Valuation Standards
The basis for the preparation of a valuation report by an appraiser is the observance of the principles and methodologies set by the appraisal standards. The internationalization of the real estate market has led to the creation of a standardization of methodology and a common framework for reference in the appraisal process with common guidelines and rules. The estimates are divided into:
- International Valuation Standards – IVS
- European Valuation Standards – EVS
- American Society of Appraisers (ASA)
The basic standards and applications issued by TEGOVA
- EVS 1: Market Value
- EVS 2: Valuation Bases Other than Market Value
- EVS 3: The Qualified Valuer
- EVS 4: The Valuation Process
- EVS 5: Reporting the Valuation
Valuation Standards Applications
Valuations for financial reporting purposes - Valuations for loan purposes - Real estate appraisals for securitization purposes - Valuable securities - Valuation of Investment Value - Cross-border valuation and valuation - Real estate appraisal under the Directive EOED (TEF) and TEGoVA for commercial real estate loans.
The competent bodies shall inform the appraisal standards in accordance with applicable law and shall require the signature of a certified professional who is required to be experienced, have the appropriate knowledge and ethics. He is the one who will choose the appropriate method for writing the valuation, thus enhancing good practices and accuracy in making valuations.
Valuation process methods
In order for a valuation to be considered reliable and efficient, the appraiser must follow international valuation standards and choose the appropriate method. The choice of the appropriate method depends on several factors, which the appraiser must take into account before making his choice, these are:
- The nature of the property
- The reason the appraisal is conducted
- The available files and data
- The assumptions which have to be made
The main valuation methods of estimating the value of a property are the following:
- The Comparison approach
- The Residual method
- The Investment method
- The Depreciated Replacement Cost
- The Profits method
- The method of determining the objective value.