Attempting to assign a number value to especially property is an intricate process and home or other property valuation often involves market research, valuation analysis and determining replacement costs, but how does it work?

For example, when it comes to a home valuation, what does the Valuer take into consideration? On a larger scale, Chartered Surveyors and Valuers, governed by strict standards of South African and International bodies for property in particular, will aid businesses in determining the value of their property, plant and equipment for various disclosure, resale or investment purposes. The following are just some of the general sectors that will require accurate home and property valuations from commercial entities:

  • Accounting Bodies: In the pursuit of faithful representation in financial statements as well as standardised accounting for Property Plant and Equipment (International Accounting Standard 16) and many other standards.
  • Financial Institutions: For the purpose of security when negotiating debt leveraging.
  • Insurance Entities.
  • Tax Authorities.
  • Investors and many others.

Internally, your business stands to gain a realistic and objective understanding of fair values and market-related values of your land and buildings. Re-valuing property is an especially frequent occurrence in commercial setting because the fluctuations in values affect you more than temporary assets or shorter-term investments within your PPE may. While a revaluation surplus on the revaluation model is not an income, it reflects the property market performance, and when the better time to sell would be

So, how does home and property valuation work? While different assets are valued differently, in the case of home and property valuation a Valuer would look at factors such as: What would this house/building sell for in a fair and unbiased market now (market value)? What type of property is this and what is the potential for generating income off of it? What is the value and extent of improvements to the site since last valued? Where is it located and how does the geographic location affect its value? Other factors such as age, the general condition, and market performance and buyer preferences are all researched by the Valuer. How it then works is that the Valuer assigns a particular rand value to the building and writes a valuation report or appraisal motivated by market research. For all the stakeholders of this information mentioned above, Valuers in the process of home and property valuation need to be independent and neutral third parties.

Such Valuers or Surveyors can be sourced from property valuations companies that have a reputable name in the industry. Another method of determining something’s value is valuation analysis, but what exactly is valuation analysis?

A valuation analysis is a process involving the comparison of the value of one asset to the value of a different asset. In terms of investing, this usually takes the form of assessing the value of one security with the value of a similar security. This activity may also be used to evaluate groups of securities or even compare the current value of an asset with its value at some point in the past.

(Wisegeek)

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