Conducting a valuation entails developing an opinion of value for real property. It can take place in Four Valuation Methods:

  1. Comparable sales (residential properties):

Here research is conducted to establish sales of other similar properties. A direct comparison of sales with similar properties is done. Motivated findings such as approach and objectives are provided in the valuation report.

  1. Depreciated replacement cost method (replacement cost less depreciation):

This is where a calculation of the replacement costs of the current improvements is made

with the new structures of the same extent and uses existing facilities,

and then depreciating the calculated replacement cost as a result of depreciation.

Calculated replacement costs are depreciated to determine a market value. The market value of the land is then added to the market value improvements.

  1. Residual-land valuation method (township development):

Viability study conducted that is similar to what a developer would do.

The present value of expected inflows is deducted from all outflows including income tax minus the developers required profit equals the maximum that the developer can afford to pay for the real estate.

This method is often used for a property with development potential.

  1. Income capitalization method (income producing properties):

Used for income-producing properties, this type of valuation is where the net market-related income for a year is divided by the sales concluded on a cash-on-cash basis.

Valuations are used for several and a vast area of things property related.

Valuations are necessary because unlike other stock, each property is unique with variables like depreciation, build etc.

There is often times a difference between what a property owner thinks their property is worth and how it will be valued by lenders, the task of a valuer comes in to determine the amounts involved.

Keep in mind that valuations can protect the potential buyer against the cost of repairing unforeseen /unknown problems especially for buyers living on a fixed income, parents with young children, first-time buyers with minimal experience of the property market, etc.

  1. Agent valuer: evaluation

Agents may provide an opinion of value which is more than market value, in order to coax the seller into signing a sole mandate to market the property. Or on the other hand, an agent may convince a seller of a lower value to conclude a quick sale. It is therefore evident that a significant difference between the 2 professionals, is being independent compared to having a vested interest. Asses the price for the property.

  1. Professional valuer:

Registered under the South African Council for the Property Valuers Profession (SACPVP). A valuation done by a Professional Valuer involves a formal process which has legal standing in court and is an independent opinion of value, whereas an estate agent’s opinion of value is an informal estimation of price and which has no legal standing.

  1. Bank valuer:

Bank valuations are performed to see whether there is sufficient value in the property to secure a home loan in order to recover the loan if they are forced to repossess and sell the property.

  1. Appraiser:

A real estate appraiser is someone who estimates the value of land and the buildings on that land before it is sold, mortgaged, taxed, insured or developed. Such is appointed by the master of the High Court to value estates in the district.

  1. Purchase and sale:

Valuer takes the buyer to view houses in the required price range and features. Comparing different dwellings with one another and also their prices in the market, for the buyer to choose accordingly from valuers written report/ recommendation.

  1. Expropriation:

In the case of an expropriation, a valuer may be called in to assist and give intel on the value of the property. Valuer also assists the state in the amount of compensation to be paid for the property.

  1. Deceased estates:

Minister of Justice calls on valuers to make a valuation of the assets in the deceased estates.

  1. Mortgages:

Valuers are used for financial institutions to determine the value of the properties against which loans are granted.

  1. Assessment rates:

Every province has its own ordinance which determines the basis on which the value of properties is to be assessed for this purpose, but without exception, the ordinances determine that the values will be assessed by valuers.

  1. Insurance:

Due to immovable improvements on land being insured against damage or destruction by fire or acts of God, the insured amount is the replacement cost of such improvements and the cost is often determined by a valuer.

  1. Company assets:

In terms of the Companies Act, 61 of 1973 the immovable properties of companies must value regularly. Companies appoint valuers for a period of time to revalue the properties, values must be reflected in the company’s balance sheet.

  1. Investments:

Individuals wishing to invest in property may need advice from valuers.

  1. Rental determinations:

The valuer must maintain complete records of rentals being paid in the property market because he is often consulted on the aspect of the market.

  1. Leases:

It is the valuer’s task to determine the influence of the lease on the value of the property. There are a number of variables and so the valuer must also be able to interpret the provisions of the lease.

  1. Servitudes: When a servitude has to be acquired over a property, the owner of the property is entitled to compensation. The buyer needs to know what the effect the servitude has on the value of the property, this where the task of the valuer comes in to determine the costs involved.