Property Valuation Methods

You do not have to be an expert to realise that an accurate property valuation is extremely important. The accuracy of this valuation is determined by the property valuation methods that are used. At the very least it quite simply determines if you can or can not buy a house. It determines how much you are willing to spend on it and it also determines if the bank will or will not lend you the money to buy it.

For property investors the property valuation methods and total appraisal are even more important. For a real estate investor the valuation will determine his or her ability to continue their investing later. Equity and the ability to leverage later is the life blood of most property investors. This is particularly the case with residential rental property investments. This equity is determined by the original price paid for the real estate and the current value of the property. Both of these are determined by the property appraisal and valuation.

To determine this value the most popular property valuation methods used is the market data approach. This approach attempts to compare the property with similar properties in the area and find the value that way. Other property valuation approaches include the cost approach, which uses the cost of building and the cost of the land to find the total value of the property.

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Intangible Assets and Your Ledger

A topic of interest to many of our customers is intellectual property valuation. IP professionals intuitively understand that IP has monetary value and use a number of ways to approximate it, but there is no standardized method for assigning a value to IP.
A number of models exist that are useful to internally assess IP that can help professionals make reasonable decisions in disciplines such as licensing and mergers and acquisitions. Externally, though, these methods don’t conform to Generally Accepted Accounting Principles (GAAP).

They don’t contain a way of dealing with critical accounting practices such as the principle of prudence or the concept of depreciation. Without a way to address these principles on a ledger, the valuations can’t assure reliability and accuracy to other businesses in an accepted way.

In my view, the industry could benefit from a universally accepted set of methods for accurately assessing intellectual property patents because it’s a fundamental necessity to fully integrate your IP into your business. While a reliable model does not exist today, I’m confident that a GAAP conformant method will emerge within the next decade.

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Analyzing an Investment Property

Despite the sluggish market, it is still complicated to find a “steal” in this day and age. A good starting point for negotiations is often 20% below the list price, with a target purchase price of 10-15% below market value.

But even after your proposal is accepted and the property is under agreement, the property value still may be reduced via the appraisal and/or the home inspection. For example, if the appraised value comes in too low, you may have to ask the seller to fiddle with the purchase price or make some other arrangement. Similarly, a deficient inspection report may force the seller to either make repairs or correct the price.

GENERAL PROPERTY VALUATION GUIDELINES
Rental property estimation is primarily determined by rental revenue, location, and condition.

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Merger-Acquisition Transaction

In the last few years, the identification and valuation of intangible assets, specifically intellectual property related intangible assets, has garnered increased attention worldwide for a variety of reasons that include increased compliance requirements for financial reporting but certainly also in the leveraged finance arena as lending institutions continue to look beyond traditional collateral sources such as accounts receivable, inventory and equipment.

In defining intellectual property, which is the type of intangible asset that has not been historically considered in leveraged finance deals, it must be seen as the group of innovative technologies and/or processes which create a legally protected and marketable product or service that establishes the foundation for sustained profits and brand development. In other words, the appraiser seeks to analyze how the “product line technology” within a company has formed the basis for creating a marketable branded product. Common types of intellectual property include copyrights, trademarks, trade/brand names, mastheads, customer relationships, patents, engineering drawings, proprietary unpatented technology, software and trade secrets.

During a merger/acquisition transaction, deciding which technique is best used to determine Intellectual property’s fair value depends on many factors, but two of the most important questions are: who is asking? and why? Is the person requesting the valuation on the “buy side” or “sell side”? Why do they need it? The request may be in advance of negotiation, mid-transaction or post-sale. What do they plan to do with the Intellectual property? Block it or use it.

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The Role of Estate Agents

In the UK the vast majority of property sales are made using estate agents. People looking to sell their home will use estate agents to advertise and attempt to find a buyer for their property. At the same time individuals searching for a new home will commonly visit their local estate agent. What is the purpose of estate agents and what are the benefits of using them?

The first stage in the sale of any property is to set a valuation. This is a crucial step in being able to find a buyer for the home. Most estate agents are able to carry out property valuations or at least able to find a professional to perform the valuation on their behalf. Valuation professionals can obtain qualifications from the Royal Institute of Chartered Surveyors or from the National Association of Estate Agents. When valuing the property the price needs to be set at an amount low enough to attract a buyer but also sufficiently high the home seller isn’t losing out.

Once the property has been valued the next role of the estate agent is to advertise the property. The agent will begin by creating promotional material for the home. This will involve compiling a description of the property that will include photos, measurements and floor plans.

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Three Property Valuation Tips

If you are planning to sell your home then there are few affective to consider issues and property valuation is one of them. Moreover, the present real estate market makes this evaluation more important like never before because not only the real estate rates are fluctuating but also falling in some parts of the country. There are few things that plays an important role in the evaluation of you home. Check out some factors affecting the evaluation of your home:

· Primarily, it is the modern and updated look of the kitchen that leads to high evaluation of your home. For many people, good kitchen is all about good home. Potential buyers always look for the big and spacious kitchen with a right deal of workspace, thus its significance to the complete evaluation procedure increases.

