Valuation Protocol: How to Establish Valuation Process Quality Control

The API standards team provide this Valuation Protocol to assist Valuers and valuation firms in the development and implementation of a valuation process quality control regime for valuation reports of real property interests.

A quality control process in relation to a valuation process is a procedure that the valuer undertakes to minimise “Valuation Process Risk”.

The protocol includes a checklist of steps and tasks that are critical to a valuation process. The checklist provides a non-exhaustive list of steps in the valuation process. Valuers and valuation firms are encouraged to adopt, modify or adapt the checklist as they deem appropriate to meet the requirements of the valuation services they are providing for their clients.

Just as the Valuer is responsible for the content, opinions and conclusions contained in a valuation report they prepared, it is the Valuer’s responsibility to have an established valuation process quality control process in place in keeping with their risk management assessment strategies.

This Valuation Protocol comes into effect on 1 March 2025. The API permits and encourages earlier adoption.

This Valuation Protocol is provided by the API to provide assistance to valuers¹ and valuation firms in relation to the implementation of a valuation process quality control regime for valuation reports² of real property interests. It should be read, interpreted and applied in accordance with 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 paper are included as footnotes. Other defined terms used within and for the purpose of this paper are expressed as title case terms and also included as footnotes for reference.

Valuation is a process

Valuation³ is a process that a valuer undertakes, requiring the physical inspection of the subject property by the valuer and preparation of a valuation report, when providing their opinion of value⁴ of a real property interest at a specified date.

A valuer is an individual possessing the necessary qualifications, ability and experience (skill⁵) to undertake a valuation process⁶ in an objective, independent, unbiased, ethical and competent manner.

When undertaking a market valuation of a real property interest, the valuation process includes all the necessary enquiries, investigations, procedures and processes (including a physical inspection of the subject property by the Primary Valuer⁷) to properly inform the valuer of the relevant characteristics and qualities of the subject property and its environs, market transactions and market sentiments that are relevant to the value as at the valuation date.

The valuation process requires the valuer to apply Professional Judgement⁸ and Professional Scepticism⁹ and 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 valuers instructed to assess Market Value¹⁰ and/or Market Rent¹¹ of a real property asset include, but are not limited to:

  1. Physical inspection(s) of the subject property, the surrounding environs and comparable market transactions;
  2. 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);
  3. Analysis of market transactions and all other relevant information to identify metrics that can be applied by the valuer to inform their opinion(s);
  4. Calculations detailing the valuer’s analysis and reasoning, identifying and adjusting for the differences between the market transactions and the subject property supporting the valuer’s opinion(s) as at the valuation date; and
  5. Preparing and completing a valuation report that is fit for purpose pursuant to the agreed instructions.

Valuation Reports

Valuation reports should satisfy the requirements contained within the instructions agreed between the valuer and the instructing party. Reports should contain the following minimum information, albeit subject to agreement with the client¹²:

  • The agreed instructions between the valuer and client;
  • Agreed purpose of the valuation report;
  • Client who can use or rely on the valuation report;
  • An appropriately worded third party disclaimer;
  • Valuation date, inspection date and date of issue;
  • Details of the subject property(ies);
  • The valuation approach(es) selected, and method or methods applied;
  • Supporting evidence for comparison purposes (e.g., market evidence);
  • Details of any assumptions or special assumptions made;
  • The conclusion(s) of value and explanation for any conclusion(s);
  • Details of any limitations, conditions, or qualifications on the valuation process and valuation report; and
  • Name of the Primary Valuer.

IVS Considerations

Where the valuer is specifically instructed to undertake and provide an IVS compliant valuation report, of a real property asset, valuers are reminded that all the requirements of the IVS General Standards and IVS 400 Real Property Interests must be complied with.

This includes an agreed instruction that meets the requirements of IVS 101 Scope of Work, specifying all of the items contained in section 20, and providing a valuation report that conveys all of the requirements outlined in IVS 106 Documentation and Reporting, section 30, paragraphs 30.06 to 30.08.

Valuation Process Quality Control is …

A quality control process in relation to the valuation process is a procedure that the valuer undertakes to minimise “Valuation Process Risk”¹³ and ensure compliance with the Rules.

A credible independent valuation report is the result of a robust, transparent, unbiased and ethical valuation process.

The checklist on the following pages contains a list of tasks that are critical to a valuation process.

IVS Considerations

Where a valuer has been specifically instructed to provide an IVS compliant valuation, the API reminds valuers that they must also be aware that IVS 100 Valuation Framework, section 20, requires valuers to have in place a valuation process quality control regime. This is a procedure that the valuer implements to minimise “Valuation Risk”¹⁴ as defined in the IVS.

Where there is no specific instruction to provide an IVS compliant valuation report, valuers should have an established valuation process quality control regime as described herein.

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Valuation Process Checklist (Real Property Interests)

The downloadable PDF version of this paper, available below, contains a checklist with a non-exhaustive list of steps in the valuation process.

DOWNLOAD A COPY OF THIS VALUATION PROTOCOL

If there are any comments or feedback regarding this Valuation Protocol, please do not hesitate to contact us at [email protected].

 

Footnotes:

1 “valuer” means a Member who holds API certification of CPV, CPV (Residential) or RPV. (API Rules of Professional Conduct).

2. “valuation report” means a report that has been prepared by a Primary Valuer following a valuation process. (API Rules of Professional Conduct)

3. “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)

4. “value” means the valuer’s opinion, 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)

5. “skill” means the minimum level of professional standards to which a Member must operate, based on their qualifications, API certifications, knowledge, expertise and experience. (API Rules of Professional Conduct)

6. “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)

7. “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)

8. “Professional Judgement” means the use of accumulated knowledge and experience, as well as critical reasoning to make an informed decision. (IVS 2025 edition)

9. “Professional Scepticism” means the valuer has an attitude that includes a questioning mind and critical assessment of valuation evidence. (IVS 2025 edition)

10. “Market Value” means the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion. (IVS 2025 edition)

11. “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)

12. “client” means any person including the client’s representative or other entity authorised by the Member to rely on the “written report, opinion or advice” (report). (API Rules of Professional Conduct)

13. “Valuation Process Risk” means the possibility that the investigations or procedures followed by the valuer and/or the valuation report is not fit for the purpose for which it was undertaken. (API)

14. “Valuation Risk” is the possibility that the value is not appropriate for the intended use. (IVS 2025 edition)