By definition, surveying is the science and art of measurement. Valuation is one branch of the surveying discipline in which ‘value’ is measured as it relates to property. Valuation Surveyors, who are also referred to as ‘Valuers’ or ‘Property Appraisers’, analyse the property market in order to determine what variables affect the price a property would sell or rent for on the open market. Valuation Surveyors can provide the following services:
- Advise on the market value of property that is under any use. This includes vacant land, residential, commercial, industrial and agricultural property as well as property that is utilised in specialised markets such hotels, leisure parks, reserves etc.
- Advise on the market rent of commercial and industrial property as well as appropriate lease terms, premiums and rent schedules.
- Serve as an independent expert in rent and sale negotiations.
- Advise on property investment and sinking funds.
- Recommend replacement costs of buildings and site improvements for insurance purposes.
- Provide rent and sale projections for proposed developments.
- Appraise property for rating and taxation purposes.
- Negotiate on behalf of property owners for fair compensation in compulsory acquisition cases.
- Serve as expert witnesses in adjudication purposes on the subject of property settlement.
- Advise on improvements and home renovations that would add value/equity to a property.
Some valuation surveyors go further to specialise in specific areas such as equity financing, property management, property investment and risk, and valuation of properties in specialised and unique markets.
How is a valuation done?
Every valuation survey has four important steps that must be followed:
Step 1 – Receive instructions – it is important that the surveyor and the client are clear on what is required. At this stage, the client makes a formal request for a valuation of his/her property. The surveyor would interview the client to find out the purpose of the valuation and also to advise on alternative services where necessary. Being clear on the purpose of the valuation is essential to undertake the survey as this purpose would impact upon the computations to be used as well as the type/format of the report that would be issued to the client. Some valuation purposes include: financing; stamp duty/probate; insurance; asset management and compensation. It is even possible for two different purposes to result in different opinions of value. For example, different variables are used in determining the value of property for financing purposes as compared to compensation purposes in compulsory acquisition. At this stage, the client and surveyor would both sign a terms of engagement so that both parties are clear on what is expected.
Step 2: Data acquisition – Now that the surveyor is clear on the instructions, s/he would then acquire the information that is necessary to do the valuation. This includes two things. Firstly, the property itself must be inspected. The surveyor would contact the client and arrange a suitable day and time when both parties are available for the inspection. The surveyor would visit the property on this appointed time. The inspection includes a measurement of the physical dimension of the building(s) and an examination of the features of the building. In order to do this, the surveyor would require full access to all parts of the property including all bedrooms, bathrooms, storage rooms etc. Secondly, the surveyor would also acquire data on recent transactions in the property market that would impact on the value of the property being surveyed.
Step 3 – Computations – In this stage, the surveyor would apply an appropriate methodology based on the purpose of the valuation as well as the data acquired. These methodologies are determined based on Valuation Standards. At present, valuation surveying in Trinidad and Tobago is guided by two sets of standards – the RICS Valuation Professional Standards (commonly called the “Red Book”) and the International Valuation Standards (IVS) that was adopted by the Royal Institution of Chartered Surveyors.
Step 4 – Reporting and delivery – Now that the value and other relevant figures have been computed, the surveyor would then report on the findings based on an approved report format. In addition to providing an opinion of value, the valuation report also describes the property in detail, refers to the instructions received from the client as well as the terms of engagement, describes the property market in a general sense, provides detailed information on the location of the property, provides photographic evidence of the property on the date of inspection as well as any other information that is relevant to the reader within the professional remit of the surveyor. Upon completion of the report, it will be reviewed and signed by the valuation surveyor who is taking responsibility for the survey. This may not be the individual who conducted the inspection of the property as inspections are sometimes carried out by a valuation assistant. The surveyor/firm will contact the client and advise on the fees payable and the report will be issued to the client.
Each firm has a different schedule of fees for providing advice. However fees are generally calculated based on a percentage of the value of the property. Most firms also give the option to quote fixed fees for a survey which the client and surveyor can agree to beforehand.