The three classical approaches to arriving at an indication of value are the Sales Comparison Approach, the Income Approach and the Cost Approach.

“That Approach in appraisal analysis which is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing property with the same utility”.

The Sales Comparison Approach estimates the value of a property by comparing it with similar properties recently sold (& listed for sale) in the open market. To obtain an accurate estimate of the value of the property, the selling prices of the comparable properties must be adjusted to reflect differences between them and the subject property.

This Approach is very popular in many assignments as it is reflective of the interplay of buyers and sellers in the open market. In order for this approach to be reliable however, it is necessary for there to be a significant number of sales of properties similar to the one for which the assignment is being carried out.

“That procedure in appraisal analysis which converts anticipated benefits to be derived from the ownership of property into a value estimate”.

The Income Approach is of considerable importance in appraising commercial properties. Most purchasers of this type of property are generally concerned primarily with an income stream, which is what this approach relies on. The disadvantage of this approach is that it is sometimes based on projections of the future. In this approach, the following steps are necessary:

1. The annual open market rent of the property is determined;
2. An estimate of the annual outgoings of the property (rates, taxes, insurance, management, voids, etc.) is then subtracted;
3. The net income derived is then capitalized at a rate obtained from the market.

“That approach in appraisal analysis which is based on the proposition that the informed purchaser would pay no more than the cost of producing a substitute property with the same utility as the subject property”.

The Cost Approach is based on the principle of Substitution and is valuable in distinctive properties for which there are either very few or no sales of similar properties. Its drawbacks are that it does not sufficiently rely on market preferences, and in cases of older properties, the quantum of depreciation to be charged is not easily identified.

This approach to value follows the following steps:

1. Determine the value of the site as if vacant;
2. Calculate the replacement cost new of the improvements;
3. Estimate the depreciation from all causes (physical, functional and external);
4. Add the site value to the depreciated value of the improvements.

As will be seen from the above, all three approaches vary in effectiveness for specific assignments. Although all three approaches may give reliable indications of value, frequently, one or two may be totally inappropriate. In arriving at an estimate of value of the subject property, all of the above approaches were considered and one or more of them utilized.

The International Valuation Standards Eighth Edition 2007 Committee defines market value as –

“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

The International Valuation Standards Eighth Edition 2007 Committee defines Highest and Best Use as –

“The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible, and which results in the highest value of the property being valued.”.

1. If the valuer has provided a sketch in the valuation report, it is to show approximate dimensions of the building and the sketch is included only to assist the reader of the report in visualising the property and understanding the valuer’s determination of its size.

2. The valuer will not give testimony or appear in court because he or she prepared a valuation of the property in question, unless specific arrangements to do so have been made beforehand.

3. The purpose and function of the report and valuation for mortgage is to enable the lending institution to assess the security offered by the property for the proposed loan. The client has not commissioned a survey of the property, structural or otherwise. It must not be assumed that if defects are not mentioned in the report, all parts of the structure are free from defect. Where attention is drawn to some defects, it does not mean that other defects may not exist. Moreover, services have not been tested.

4. If the client is proposing to purchase the property and wishes to be satisfied as to the condition of it, he or she must have a surveyor’s detailed inspection and report of their own before deciding whether to enter into a contract. If the property is of architectural or historic interest, appropriate specialist advice should be sought before carrying out any works.

5. It is assumed that the property is connected to, and there is the right to use, the reported main services on normal terms. It is also assumed that sewers, main services and the roads giving access to the property have been adopted, and that any lease provides rights of access and egress over all communal grounds, parking areas and other facilities.

1. The information received as to the area and tenure of the land being correct;
2. A good marketable title to the property being available;
3. There being no onerous or unduly restrictive covenants in the Deed for the property;
4. The property not falling under the provisions of the Rent Restriction Act of 1981;
5. All relevant approvals having been obtained from the appropriate Statutory Authorities and their conditions complied with;
6. All electrical and plumbing equipment being in working order;
7. The absence of deleterious or hazardous substances or contamination;
8. Vacant possession being available.

2. The Valuation Report is provided for the stated purpose and for the sole use of the named Client. It is confidential to the Client and his professional advisers and the Valuer accepts no responsibility whatsoever to any other person.

3. Neither the whole nor any part of the Valuation Report or any reference thereto may be included in any published document, circular or statement, or published in any way, without the Valuer’s written approval of the form and context in which it may appear.