Frequently Asked Question:
What is meant with the Direct Comparable Sales Approach?
The object of the comparison method is to utilize recent existing open market sales statistics to derive a yardstick that will serve as a guide in estimating the market value of a property
What are the main types of valuation methods?
- Direct Comparable Sales Approach
- Cost Approach
- Income Approach
- Land Residual / Township approach
What influences the valuation method used?
When valuing real estate, the Valuer must concern himself with placing a value on the rights attached to the property and the benefits of occupation and/or ownership thereof. In the valuation process, cognisance must be taken of the purpose for which the property is capable of being used and the future income or amenities, which it is likely to produce. At the same time, however, the property must be compared with available substitutes and/or alternative investment opportunities. The object of the valuation process, therefore, is to arrive at a figure which will reflect the point of equilibrium between supply and effective demand at the time of valuing the property.
The valuation of land as if vacant, or of land and improvements to or on the land, is an economic concept. Whether vacant or improved, land is also referred to as real estate.
What is meant with the “highest and best” use of a property?
The highest and best use refers to the highest potential in terms of value that the property can achieve with due cognisance being taken of the local authority rights, restrictions and regulations, if applicable, as well as the general use of properties in the surrounding area.
What is market value?
The definition of ‘Market Value’ as laid down by the International Valuation Standards Committee is:
“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.
What is the replacement value of improvements?
The property is valued as at market-related reconstruction cost of all fixed property. These replacement figures are based on research conducted with the relevant experts regarding construction costs of similar buildings. Replacement values should also take into account professional fees, demolitions costs, escalations, as well as value added tax. Final insurance amounts will include the aforesaid, as well as 12 months’ rent during re-construction.