A market appraisal (typically done by a real estate agent) is intended to be more of a guide to what the property may fetch if it was sold. It is not performed by a qualified Valuer.
A valuation is performed by a qualified valuer, accredited by the Australian Property institute. Qualified Valuers operate under the designation of either a Residential Property Valuer (RPV) or Certified Practising Valuer (CPV). See more about our Valuers.
Qualified Valuers act in an independent and impartial capacity when completing market valuation assessments. The assessment is the opinion of the valuer at that point in time based upon a wide range of factors, including the specifics of the subject property and the market evidence at the date of assessment.
Market Valuations are assessed at a specific point in time. This is usually the date of inspection of the property, or in the case of retrospective valuations, the date in the past that is relevant to a particular circumstance.
Valuers can sometimes act as an Advocate in an advisory role when specifically instructed to do so, but this usually relates to non-market value advice.
In the first instance, our job as professional valuers and advisors is to understand the ‘Scope and Purpose’ of our clients request.
By ‘Scope’ we mean, who is relying on our advice. Alternatively, by ‘Purpose’ we ask why you require this advice. By doing this we limit the use of our advice to that specific purpose.
Once we have established these two important factors, then we establish if we have any actual or potential conflicts of interest that would preclude us from rendering our independent opinion(s).
Provided that there are no conflicts of interest, and we accept the client’s instruction(s) we create a file and commence work.
When assessing market value, our considerations centre around the core concept of ‘Highest and Best Use’.
The highest and best use of a property is described by the International Standards Committee and the Australia Property Institute under the International Guidance Note No. 1 as:
“The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible, and results in the highest value of the property being valued”.
Following from this concept we research and explore the physical, legal and financial attributes of a particular property and establish what we consider the highest and best use of the property is.
This process involves background research on such things as the Certificate of Title and plan of Subdivision attributes, easements encumbrances and restriction of use on Title, Zoning and Planning Overlays, etc.
We then conduct a thorough and comprehensive inspection of the subject land and improvements, and the locational attributes surrounding the subject property.
Following our inspection, we research and analyse relevant open market transactions (i.e. either sales or leasing or both) to identify how the market is attributing value to a particular property type.
We then research and analyse the demand and supply characteristics of the particular market segment in focus, to understand the specific dynamics of the market for the subject property.
After having completed this comprehensive research, inspection and analysis process our experienced Valuers then use their skill to interpret this information and apply it when forming an opinion of value for a particular property.
The International Assets Standards Committee and Australian Property Institute’s definition of Market Value is:
“the estimated amount for which the land should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction, after proper marketing, where the parties had each acted knowledgeably, prudently and without compulsion.”
The most common alternative form of value assessed for clients by Lee Property is what is known as ‘Fair Value’. This is a specific value concept used in Financial Reporting Valuations.
Valuations prepared for Financial Reporting Purposes, generally flow from a requirement for an entity (usually a company or Government Agency) to have regard the following accounting standards:
- The Australian Accounting Standards Board AASB13, – Fair Value Measurement;
- The Australian Accounting Standards Board AASB116 – Property Plant & Equipment;
- The Australian Accounting Standards Board AASB136 – Impairment of Assets;
Accounting Standard AASB13 defined ‘Fair Value’ as follows;
“The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”
There are very specific guidelines for Valuers to have regard to when completing assessments under these Accounting Standards, and it is a specialised sector of valuation practice.
Whilst all CPV registered valuers can practice in this area Lee Property has two valuers awaiting accreditation as “Specialist Financial Reporting Valuers”, by the API, those being Mr Corey McMahon and Mr Tim Shaw.
A market valuation of a particular property is relevant at a point in time only. This is most commonly the date on inspection. However, a valuation report completed by Lee Property is only valid as at the date of valuation.
We can complete valuations at a retrospective date under certain circumstances.
The value assessed may change significantly and unexpectedly over a relatively short period (including as a result of general market movements or factors specific to the particular property).
Lee Property does not accept liability arising from such subsequent changes in value.
Without limiting the generality of the above comment, Lee Property does not assume any responsibility or accept any liability where a valuation is relied upon or after the expiration of three (3) months from the date of the valuation, or such earlier date if you become aware of any factors that have any effect on the valuation.