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].
Download a copy of this article here.
Footnotes:
- “valuation process” means all the necessary enquiries, investigations, procedures and processes including the physical inspection of the tangible asset by the Primary Valuer, which is a pre-requisite for a valuation, required to fully inform the Valuer’s reasoning and analysis in accordance with the practice accepted as proper by the API. (API Rules of Professional Conduct)
- “valuer” means a Member who holds API certification of CPV, CPV (residential) or RPV. (API Rules of Professional Conduct)
- “value” means the Valuer’s opinion of value, in monetary terms, for a tangible asset as a result of a valuation process or desktop process as at a specified date. (API Rules of Professional Conduct)
- “valuation” means an established evidence based valuation process for assessing the value, including but not limited to market value and market rent, of a tangible asset as at a specified date following a physical inspection of the asset by the Primary Valuer. (API Rules of Professional Conduct)
- “valuation report” means a report that has been prepared by a Primary Valuer following the valuation process. (API Rules of Professional Conduct)
- “Primary Valuer” means a Valuer who personally and physically inspected the tangible asset, and undertook all the necessary enquiries, investigations, procedures and processes to complete the valuation and who has assumed responsibility for completing the valuation and the opinions contained in the valuation report and; (API Rules of Professional Conduct)
- “Professional Judgement” means the use of accumulated knowledge and experience, as well as critical reasoning to make an informed decision. (IVS 2025 edition)
- “Professional Scepticism” means the valuer has an attitude that includes a questioning mind and critical assessment of valuation evidence. (IVS 2025 edition)
- “Market Value” means the estimate amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing selling in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion. (IVS 2025 edition)
- “Market Rent” means the estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion. (IVS 2025 edition)
Posted on November 28, 2024
market value valuation process valuation report Value valuer