inside of the building - see Rules
valuer should have the client supply missing information or clear up
any uncertain aspects of the instructions. This is most important as
serious liability consequences could occur if the valuer provides the
wrong valuation or a valuation on different premises to that expected
by the client.
valuer should also examine the likely complexity of the valuation.
Complexity will have a bearing on liability and professional
indemnity issues. If the valuer is acting within a large organisation
he/she may refer a complex valuation to a more experienced valuer.
This is a "risk management" procedure.
the more complex the valuation, the greater the chance of a liability
action against the valuer. Therefore, the valuer should be sure that
his/her professional indemnity insurance covers the valuation type as
well as being of sufficient cover.
valuer's next step is to examine the proposed plan to complete the
assignment. This should meet the firm's or organisation's
requirements and quality control criteria.
assignments will involve staff and other resources. The more complex
and involved the valuation, the more staff and resources will be
necessary to complete it. The valuer before commencing, should make
sure that sufficient staff and resources are available for the
efficient completion of the valuation.
scale valuations should have a contingency plan. By having a plan in
place, cost overruns and duplication of efforts are minimized.
the assignment's timeline make sure that the completion date (end
date) is feasible and incorporate a number of intermediate target
dates as interim measures of efficiency.
report should only answer the client's instructions and the valuer
should not volunteer any extra information unless it can be implied
from the instructions. It should not include other opinion, data, or
values not pertinent to the subject valuation. The report should
include ALL correspondence that has been entered into concerning the
valuation, as this will protect the valuer if a dispute arises over
the type of valuation provided.
instructions become the objectives of the report. It is a good idea
to dissect the instructions into parts, with appropriate headings and
use those headings in the report. In this way the valuer knows that
the report fully covers and meets all of the objectives of the
FOR NON VALUATION INFORMATION
the valuer is asked to provide an investment or land use report
he/she is determining whether or not the existing or proposed use is
the highest and best use. This will require the consideration of a
number of land use options. The first is the "as is" land
use which becomes the "datum" or "benchmark" use.
Other possible land uses are considered against the market value of
the benchmark use.
problems arise when the valuer is asked for information outside the
gambit of market valuation such as whether or not the particular land
use has long term viability.
valuer should be cautious about pontificating about a land use which
he/she does not have expert knowledge. It is better to refer the
client to published trade forecasts or some article written by an
expert in that field. The problem with such forecasts is that the
long term viability of a particular land use is usually a function of
the expected growth of Australia's economy. That is, the client is
asking the valuer to predict Australia's Gross Domestic Product or
preferably, State Domestic Product in the long run. However, the
valuer does not have the expertise to do this.
is better for the valuer not to provide such unnecessary information.
This can be done by explaining to the client that the value arrived
at is "market value" which incorporates (through the
capitalization rate) the market's assessment of the long run
viability of the land use. The market's opinion is far more important
than that of the valuer as it will largely, determine the expected
resale value of the subject property and this is usually, the
client's main concern.
AND NEGOTIATE FEE
fee should be clearly established with the client before the
assignment begins. There is little point continuing with the
assignment if either you or your client is unhappy about the fee.
the valuer is working in a large organization then he/she should make
sure that the fee structure has been determined according to company
policy. This policy should also include how and when the fee is to be
paid. Often it is payable when the client picks the valuation up or
having the client make a part payment beforehand.
ASSIGNMENT WITH CLIENT
the valuer accepts an assignment he/she is confirming with the
client, the agreed timeline, the fee or the basis of the fee, special
conditions (if any), qualifications (if any) and any other
requirements agreed to by the parties.