VALUATIONS
Valuers
carry out "valuations" that is, they determine the value of
the subject property as at a certain date. A valuation is a report
which states the value of the land according to accepted practice and
theory. It is important to realise that a valuation is much more than
the determination of numbers when determining the market value of the
subject property. In fact, as is shown below, outside environments
such as the consumer (client or taxpayer), the courts and politicians
are much more important in the valuation system than the valuer.
It
is a common mistake for valuation commentators to think of the valuer
as a "stand alone" person who can determine the value
independently of the outside environment, a discipline centric view.
Rather, the outside environment which is usually beyond the control
of the valuer, determines the nature, the content and method of
valuation. Therefore, a good definition of a valuation is the one
that follows as it recognises the outside environment:
Making
an appraisal is solving a problem. The solution requires
interpretation, in terms of money, of the influences of economic,
sociological, and political forces on a specified real property -
American Institute of Real Estate Appraisers (AIREA), "What to
look for in an appraisal", 1975.
The
more traditional and less accurate definition is as follows:
The
act of estimating the value or worth of anything is the duty of the
valuator - Wellan, "Real estate valuation", The Valuer,
October, 1951, 387.
The
following Institute definition although not recognising the effect of
the outside environment, at least recognises the eclectic nature of
valuation:
Valuation
is a method of investigation characterised by insistence on careful
appraisal and measurement. It purports to establish a money value for
land and buildings both urban and rural. There, as a discipline, it
is closely related to economics, to accounting, to surveying, to town
and regional planning, and to real estate practice - Australian
Institute of Valuers (AIV) Handbook, 1976.
The
steps in the valuation process are as follows:
1. THE
VALUATION PROCESS
INSTRUCTIONS
Receive, interpret
& clarify
2. SEARCH
& GROUP
DATABASE
Public & private
records
3. INSPECTION
#1
Physical factors,
measurements.
condition,
income/outgoings
etc
4. DETERMINATION
OF
HIGHEST
& BEST USE
Physical, legal and
economic factors
5. SALES
INSPECTION
As per inspection #1
add to database,
analyse
5. METHOD
Determination of
primary &
secondary
methods
6. VALUATIONS
Determine primary
& secondary
valuations
7. COMPARISON
Compare primary
& secondary
valuations
8. INSPECTION
#2
If comparison is OK
Update database
9. REPORT
#1
Prepare draft
report
2
10. DATABASE
Update database
change values if
necessary
11. REPORT
#2
Final report
12. FEEDBACK
Monitor relevant
subsequent
sales and events
13. SUPPORT/DEFENCE
If necessary support
& defend
valuation in
court or tribunal.
To better understand
the effect of the outside environment, valuation should be analyzed
using the systems approach as this puts the valuation into it's proper
context. The valuation environment can be classified a number of ways
for example, by users.
See
valuation user environments
3