Property valuation questions Essay Example | Topics and Well Written Essays - 1750 words

Property valuation questions - Essay Example Here discounted cash flow method is used in this type of property valuation methods. The Residual Method: This method is used to value existing properties that has a potential to redevelop. This method of property valuation consists of many variables and these variables are very sensitive to any changes in market conditions. The Profits Method: This method is also known as account method. It is used where a commercial property is used for accommodation as an integral part of its business. It is generally used in trading premises but also restricted to the property that changes hand on freehold basis. The cost Approach: This method of property valuation for a property that is acquired by its owner but lacks in comparable evidence for similar property transactions. It works on the assumption that the property valued forms part of an ongoing business asset. 5. The comparative method: When comparable transaction of a property is done against a property with similar characteristic. This method of property valuation is called the comparative method of valuation. Generally valuation of agricultural land is mostly valued using this valuation method where the value of the agricultural land is derived from the similar land sold earlier. This method is also in use in UK as an informative source. It is used as standalone valuation method in UK. The Investment Method: This method is generally used to value an income producing property. This method is used to value a commercial property that has a capability to produce rental income. Here discounted cash flow method is used in this type of property valuation methods. The Residual Method: This method is used to value existing properties that has a potential to redevelop. This method of property valuation consists of many variables and these variables are very sensitive to any changes in market conditions. The Profits Method: This method is also known as account method. It is used where a commercial property is used for accommodation as an integral part of its business. It is generally used in trading premises but also restricted to the property that changes hand on freehold basis. The cost Approach: This method of property valuation for a property that is acquired by its owner but lacks in comparable evidence for similar property transactions. It works on the assumption that the property valued forms part of an ongoing business asset. (b) (i) The comparative method (ii) The profit method (iii) The investment method (iv)The investment method 3. Assumptions: (i) First assumption is, the appraised value of a property will vary that depends on whether the appraisal is conducted for the buyer or the seller of the property. (ii) The second assumption is the appraisers are hired only to estimate real estate property values in property sales involving mortgage lending transactions for the property valued. (iii) The third assumption is, market value should approximate replacement cost for the similar property. (iv) The forth assumption is that the assessed value should equate to market value of the property. (v) The fifth assumption is that the appraisers use a formula, such as a specific price per square foot, to figure out the value of a home or any other residential property. (vi) The sixth assumption is that as because consumers pay for appraisals when applying for loans to purchase or refinance real estate, they own their appraisal for there property. (vii) The seventh assumption is that an appraisal is the same as a home inspection for property. 4. Statutory Reasons: (i) The property valuation for statutory purposes including rating of the property. (ii) Government taxes affecting property including land tax and should be taken care of on valuation. Non-Statutory Reasons: (i) Property non-statutory instrument to assert its influence on the land and property markets for the property. (ii) The property tax exemption is limited to the non-profit activities for the property. 5. The comparative method: When comparable transaction of a property is done against a property with similar characteristic. This method of property valuation is called the comparative method of valuation. Generally valuation of agricultural land is mostly valued using this valuation method where the value of the agricultural land