Basically, buyers look for floors constructed of materials such as stone or tile and counter tops which are made out of high quality of materials. Additionally, if you want to increase the evaluation of your home then make sure that kitchen is well equipped with modern appliances. In case, your kitchen is small you can make it appear spacious with a logical layout and designing.

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Mineral Exploration Property Valuation

The valuation of mineral exploration properties generally fall into two broad categories, those with defined mineral resources and those without. The valuation technique used is different in each case and is in all cases dependent upon the level of knowledge regarding the continuity of grade and geology. A valuation is therefore more robust and quantitative as the available data increases in quality and quantity.

There are numerous reasons why mineral exploration and mining companies should consider valuation of their projects. This may be for mergers, acquisitions, sales or simply internal project ranking. During periods of “depressed” exploration activity there are good opportunities for funded exploration companies to build portfolios of good exploration assets at minimal cost.

During this process it is important to obtain an independent view of what is a fair and reasonable value for a project and to asses its maximum potential value. Similarly in times of reduced exploration expenditure it is often helpful for companies to review their existing projects and produce a comparative valuation of these. This process helps with important decisions regarding which project should be kept, disposed of, “moth-balled” etc and which projects are likely to provide the best return for your exploration spend.

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True Value is in the Eye of the Beholder

There are few more emotive issues than the estimated value of your own property.
Anyone who has been or is intending to remortgage in the foreseeable future will be aware that an independent valuation will need to be completed in most cases. In the current property market, this can be a harrowing and eye opening experience. It has become increasingly evident that property valuers have been taking a very lean view of the UK property market and this has significant implications for seller, purchasers, remortgagers and, most importantly, mortgage brokers and IFAs.

According to London-based data services company Hometrack, which delivers a good indication of a property’s value, house prices fell for 18 consecutive months up to December last year, when the average house price in the UK climbed just 0.1 per cent.

For most areas, last year provided the poorest house price growth – if any – in more than a decade. There is no doubt that 18 months of average values falling, or at the very least the speed of growth falling dramatically, have diminished homeowner equity levels and dented consumer confidence. Hometrack’s national average house price in December was measured at £160,900, down 1.6 per cent from £163,474 in December 2004.

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Business Personal Property Valuation

Business personal property (BPP) can be challenging to value because of the limited quantity of data available and primary reliance upon the sales comparison approach. Relatively speaking, a voluminous quantity of data is available when valuing real estate as opposed to valuing business personal property. Many real estate appraisals consider three approaches to value: cost approach, sales comparison approach and the income approach. By contrast, most business personal property appraisals depend primarily upon the sales comparison approach. While it is possible to develop a reasonable estimate of the market value for business personal property, the values tend to be more subjective than the value of real estate.

The sales comparison approach depends upon principles of substitution and supply and demand. Purchasers of business personal property will seek alternatives and choose the alternative most beneficial for them considering cost, quantity and quality. For real estate, comparable sales data is available with in-depth descriptions of the real estate, including quantity and quality. For business personal property, is more difficult to obtain accurate information regarding the quantity and quality of property involved in a sale. For example, assume the XYZ Company recently closed its Chicago operation and sold the furniture, phone system, network servers, personal computers and related items for an office with 30,000 square feet of space and 120 employees. The sales data includes the quantity of desks, chairs, file cabinets, personal computers, network computers, etc. However, it does not contain precise information regarding the condition and age of each of these items. Real estate is more homogeneous and easier to describe versus the sale of a quantity of business personal property.

Real estate appraisers often gain insight from preparing each of the three approaches to value for real estate assignments. However, personal property appraisers typically focused primarily upon the sales comparison approach. They do not have the benefit of contrasting the value conclusion via the sales comparison approach with values via the cost approach and income approach.

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Assess the Value of Your Property

The term property valuation refers to determining the value of real property usually in terms of its market value. Here real property refers to both movable and immovable property like land, buildings, machinery, equipments etc, and market value refers to the price at which the property/asset would be traded at a competitive auction setting. The need for appraisals in property valuation may arise if the property is of a heterogeneous nature. The appraisals are performed by licensed appraisers. The process of valuation of property is also referred to as land valuation and real estates appraisal.

There are several types of values of property based on which the price of the property is determined. Some of the types are listed below:

1.Market value: The price at which the property is traded in a competitive market.
2.Value in use: The value to a particular user. It is lower than Market value
3.Investment value: The value to a particular user and is higher than market value
4.Insurable value: Value covered by insurance policy.
5.Liquidation value: Likely price of a property after reduced exposure to potential buyers because of insufficient time to sell in market.

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