Скачать или смотреть Property Valuation and Appraisal Module 8 Valuation for Different Purposes

Module Overview:
This module explores the various purposes of property valuation, emphasizing how the intended use of a valuation report influences methodology, assumptions, scope, and reporting format. Unlike the technical application of valuation methods in Module 7, this module focuses on the functional drivers behind property valuations in both public and private sectors, from commercial financing to government expropriation.
It critically examines how different objectives such as mortgage lending, financial reporting, taxation, compensation, investment decision-making, and insurance demand specific analytical considerations, legal references, and reporting outcomes. The module also integrates valuation standards from international bodies like the IVSC, IFRS, and RICS, which govern purpose-specific valuations.
By the end of this module, you will be equipped to contextualize valuation assignments, adapt methodology appropriately, and comply with professional standards relevant to each valuation purpose.
8.1 Introduction to Valuation Purposes
Valuations are conducted to serve various stakeholders, including:
Property owners


Financial institutions


Investors


Government agencies


Courts


Insurers


Developers


Each purpose influences the assumptions, type of value, scope of work, and content of the valuation report.
8.2 Valuation for Mortgage and Loan Security
Banks and mortgage providers require valuations to:
Assess loan-to-value (LTV) ratios


Determine marketability and foreclosure potential


Estimate forced sale value (FSV)


Key considerations:
Quick sale assumptions


Legal ownership verification


Risk-based adjustments


Market volatility


Method Used: Investment or Comparative Approach
Valuer’s Role: Provide objective, defendable value that protects lender’s interests in event of default.
8.3 Valuation for Financial Reporting (IFRS/GAAP)
Companies must report real estate assets at fair value or depreciated cost under standards such as:
International Financial Reporting Standards (IFRS)


Generally Accepted Accounting Principles (GAAP)


Valuation supports:
Balance sheet accuracy


Asset impairment testing


Revaluation surplus or deficit


Key Standard: IAS 40 (Investment Property)
Value Basis: Fair Value (exit price in an orderly transaction)
Reporting Requirements:
Evidence of market data


Assumptions and adjustments disclosed


Auditor scrutiny


8.4 Valuation for Taxation
Valuations are required for:
Property tax (land use charge, tenement rates)


Capital gains tax


Stamp duty


Estate/inheritance tax


Authorities rely on:
Mass appraisal methods (for property tax)


Market value basis (for estate tax)


Challenges include:
Political sensitivity


Data inconsistency


Property under-declaration


Valuer’s Responsibility: Transparency, defendability, compliance with revenue authority guidelines.
8.5 Valuation for Insurance Purposes
Insurance valuation estimates the cost to reinstate or replace a building in the event of total destruction.
Value Basis:
Reinstatement Value (including demolition and professional fees)


Indemnity Value (less depreciation)


Approach Used: Cost Method
Coverage Considerations:
Fire, flood, structural failure


Loss of rent (consequential loss)


Period of reconstruction


Errors can lead to underinsurance or overinsurance, affecting claim outcomes.
8.6 Valuation for Compulsory Acquisition and Compensation
Governments may acquire property for public interest under:
Eminent domain laws


Urban renewal or infrastructure projects


Compensation is based on:
Market Value at date of notice


Disturbance allowance


Severance and injurious affection


Cost of relocation


Legal Basis in Nigeria: Land Use Act, State Acquisition Laws
Valuers must ensure:
Accuracy


Compliance with statutory frameworks


Transparent rationale


8.7 Valuation for Investment and Decision-Making
Investors require valuation to:
Make buy/sell decisions


Forecast returns and cash flows


Estimate net present value (NPV) and internal rate of return (IRR)


Valuations help in:
Feasibility studies


Real estate fund performance


Portfolio analysis


Approaches Used: Investment, DCF, Residual Method
Key Elements:
Risk profiling


Assumptions on income, growth, and exit yield


Sensitivity analysis


8.8 Valuation for Litigation and Legal Settlements
Courts require valuations in cases such as:
Divorce


Business dissolution


Tenant disputes


Fraud investigations


You serve as expert witnesses, providing:
Unbiased, evidence-based opinions


Clear rationale


Reports that can withstand cross-examination


8.9 Valuation for Mergers, Acquisitions, and IPOs
Corporate actions such as mergers, acquisitions, or public offerings (IPOs) require valuation of property portfolios to:
Determine fair market value of assets


Support share pricing


Satisfy regulatory disclosures


You must:
Work with auditors and investment bankers


Ensure IFRS compliance


Be prepared for institutional review