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



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