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中原工学院经济管理学院外文翻译
Method of Valuation
The
Comparative Method
There
are
conventional
five
methods
of
valuation:
the
comparative
method,
the
contractor’s
method,
the
residual
method,
the
profits
method,
and
the
investment
method.
The
comparative method is probably the most widely
used method and even if one
of
the
other
four
methods
is
used
by
a
valuer
he
will
still
almost
inevitably
have
recourse
to
comparisons
as
well.
The
method
entails
making
a
valuation
directly
comparing the property
under
consideration
with similar properties
which
have been
sold,
finding
its
value
from
these past
transactions.
Although this
sounds simple and
straightforward,
there
may be
many pitfalls
to trap the
unwary. In
using
the
method
it
is desirable that the comparison should
be made with similar properties situated in the
same are. and with transactions, witch
have taken place in the recent past.
The less the
comparable
property
complies
with
these
requirements,
the
less
valid
will
be
the
comparison. Often a valuer is able to
get evidence of sales witch do accord with these
requirements, particularly
when a
valuation
is of a property such
as a
semi-detached
suburban
house.
However,
the
more
uncommon
a
property
is,
and
the
more
specialized
the
type
of
property
,
the
less
likely
is
it
that
the
valuer
will
be
able
to
finding
good
‘
comparables
’
,
and
it
is
not
unusual
for
there
to
be
a
complete
lack
of
evidence of sales of comparable
properties.
Even when properties appear to be
similar, close inspection often reveals that they
are
in
fact
different.
A row of apparently
identical
houses
may on
internal
inspection
prove
to
have
many
differences, and
thee skill of
the
valuer will be required
to
make
an
allowance
in
money
terms
for
such
difference
in
value
caused
by
a
different
geographical situation.
It
is
essential
in
using
this
method
to
have
as
much
evidence
as
possible
readily
available and good office records are
invaluable. Any valuer should ensure that he has
an
efficient
filing
system
which
is
regularly
kept
up
to
date,
and
which
contains
as
much
information
as
can
be
obtained
of
each
market
transaction
which
is
recorded.
Modern computer
filing systems greatly facilitate good record
keeping and the almost
instantaneous
recall
of
information.
However,
for
helpful
records
to
be
kept,
there
must
be
evidence
of
suitable
comparables
available,
and
unfortunately
,
in
the
real
world,
this is often locking.
The word recent is a
relative term. At some points in time a sale which
took place
a
year
earlier
may
be
recent
enough
to
be
a
valid
comparison
if
the
market
has
remained relatively stable
in the
intervening period.
If the
market has been volatile or
has changed in any way during this
time, then market evidence might need to be much
more recent past, a valuer may be able
to get some guidance from considering market
evidence
over
period
of
earlier
years
or
months,
as
it
possible
that
a
clearly
defined
trend of
values
might be detected.
The
valuer
may
decide that
this trend would
have
continued through to be
date on which he is making his valuation.
In
using the comparative
method
a
most through
inspection of
all the
underlying
中原工学院经济管理学院外文翻译
factors in the market must be made in
order to decide whether they have been changes
in conditions since other transactions
take place.
The
method
involves
few
dangers
if
the
market
is
stable.
When
it
is
not
stable,
valuer
may encounter
problems
in
its
use, and
this
may
also be the case
if there
are
few comparables, or
if
there are
no
true comparables, that
is
if
the range of properties
sold does not
contain anything truly identical to the property
under consideration.
Some
differences
may
be
relatively
unimportant,
and
differences
in
architectural
design, for
example may often make little difference to value.
However, if a particular
design renders
a building inefficient in use, the difference may
be very important, and
in using the
method the valuer should always consider such
possibilities. The age of a
building
can
be
important
in
that
it
may
be
such
as
to
render
it
either
more
or
less
fashionable and
in
many
instances
the structural condition and
state of
repair will be
directly related to the age of the
building.
V
aluers
should
also
pay
considerable
attention
to
the
accommodation
offered
by
different properties, and
try to
make allowances
for
variations
in
the
amo
unt of
floor
space
and
differences
in
the
lay-out
and
the
number
of
rooms
provided.
Allowance
should
also
be
made
for
differences
in
the
quality
of
fixtures
and
fittings,
and
for
differences
in
the
size
of
plots
on
which
properties
stand.
Location
is
always
very
important,
and
valuers
should
be
wary
of
assuming
that
values
should
be
similar
because
the
size
and
accommodation
of
properties
is
identical.
