Value Defined

Market Value

“Market Value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and willing seller in an arms length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion” [PINZ PPM 5th Ed. Pg49]

 

What is Value

There is no such thing as a single value for a property. Each person looks at the property from a different point of view which results in different values. An owner will view a property in a particular light and a potential buyer will look at it differently and an outsider will also have a different opinion.

Complicating matters is that a valuation can be forward-looking or retrospective and is based on certain assumptions. Again, every individual's assumptions will be different and every individual will attach a different weight or significance to the assumptions. Therefore, should you for instance refer your valuation to another person for comment, they would have different opinions on the valuation.

 

Why Use a Valuer

Before selling a property, buying a property, signing a lease, developing, subdividing, rezoning etc, you require an independent, impartial value in order for you to realise the best possible price.

The valuer carries out his responsibilities by being qualified with the appropriate academic education. He/she has accrued professional experience in the areas of the various types of properties such as Residential / Coastal / Lifestyle, Commercial / Industrial and Rural.

The valuer should be proficient in Property Finance, Property Law, Town Planning, Building/Construction and Local and National by-laws and regulations.

What is the property economic climate? What is the property value as an investment class, environmental issues and land use contracts. All this will contrive to heat and cool the property market.

A partly informed real estate purchase or sale could cause a loss far in excess of the capital outlaid, particuarly when using finance. Our Valuations are independent and impartial.

Glossary

BUYER'S MARKET
Market conditions that favour buyers. With more sellers than buyers in the market, sellers may be forced to make substantial price concessions.

CYCLICAL TREND
A short-term growth path of an economic variable. Normally refers to the business cycle, as distinct from a secular trend.

ENCUMBERANCE
A charge or mortgage on real or personal property.

EQUITY (in Property)
The mortgagor’s estate in land subject to a mortgage or the purchasers interest under an agreement for sale and purchase.

FREEHOLD
This is when you own the improvements as well as the land on which it is built. Freehold does not necessarily mean the property is mortgage free.

HIGHEST & BEST USE
The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible and which results in the highest value of the property being valued.

IN SPECIE (of Property)
Still in tangible form and not converted into cash.

INITIAL YIELD
The first year's expected net operating income (based on existing leases and other income reasonably expected) divided by the purchase price. Therefore the initial yield and capitalisation rate are only the same in those rare cases where a building is let at open-market rentals.

LESSEE
A person or other entity to whom space is rented under a lease. A tenant.

LESSOR
One who rents space to another under lease. A landlord.

LOCATIONAL BENEFITS
The benefits derived from the use property that is properly attributable to the desirability of the site location.

MARKET RENTAL
The most probable rental that a voluntary, informed and prudent lessor will pay a voluntary, informed and prudent lessor in a normal open-market (arms-length) transaction, when neither party is under any compulsion to rent or let, other than their normal desire to transact.

MARKET VALUE
The most probable value that a voluntary, informed and prudent purchaser will pay a voluntary, informed and prudent seller in a normal open-market (arms-length) transaction at the date of valuation - after allowing for proper marketing prior to the valuation date - when neither party is under any compulsion to sell or purchase, other than their normal desire to transact.

MANAGEMENT AGREEMENT
A contract between an owner of a property and a property management firm, in which the firm accepts periodic payments for supervising the affairs of the property.

MOST PROBABLE USE
The use or uses to which a property is most likely to be put to, and whilst recognising that this is not certain, having the highest probability of occurrence.

NORMALISED EXPENSES
An term for the operating expenses of a property as they would occur in a typical year.

NORMALISED NET OPERATING INCOME
The net income figure resulting when a typical year's operating expenses are subtracted from a typical year's effective gross income.

OUTGOINGS (OPERATING COSTS)
In the case of commercial leases, the following items are typically included as the tenants obligations : rates, building insurance, cleaning; repairs and maintenance (internal); electricity and water; security, management; refuse and sewerage; tenant installations. The following items are generally excluded: repairs & maintenance of a structural nature.

PARTY WALL
An exterior wall common to two contiguous structures, each under different ownership.

PAYBACK PERIOD
The amount of time required for an investor to recover the capital committed to a venture.

PORTFOLIO RISK
Overall risk associated with ownership of a group of assets. Generally risk declines where assets are appropriately combined together as in property portfolios or fund of funds.

POTENTIAL GROSS INCOME
The amount of money that a property will generate if fully utilized with no gaps, vacancies or other income interruptions.

PROFIT A PRENDRE
A right to enter on land and take specific things eg. A timber grant.

PRESENT VALUE APPROACH
Technique used to express anticipated future cash flows in terms of their current worth by adjusting for the opportunity cost of capital.

REGIONAL PLANNING
Setting a framework or standard for the overall development of large geographical areas or regions viz land use, transportation, infrastructure, etc.

RETROFITTING / REFURBISHMENT
The process of refurbishing older or physically deteriorated buildings for a current use.

STANDARD CAPITALISATION RATE
It is the expected net operating income for year 1, assuming the entire building is let at open-market rentals, divided by the purchase/transaction price, normally expressed as a percentage. this calculation, ignores interest and tax, and assumes a cash transaction.

TITLE DEED
Document which gives evidence of ownership of a property. Also indicates the rights of ownership and possession of the property.

UNIT ENTITLEMENT
This is where an entire complex (flats and townhouses) are divided into individual units.

VALUATION REPORT
A written document detailing an estimate of a property's current market value completed by a person with knowledge of the property markets.

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