Principles Based On Property Valuation

What types of value are determined during the valuation of the property?

The assignment for the valuation of the property of the enterprise (annex to the contract concluded with the appraiser) indicates the specific type of value, which is determined by the intended use of the valuation result.

When conducting property valuation, the following types of value are used:

  • Market price;
  • Investment value;
  • Liquidation value.
  • In determining the market value of the property, the most probable price is determined at which the property can be alienated in a competitive environment, when the parties to the transaction act reasonably, having all the necessary information, and the value of the transaction does not reflect any extraordinary circumstances, that is, when :
    • One of the parties to the transaction is not obliged to alienate the property, and the
    • Payment for the assessed property is expressed in cash.

The possibility of alienation of the assessed property means that it is represented typical of similar objects, and the period of exposure of this property on the market should be sufficient to number of potential buyers.

The reasonableness of the actions of the parties to the transaction means that the price of the transaction with the assessed property is the highest of the reasonable prices for the seller and the lowest of the reasonable prices for the buyer.

The completeness of the available information means that the parties to the transaction are sufficiently informed about the estimated property on which the transaction is concluded, acting to achieve the terms of the transaction, the best from the point of view of each party, in accordance with the full amount of information on the real estate market available on date property valuation.

The absence of extraordinary circumstances means that each of the parties to the transaction with the assessed property has motives for making the transaction, while there is no coercion of the parties to the transaction.

In determining the liquidation value of the property, the estimated value is determined, reflecting the most likely price at which the property can be alienated for the exposure period, less than the typical exposure period of such objects for market conditions, in conditions when the seller is forced to make a deal on its alienation. In determining the liquidation value, as opposed to determining the market value, the effect of extraordinary circumstances is taken into account, forcing the seller to sell this property under conditions that do not correspond to the market.

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Investment value is defined as the value for a specific person or group of persons with investment purposes for the use of property established by this person (persons) In determining the investment value of the property being valued, as opposed to determining the market value, taking into account the possibility of their alienation at the investment value in is not obligatory.

What are the principles based on property valuation?

In drawing up the report on the valuation of the property of an enterprise, the appraiser adheres to the following principles:

The property valuation report should contain all information that is material in terms of their value (materiality principle);

the information provided in the property valuation report, used or obtained as a result of calculations in conducting the valuation, essential in terms of their value, must be confirmed (the principle of reasonableness);

The content of the property valuation report should not mislead the users of this report, as well as allow ambiguous interpretation (uniqueness principle);

The composition and sequence of the materials presented in the property valuation report and the description of the valuation process should allow to fully reproduce the calculation of the value of this property and lead to similar results (principle of verifiability).

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