SACPVP Associated Valuer cheat sheet

Valuation is an opinion of value at a specified date, on stated assumptions and a defined basis of value; the date of valuation is distinct from the date of the report.

The valuation report must state: purpose, basis of value, date of valuation, extent of investigation, sources of information, assumptions, special assumptions, and any limiting conditions.

Inspection scope must be recorded: which parts were inspected internally, externally, or not at all, and whether access was restricted.

Independence and objectivity: fees must not be contingent on the value reported; contingent or success-based fees create a self-interest threat.

Engagement terms should be agreed in writing before work begins, covering scope, fee basis, liability, and reliance by third parties.

A conflict of interest exists where the valuer has a financial or personal interest in the property or the outcome; disclose and decline if material.

Peer review and file retention: the working file should allow another valuer to reconstruct the reasoning, evidence, and comparables used.

Special assumptions (e.g., vacant possession, planning consent granted) must be clearly distinguished from ordinary assumptions and their effect quantified.

Core ethical principles: integrity, objectivity, competence, confidentiality, professional behaviour, and compliance with technical standards.

Threat categories to independence: self-interest, self-review, advocacy, familiarity, and intimidation; safeguards must be identified for each.

Competence rule: accept instructions only where the valuer has, or can obtain, the knowledge and skill required, or disclose the limitation.

Confidentiality is bounded by legal compulsion, court order, and regulatory or disciplinary disclosure obligations.

Statutory valuations (e.g., expropriation, rating, tax) are governed by the enabling statute, which overrides the ordinary definition of market value where they conflict.

Valuers giving evidence owe a paramount duty to the tribunal, overriding the duty to the client who pays them.

Continuing professional development and adherence to the professional body's code are conditions of practising as a registered valuer.

A material breach may be reportable to the regulator; failure to report can itself be a disciplinary matter.

Market value: 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, where the parties acted knowledgeably, prudently, and without compulsion.

Investment value is value to a specific owner/investor; fair value is the price in an orderly transaction between identified parties; both differ from market value.

Income capitalisation: Value = Net Operating Income / Capitalisation Rate; equivalently the capitalisation rate is the market-derived yield used to convert income to value.

DCF: PV = Σ CFt / (1+r)^t plus a discounted terminal value; r is the discount rate reflecting risk and the time value of money.

Direct comparison is preferred where an active market of comparable properties exists; adjust comparables for differences in time, location, size, condition, and rights.

Cost approach: Value = replacement or reproduction cost − accrued depreciation + land value; depreciation is physical, functional, or external.

Gross rent multiplier = sale price / gross annual rent; only valid where income and expense ratios are broadly similar.

Reconciliation (weighting) of methods must be reasoned: the method given most weight should reflect the quality and quantity of evidence available.

Ownership of land generally extends to fixtures but not to chattels; the fixture test turns on degree and purpose of annexation.

Real rights (ownership, servitudes, leases, mortgages) bind successors; personal rights bind only the original parties.

A lease is a contract plus a real right; a registered long lease survives transfer of ownership, whereas a mere personal right to occupy may not.

Servitudes (easements) grant limited use over another's land; they must be defined, and cannot impose a positive obligation on the servient owner unless the law allows.

Mortgage/security: the lender's right is over the property as encumbered; valuation must state whether the property is valued subject to or free of the encumbrance.

Co-ownership may be undivided (shares in the whole) or sectional/title-based; the valuer must identify exactly which interest is being valued.

Encroachments and boundary disputes: physical occupation may differ from registered title; the valuation must reflect the legal position, not merely the physical layout.

Restrictive covenants and conditions of title can reduce value and must be checked against the title deed or register.

The valuation must identify the registered owner, the title number, and the nature of the right (full ownership, long lease, usufruct, bare ownership).

Title investigation confirms boundaries, area, encumbrances, and any endorsements (e.g., mortgage bonds, caveats, servitudes).

A caveat or restriction on the register can prevent transfer and materially affect marketability and value.

Sectional title/strata ownership comprises a private unit plus an undivided share in common property; the valuer must apportion value accordingly.

Leasehold value declines as the unexpired term shortens; the discount relative to freehold reflects the remaining term and rent terms.

Valuation must state the interest valued and any rights of third parties (tenants, occupiers, holders of servitudes) affecting it.

Unregistered or informal rights may exist on the ground; these are a legal risk and should be disclosed as a special assumption or limitation.

Where title is defective or in dispute, value the interest as it legally stands and disclose the uncertainty.

Zoning determines permitted use, density, coverage, height, and floor area ratio; the valuer must confirm the applicable zoning against the official scheme.

Highest and best use is the reasonably probable, legally permissible, physically possible, financially feasible, and maximally productive use.

Existing use rights (non-conforming use) may continue but typically cannot be extended without consent.

Development potential is valued by residual method: Land value = Gross Development Value − construction and fees − developer's profit − finance costs.

Developer's profit is usually expressed as a percentage of GDV or of total development cost; the choice must be stated and consistently applied.

Planning consent conditions (e.g., affordable housing, infrastructure contributions) reduce the residual land value and must be costed.

