MMP311 - Advanced Property Valuation
MMP311 - Advanced Property Valuation Property Valuation – Revisit the Basics What is property valuation? - The estimation of the value of a particular property for a specific purpose at a particular point in time - “The art and science of estimating the value for a specific purpose of a particular interest in property at a particular moment in time, taking into account all the features of the property and also considering all the underlying economic factors of the market” Value estimated in valuations? - Mainly the market value - Other types of valuations: o Investment value – value to a particular investor/purchaser o Assessed value – value placed on a property for tax purposes o Insurable value – the cost of replacing the structure in the event of a loss o Salvage value – disposal value of a property Market Value “ is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and willing seller in an arm’s length transaction after property marketing wherein parties had each acted knowledgably, prudently and without compulsion” Common assumptions: - An informed buyer and seller - Rational or prudent behavior by both buyer and seller - No undue pressure on either party - A reasonable time is allowed to find a buyer Valuation Process
1. Define the problem - Clients - The intended use of the valuation (e.g. Purchasing decisions, mortgage, compensation, financial reporting etc.) - Define the type of value estimated - Effective date of valuation (current, retrospective, prospective) - Real property interest to be valued (e.g. freehold, leased fee or leasehold, whole interest, partial or fractional interest etc.) - Limiting conditions and/or special assumptions 2. Scope of work determination - Acceptable if leads to credible assignment results, is consistent with the expectations of regularly intended users, and the actions of the valuer’s peers would do for similar assignment - To identify the type and extent of research and analysis in an assignment 3. Data collection and analysis - Specific data o Details about the property being appraised o Details on comparable sales/rental information o Details of local market characteristics - General data o General economic, social factors affecting the property market Specific Data - Information about the actual property o Land characteristics o Building characteristics o Property interests to be valued - Details on comparable sales o Similar properties that were sold/leased recently - Local market characteristics o Market characteristics that affect the value of the property
1. Define the problem - Clients - The intended use of the valuation (e.g. Purchasing decisions, mortgage, compensation, financial reporting etc.) - Define the type of value estimated - Effective date of valuation (current, retrospective, prospective) - Real property interest to be valued (e.g. freehold, leased fee or leasehold, whole interest, partial or fractional interest etc.) - Limiting conditions and/or special assumptions 2. Scope of work determination - Acceptable if leads to credible assignment results, is consistent with the expectations of regularly intended users, and the actions of the valuer’s peers would do for similar assignment - To identify the type and extent of research and analysis in an assignment 3. Data collection and analysis - Specific data o Details about the property being appraised o Details on comparable sales/rental information o Details of local market characteristics - General data o General economic, social factors affecting the property market Specific Data - Information about the actual property o Land characteristics o Building characteristics o Property interests to be valued - Details on comparable sales o Similar properties that were sold/leased recently - Local market characteristics o Market characteristics that affect the value of the property