A
slightly
different
location can make a vast different to
market value.
In
using this
method the
valuer should
always bear
in
mind
the
fact that property
is
heterogeneous, and should
always ask
himself whether any special
factors affected
the
market
value
of
the
comparables
that
he
is
using,
or
whether
any
special
factors
are likely to affect
the value of the property which he is considering.
The Contracto
r’s
Method
The
contractor
’
s
method(summation)is
used
to
value
the
type
of
properties
which
seldom change
hands and
for
which there are
therefore
few
comparables
．
It
must
at
this
point
be
stressed
that
cost
and
value
are
rarely
tell
same,
but
this
method
of
valuation
is based
loosely on the assumption that they are
related. It should
therefore
be appreciated that it is a method used
only infrequently
，
and which
is something of a
last
resort
．
The basic theory of
the cont
ractor’s method is that the
cost of t
he site plus
the
cost of the buildings will give the value of the
land and buildings one unit.
With
the
majority
of
properties
there
is
ample
evidence
to
show
，
that
this
proposition is not
correct
，
but the
Contracto
r’s
method is used
to value properties for
which
there
is
little
general
market
demand
and
which
are
consequently
rarely
sold
．
The types of
property for which it could be appropriate are
hospitals
，
town halls
< br>，
schools
，
libra
ries
．
police
stations
，
and other such
building
．
It will be noted
that this
list
comprises
principally
public
buildings
，
although
the
use
of
the
method
is
not
necessarily
restricted
to
public
building
alone.
Cost
is
normally
only
one
factor
of
many
which
may affect supply and demand and
which therefore affect
value, but
it
is
probably
true that with true that with this type of
building it is a predominant factor.
It
would
always
be
possible
for
the
would-be
users
of
such
buildings
to
acquire
中原工学院经济管理学院外文翻译
alternative
sites
and
to
construct
new
buildings
rather
than
purchase
an
existing
property at
greater overall
cost
．
Competition between
rival potential
users would
be
unlikely and
it
is therefore reasonable to assume that
cost and
value are not
unrelated
with such special
buildings
．
However if an alternative building were
constructed it would be a new
propertv
，
whereas
with
an
existing
property
it
is
obvious
that
there
would
be
some
wear
and
tear
resulting
from
is previous
use and there
might also be
a degree of obsolescence
which
had arisen since
it was
new.
In
using
the contractor's
method
the
valuer
must
therefore
make
a
deduction
to
allow
for
both
depreciation
of
the
buildings
and
obsolescence of design.
The basic valuation approach then becomes as
below
：
Cost of site
Plus
Cost of building
Less
Depreciation Allowance and
Obsolescence
Allowance
V
alue of Existing Property
This
method
is
most
frequently
used
for
rating
purpose
where
rates
are
levied
on
the
value
of
buildings
and
sites
together
and
it
is
also
sometimes
used
in
valuations
for compensation
when property of a special nature has been
compulsorily acquired
．
The Residual Method
The
residual
method (hypothetical
development
method)
is
used when a property
has
development
or
redevelopment
potential.
It
is
needed
when
there
is
an
element
of
latent
value
which
can
be
released
by
the
expenditure
of
money
on
a
property
.
Residual
valuations
are
quite
regularly
made
by
people
who
purchase
residential;
properties which they consider could be
made
more
valuable
id
money
were spent on
improvement
and
modernization.
This
would-be
purchaser
may
look
at
a
house
and
decide
that
it
is worth
￡
20000, after
which
it
will
have a
market
value of
￡
90000.
A quick
inspection of the
figures shows that
latent
value of
￡
20000
has been
in
use,
but
even when
much
more complicated
calculations are
involved, the basic
approach
to the method is still exactly
the same.
V
alue of the completed
development
Less
Total expenditure on improvements or
development
(including
developer
’
s profit)
V
alue of site or property in
its present condition
(Residual value)
The
value
of
the
completed
development
is
sometimes
referred
to
as
the
Gross
Development
V
alue, or as the Gross Realization.
The use of the residual method involves
considerable skill and it is first necessary
to decide
what
is
the best
form of development
suitable
foe or property,
and then to
task,
as
apart
from
the
skill
involved
in
choosing
the
best
use
for
a
site,
the
vaguer
also has to estimate the value of a
building which does not as yet exist. He has to
cast
his mind forward to estimate the
Gross Development V
alue.
Even
when
this
has
been
done
with
great
skill
accuracy
,
all
the
costs
of
improvement and development must then
be estimated. These may include such items