Subdivision and consolidation change the unit of value; check minimum lot sizes, access, and services before assuming a higher value.

A valuation 'subject to planning' is a special assumption; the report must state the consent assumed and the probability/risk of non-grant.

Property value is driven by demand (population, income, employment, credit) and supply (construction pipeline, land release, planning constraints).

Yields move inversely to values: an upward shift in capitalisation rates lowers values for a given income stream.

Interest rates affect both affordability (demand) and the discount rate/capitalisation rate (pricing); rising rates generally compress values.

Property is illiquid, heterogeneous, and locally segmented; comparables must come from the same market segment and location.

Market rent is the rent at which a property would be let on the valuation date between willing parties on appropriate lease terms.

Cyclical phases (recovery, expansion, oversupply, recession) affect vacancy and rental growth assumptions in DCF models.

Inflation affects replacement cost, operating expenses, and rent review outcomes; real versus nominal assumptions must be consistent.

Macro shocks (credit tightening, tax changes, infrastructure shifts) are reflected in market evidence only when transactions confirm them.

Statutory valuations are defined by the governing statute; where the statute prescribes a method or date, it prevails over market convention.

Rating/municipal valuation commonly uses mass appraisal or standardised methods; the statutory definition of rateable value controls.

Capital gains or transfer tax valuations may require the value at a specific historical date, reconstructed from evidence available then.

Expropriation compensation typically covers market value plus consequential loss and disturbance, as defined by the applicable law.

Inheritance/estate duty valuations require the value of the interest actually held, including any discount for fractional or undivided shares.

Valuation date discipline: use only evidence known or reasonably knowable at the statutory date; later evidence may be admitted only as confirmation of trend.

Tax valuations must state the basis (e.g., unencumbered, vacant possession, existing use) exactly as the statute requires.

Objection and appeal processes have strict time limits; the valuer's report should record the statutory basis to support any objection.

Measurement standards: gross external area (GEA), gross internal area (GIA), and net lettable area (NLA) are not interchangeable; state the standard used.

Floor area ratio = total gross floor area / site area; coverage = footprint area / site area.

Structural systems (load-bearing masonry, frame, steel, concrete) affect flexibility, lifespan, and replacement cost.

Common defects: rising damp, settlement cracks, roof leaks, concrete carbonation, and inadequate drainage; distinguish structural from cosmetic.

Defect diagnosis must separate cause from symptom; a crack pattern (e.g., diagonal vs vertical) indicates whether movement is active.

Asbestos, lead paint, and other hazardous materials create remediation liability and must be flagged as a possible deduction.

Services (electrical, plumbing, HVAC) condition and compliance affect both value and insurability.

A building survey informs the valuation; the report should state whether defects were visible and whether specialist reports were relied upon.

A valuation report must be clear, unambiguous, and sufficient for the intended user to understand the opinion without the valuer present.

Structure: instructions and purpose, property description, title and tenure, location and market, valuation approach, valuation, assumptions, and limiting conditions.

Every figure must be traceable to evidence or a stated assumption; unsupported numbers undermine the opinion.

In litigation, the expert's report must state the expert's duty to the court, the facts and instructions relied on, and the range of opinion considered.

The expert must distinguish fact from opinion, and must not advocate the client's case.

Comparables should be described with date, location, size, price, and adjustments so the reasoning can be tested.

Communication of uncertainty: state the sensitivity of the value to key assumptions rather than presenting a single figure as certain.

Record instructions and any restriction on reliance; third-party reliance must be expressly permitted or excluded.

Compound interest: FV = PV(1+i)^n; present value: PV = FV / (1+i)^n.

Present value of an annuity: PV = A × [1 − (1+i)^−n] / i; the reciprocal is the capital recovery factor.

Net present value = Σ CFt/(1+r)^t − initial outlay; accept where NPV > 0, reject where NPV < 0.

Internal rate of return is the discount rate at which NPV = 0; compare IRR to the required rate of return.

Capitalisation rate = discount rate − growth rate (Gordon growth model), valid for constant perpetual growth.

Sinking fund factor = i / [(1+i)^n − 1]; used to accumulate a replacement reserve.

Mortgage constant = annual debt service / loan principal; debt coverage ratio = net operating income / debt service.

Cash-on-cash return = annual pre-tax cash flow / equity invested; it ignores appreciation and tax effects.

Engagement risk assessment should consider the complexity of the asset, availability of evidence, and the valuer's competence before accepting.

The date of the report and the date of valuation may differ; market movements between them must be disclosed.

Inspection notes, photographs, and comparable evidence should be dated and retained as part of the working file.

Where reliance is placed on information from others (e.g., architects, engineers, managing agents), state the source and that it was not verified.

A valuer should decline or qualify instructions where the scope is so limited that the opinion cannot be supported.

Fee arrangements based on the outcome of a transaction or valuation create an advocacy threat and are generally prohibited.

Professional indemnity insurance and limitation of liability clauses must be consistent with the engagement terms and applicable law.

Complaints and claims should be handled through the firm's documented procedure and reported to the insurer where material.