Property Valuation, 3rd Edition

Chapter 5Valuation Process and Governance

5.1 Valuation process

The term ‘valuation’ can mean two things, the act of preparing an estimate of value and the estimate of value itself. Valuation is, therefore, a term used to describe both a process and an outcome. As a process, valuation is based on an analysis of market information under certain assumptions, supported by experience and knowledge. The valuation process should be objective and impartial or ‘client‐neutral’. The aim is to provide a consistent approach, credible and consistent valuations, independence, objectivity and transparency, clear terms of engagement, a clear basis of value and clear reporting.

The process of valuation involves the following steps, which can be codified in valuation standards as a way of promoting consistency in approach:

• Confirm instruction and agree terms of engagement
• Inspect the property
• Gather and analyse comparable evidence
• Establish basis of value
• Make assumptions and special assumptions as appropriate
• Select the appropriate valuation method(s) and undertake the valuation
• Produce the valuation report

5.1.1 Confirm instruction and agree terms of engagement

5.1.1.1 Understanding and agreeing the valuation task

Valuations in the public sector – land and property taxation or expropriation for example – are usually in response to statutory requirements and detailed instructions are often prescribed in laws and regulations. Private‐sector valuations, on the other hand, are likely to be ...