Valuation MethodologyProperty (Real Estate & Machinery)

We offer the following services;

We undertake Valuation of all interests in both real property and moveable properties for all purposes including; Investment, mortgage, insurance, rental assessment, compensation, financial reporting/ accounting, sale/purchase and rating. Real property encompasses land and buildings while moveable properties include office/home furniture and equipment, vehicles, plant and machinery.

Basis of

The basis of valuation as advanced by the International Valuation Standards Committee (IVSC) is the Market Value.  Clearly defined, Market Value is‘The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.’

GENERAL VALUATION METHODOLOGY:- In assignments to develop an opinion of market value, the ultimate goal of the valuation process is a well-supported value conclusion that reflects all of the pertinent factors that influence the market value of the property being appraised. The valuation process at White knights Valuers is a systematic procedural model we follow to provide answers to a client’s questions about real property value.  Our brief steps in the valuation process include.

Defining the Appraisal Problem:- We believe the first step in the valuation process is the development of a clear statement of the appraisal problem. This sets the limits of the appraisal and eliminates any ambiguity about the nature of the assignment. Our definition of the problem entails: Identification of the client and intended users of the appraisal, Intended use of the appraisal, Purpose of the appraisal (including the definition of value) Date of the opinion of value, Identification of the characteristics of the property (including its location, the property rights to be valued, and other features), extraordinary assumptions and Hypothetical conditions.

Identifying Scope of Work:- The scope of work is the amount and type of information researched and the analysis applied in an assignment. In our appraisal report, the scope must be clearly disclosed.

(a) The cost approach is based on the understanding that market participants relate value to cost. In the cost approach, the value of a property is derived by adding the estimated value of the land to the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation (i.e., deterioration and obsolescence) in the structures from all causes. Entrepreneurial profit and/or incentive may be included in the value indication. This approach is particularly useful in valuing new or nearly new improvements and properties that are not frequently exchanged in the market. We obtain the current costs to construct the improvements from cost estimators/quantity surveyors, cost manuals, builders, and contractors. Depreciation is measured through market research and the application of specific procedures. We estimate Land value separately in the cost approach and this is largely based on sales comparison.

(b) Sales Comparison Approach: we use this approach when a number of similar properties have recently been sold or are currently for sale in the subject property’s market. Using this approach, we produce a value indication by comparing the subject property with similar properties, called comparable sales. The sale prices of the properties that are judged to be most comparable tend to indicate a range in which the value indication for the subject property will fall. We estimate the degree of similarity or difference between the subject property and the comparable sales by considering various elements of comparison including: Real property rights conveyed, construction details and age, financing terms, conditions of sale, Location, Physical characteristics, Economic characteristics, Use and Market conditions.

(c) Income Capitalization Approach:-In the income capitalization approach, the present value of the future benefits of property ownership is measured. Like the sales comparison and cost approaches, the income capitalization approach requires extensive market research. Data collection and analysis for this approach are conducted against a background of supply and demand relationships, which provide information about trends and market anticipation. The specific data that we investigate in the income capitalization approach might include the property’s gross income expectancy, the expected reduction in gross income caused by vacancy and collection loss, the anticipated annual operating expenses, the pattern and duration of the property’s income stream, and the anticipated reversionary value. After income and expenses are estimated, the income streams are capitalized by applying an appropriate rate or factor or converted into present value through discounting.

Final Reconciliation of Value Indications:-after using different approaches on the same property, we undertake reconciliation of the value indications derived into a single figure or a range into which the value will most likely fall. The nature of reconciliation depends on the appraisal problem, the approaches that have been used, and the reliability of the value indications derived. When all three approaches have been used, we examine the three separate indications and consider the relative dependability and applicability of each approach. In the reconciliation section of the report, we explain variations among the indications produced by the different approaches and account for differences between the value conclusions and methods applied. The final opinion of defined value, which is the goal of the valuation process, is usually reported as a single figure. However, at times we might report it as a range of value or as a value in relation to some stated benchmark amount.

Final Report and submission to the Client:-The assignment is not complete until the conclusion is stated in a report and presented to the client. The reported value is our opinion and reflects the experience and judgment that has been applied to the study of the assembled data. The report we present is the tangible expression of our work and the last step in the valuation process. The conclusions of our reports are mostly communicated to the client in writing although in a few instances can be oral.

Specific Methodology for Land and Buildings Valuation: –This methodology entails three approaches/phases i.e. Pre field Work Phase, Field Work Phase and Post Fieldwork Phase.

Pre Field Work:- Under this phase, we try as much as possible to; insist on written instructions to undertake the assignment, acquaint ourselves with all the particulars of the property; inform occupants, tenants, local area leaders or police of our impending field inspections; organize the requisite team and paraphernalia like GPS devices, tape measures, total stations, cameras, note pads, etc depending on the size of work; and liaise with our contacts in key land offices to undertake title searches on the property with a view to verifying the authenticity of details on the Photostat copies of titles availed to us.

Field Work Phase:-During this phase, our team undertakes site visits, Takes note of key site information like shape of the plot, terrain, property measurements, accommodation details, pictorial evidence of different elevations of the property, Carries out boundary opening to verify that the plot being valued is the one on both the print and on ground. This also identifies encroachments onto the land if any, Collects all relevant market information of the immediate and general neighborhood and draws site layout sketch plans and location maps.

Post Field Work Phase:- during this phase, We analyze all market data garnered from the report and prepare a draft report, Draft Report reviews done by head of valuation on values returned., Peer Reviews of valuations with other professional colleagues, Directors Review of the report before a final report is printed, Quality assurance checks – before the report is delivered to the client. This is to make sure the report conforms to both our client’s standards and international standards, Preparation of a formal valuation report indicating the market values, Report Submission. We submit two copies directly to the client.

Specific Methodology for Plant and Machinery:-Our valuation technical team establishes the Depreciated Replacement Costs of the plant and Machinery. The method of computing the depreciated replacement values is arrived at by taking the Gross Current Replacement Cost less depreciation. The Gross Current Replacement Cost of an asset is defined as the amount of money required to reproduce a new similar item with the same capacity and in a similar location. This cost includes taxes that would be levied and freight charges if the asset would have to be transported to its final location. Depreciation would be defined as the measure of wearing out, depletion or other loss of value of the fixed asset, whether arising out of use, effluxion of time or obsolescence. Depreciation is quantified considering both functional obsolescence and economic obsolescence.

The Valuation Engineers inspect and ascertain the condition of the plant and machinery and thereafter arrive at their values. As part of their specific exercise, the Valuation Engineers:

  1. Peruse through the available data to obtain the histories of the machinery to be valued, to establish their dates of acquisition and records of maintenance. We; Inspect and categorize each by; name, type, power, capacity, model and condition of repair, Take photographs and describe the use and functions of each accessory; Take note of the location, condition and age.
  2. Obtain the specific suppliers costs for the machinery (at C.I.F) and their estimated lifetimes. Life here is defined as the period between acquisition of the asset and its anticipated retirement.
  3. Establish the estimated future life the vehicles have and compute their depreciated values.
  4. Prepare appraisal schedule for every item detailing the equipment by; description, quantity, condition rating/ depreciation, remark and value;
  5. Review of the report with a view to aligning it to internationally acceptable standards;
  6. Report Submission.

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