The API is pleased to publish another of our standards series articles which are designed to provide plain English explanations of individual API Rules, specifics topics or reminders about principles and concepts.

The API provides the following to reinforce the concepts and principles contained in Rule 11 of the API Rules of Professional Conduct.

This article is intended to serve as a reminder for Valuers, and a resource that they can use to educate their clients as to the necessary enquiries, investigations, procedures and processes undertaken by Valuers when providing valuation services.

Valuation Process is …

This article relates to the valuation process¹ undertaken by API Valuers² when assessing the value³ of real property assets, but excludes valuations undertaken for rating and taxation purposes. Rating and taxation valuations are completed in accordance with legislation for the jurisdiction in which the property is situated and the “Statutory Valuations” rule in the API Rules of Professional Conduct. (“Rules”)

Where an included term is used as defined under the Rules it is shown in italics and the meaning for the interpretation and understanding of this article is included as footnotes. Other define terms used within, and for the purposes of, this article are expressed as title case terms and also included as footnotes for reference.

Valuation⁴ is the process that the Valuer undertakes, including a physical inspection of the subject property by the Valuer and the preparation of a valuation report⁵, when providing their opinion of value of a real property asset at a specified date.

A Valuer is an individual possessing the necessary qualifications, ability and experience to undertake a valuation process in an objective, unbiased, ethical and competent manner.

The valuation process includes all the necessary enquiries, investigations, procedures and processes, including a physical inspection of the subject property by the Primary Valuer⁶, to properly inform the Valuer of the relevant characteristics and qualities of the subject property, market transactions and market sentiments that are relevant to the value of the subject property, as at the valuation date. The value included in the valuation report is the Valuer’s opinion of the most likely price for which the property would transact, in a hypothetical transaction, as at the valuation date.

The valuation process requires the valuer to apply Professional Judgment⁷ and Professional Scepticism⁸ involves obtaining, compiling and appropriately verifying relevant facts and data to properly inform the Valuer’s reasoning and analysis.

The necessary enquiries, investigations, procedures and processes undertaken by the Valuer when requested to assess the Market Value⁹ or Market Rent¹⁰ include, but are not limited to:

  • physical inspection of the subject property and comparable market transactions;
  • enquiries relating to the subject property and the market in which it is most likely to transact to enable the Valuer to be fully cognisant with all relevant information (facts and data);
  • analysis of market transactions and all other relevant information to identify metrics that can be applied by the Valuer to inform their opinion of the value of the subject property;
  • computation and calculations which records the Valuer’s reasoning and analysis, to assess the differences between the market transactions and the subject property, to arrive at the Valuer’s opinion of the most likely price that the property would transact at in a hypothetical transaction, as at the valuation date; and
  • preparation and completion of a valuation report that is appropriate for the subject property and the agreed purpose of the valuation report.

A Valuer must have the appropriate level of skill, knowledge and experience to undertake a valuation process to enable a competent valuation report to be completed in accordance with accepted principles and practice of valuation in Australia.

A credible valuation report containing the Valuer’s opinion of the value of the subject property and based on pertinent facts correctly verified and interpreted, by the Valuer, is the result of a diligent and competent valuation process.

If there are any queries in relation to this article, please contact [email protected].

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