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EUROPEAN VALUATION STANDARD – 2 VALUATION BASIS OTHER THAN MARKET VALUE

Explore different valuation bases other than market value, such as Fair Value, Investment Value, Mortgage Lending Value, and Insurable Value. Learn about Forced Sale Value, Depreciated Replacement Cost, and Alternative Use Value, and how they impact valuation methodologies.

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EUROPEAN VALUATION STANDARD – 2 VALUATION BASIS OTHER THAN MARKET VALUE

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  1. EUROPEAN VALUATION STANDARD – 2 VALUATION BASIS OTHER THAN MARKET VALUE

  2. Circumstances where an alternative basis of valuation may be required Understanding the distinction between market value and the alternative basis The impact of an alternative valuation basis Construction of the valuation Production of the valuation Introduction and Scope

  3. The definition of the “Basis of Valuation” Distinguishing the basis from the methods or techniques used The importance of transparency when applying the basis of value Revealing the assumptions The basis of valuation in context Basis of Value

  4. FAIR VALUE • The definition of Fair Value • Recognised as a permissible basis of valuation • Special Value – A special purchaser – Going concern value – Synergistic value or marriage value

  5. Definition of investment value or worth The individual buyer and the bid Not expected to be consistent with market value Such valuations are: To be determine the value for a specific individual, and Do not assume an exchange of property Investment Value or Worth

  6. Definition of mortgage lending value The Capital Requirements Directive The Basel II Accord The concept of Mortgage Value Lending (MVL) The “value-at-risk” approach The exposure risk Mortgage Lending Value

  7. Insurable Value • The definition of Insurable Value • Mitigating the risk • The relationship with the insurance contract • The implication of the valuation and the unrecoverable loss

  8. Alternative Use Value • Definition of the Alternative Use Valuation • Considering alternative uses of the building which may not involve continuing the present business • The value would not reflect any costs of ceasing the business • This basis may be relevant where a depreciated replacement cost valuation has taken place

  9. Forced Sale Value • Definition of the Forced Sale value • The need for this valuation may arise where the seller is under compulsion to sell • Identification of the constraints • Can only be the basis once the relevant constraints are identified • The value will reflect the specific circumstances

  10. Depreciated Replacement Cost • Definition of the Depreciated Replacement Cost • Also known as the “Contractors Method” • Used for properties with “non conforming”, unusual or distinctive attributes • A valuation of last resort • Choice of depreciation rate is a valuation judgement

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