- — Appraisal Institute
- — Appraisal Standard Board
- — Appraiser
- — Approaches to Value
- — Cost Approach to Value
- — Income Approach to Value (Income Capitalization Approach)
- — International Valuation Standards Council (IVSC)
- — Investment Value
- — Project Appraisal
- — Qualified Valuer
- — Real Estate Appraisal
- — Residual Income Valuation (RIV)
- — Royal Institution of Chartered Surveyors (RICS)
- — Sales Comparison Approach to Value
- — The Appraisal Foundation
- — Uniform Standards of Professional Appraisal Practice (USPAP)
- — Valuation
- — Valuation Using Multiples
- — Value-in-use
The Appraisal Institute is a global association whose members are professional real estate appraisers. The Appraisal Institute has about 23,000 members all over the world. Its members are present in nearly 60 countries. This global membership association of real estate appraisers was established in 1932. It works towards making the appraisal system more transparent and supports equal opportunity and fairness in the profession of appraisal. It also performs its activities according to the federal, state and local laws.
Appraisal Standard Board
The Appraisal Standard Board (ASB) is one of the divisions of The Appraisal Foundation which is commonly known as TAF. The Appraisal Foundation makes use of the Appraisal Standard Board to carry out some of its work. The main task that the Appraisal Standard Board performs is developing, interpreting and amending the Uniform Standards of Professional Appraisal Practice (USPAP) and this is done on behalf of the users and appraisers of the appraisal services.
An appraiser is a person who appraises something. An appraiser is a professional who is certified to estimate the worth or value of some item or thing. An appraiser is needed to appraise assets and properties to set value to them. They are also needed to estimate the value of assets of businesses. Appraisers are individuals and they work independently to estimate the worth of assets and properties including business assets. They are needed for the preparation of the valuation of a business by making use of the physical review, financial analysis and comparing the business with other similar businesses in the industry.
Approaches to Value
Approaches to value are the methods or procedures by which valuation of a property is ascertained. For different property, different approach to value is used. There are three types of approaches to value and they are sales comparison approach, cost approach and income capitalization approach.
Cost Approach to Value
Cost approach to value is one of the approaches to value and is used for determining the value of a property. Other than this, there are also two other approaches to value and they are the income capitalization approach and sales comparison approach.
Income Approach to Value (Income Capitalization Approach)
The income approach to value, also known as income capitalization approach is used to determine the value of an income generating property by deriving a value indication by conversion of expected benefits like cash flows and reversion into value of property.
International Valuation Standards Council (IVSC)
The International Valuation Standards Council is the recognized international setter of standard of valuation. The main task of the International Valuation Standards Council (IVSC) is to develop and maintain standards that deal with undertaking and reporting valuations. It is more important in the cases where the investors and third party stakeholders rely on them. Another task of the International Valuation Standards Council is to support the need for developing a guidance framework regarding the best practice of valuations of the different classes and types of assets and liabilities. The IVSC also looks after the steady and unfailing delivery of the standards throughout the world with the help of extremely trained professionals. Since 1985, the International Valuation Standards (IVS) has been published by the International Valuation Standards Council (IVSC).
When a business is sold to an investor as a whole then the investment value is value of the business on the basis of ROI that is return on investment. Investment value is also sometimes known as “going concern” valuation. By “going concern” valuation, we mean the value of a business which is not expected to close and will function continuously. Such a business will be ongoing and will be open for business.
Project appraisal is the structured process of assessing the viability of a project or proposal. It involves calculating the feasibility of the project before committing resources to it. It is a tool that company’s use for choosing the best project that would help them to attain their goal. Project appraisal often involves making comparison between various options and this done by making use of any decision technique or economic appraisal technique.
The profession of a valuer is related with the evaluation and estimation of the real estate. Basically the valuer is concerned with the insurable value of any possession of property. Therefore valuation has become a special case in which the effective and insurable value of a property is estimated.
Real Estate Appraisal
Real estate appraisal is the process of appraising and evaluating real property. Real estate appraisal is also known as land valuation and property valuation. In this type of appraisal, the market value of the property is usually required.
Residual Income Valuation (RIV)
Residual income valuation (RIV) which is also known as residual income method or residual income model (RIM) is an approach to or method of equity valuation which properly accounts for the cost of equity capital. The word ‘residual’ refers to any opportunity costs in excess which is measured as compared to the book value of the shareholders’ equity and the income that a firm generates after accounting for the true cost of capital is then the residual income. This approach is largely similar to the MVA/EVA based approach having similar advantages and logic.
Royal Institution of Chartered Surveyors (RICS)
The Royal Institution of Chartered Surveyors (RICS) is a professional, representative and independent body that works to control surveyors and property professionals in U.K and in other sovereign nations. This representative body provides strict codes of practice for the protection of consumers; it offers training and education standards and give advice to businesses and government. It offers knowledge in matters that relates to fixed assets and this is not limited to real property. It is a member of the International Federation of Surveyors.
Sales Comparison Approach to Value
The sales comparison approach determines the value of a property by comparing it to similar properties in the vicinity that have been recently sold, along with proper adjustments for acreage, size, amenities, time, etc. This approach to value is mainly based on the principle of substitution.
The Appraisal Foundation
The formation of the Appraisal foundation in 1987 was due to the flux arising in businesses relating to mortgage lending and real estate. A committee comprising of nine professionals in the field, were made, which was impromptu. The main purpose why The Appraisal Foundation was established was to set certain rules that are to be followed by remaining organizations all over Northern America.
Uniform Standards of Professional Appraisal Practice (USPAP)
Uniform Standards of Professional Appraisal Practice (USPAP) is a kind of quality control standards in the U.S. and its territories which is related to personal property, intangibles, real property and business valuation appraisal analysis and report. Uniform Standards of Professional Appraisal Practice which is commonly known as USPAP was developed by a joint committee that represents the major United States and the Canadian appraisal professional organizations. It was written in the 1980s.
Valuation, in finance means the process by which the value of something is estimated. In case of businesses, the value of financial assets and liabilities are usually estimated. Valuation of both tangible and intangible assets is done. Tangible assets include land, building, investments in marketable securities and many more. Some of the examples of intangible assets are goodwill, trademark and patent. Liabilities such as bonds issued by company are also valued.
Valuation Using Multiples
Valuation using multiples often known as relative valuation is a technique that is used for making an estimate of the value of an asset and this is done by making a comparison of the asset’s value with the values of similar assets or comparables after analyzing the market.
Value-in-use of an asset is the net present value of cash flows or some other benefits which is generated by an asset in a certain use for a certain owner. This term is used in the U.S. and is usually estimated at use and this value is less than the highest and best use and so this value is usually lesser than the market value. The value in use of an asset may be higher than market value, when a person gets special benefits like grandfathered zoning, agglomeration benefits, or extraordinary financing and at that time the value is regarded as an investment value.