Professional Practices and Valuation

1. GOVERNMENT ENGINEERING
COLLEGE, BHAVNAGAR.
Civil Engineering Department

2. Professional
Practices and
Valuation.
Topic:- Valuation

3. Introduction
– Engineer has to work out the value of an existing property for
various purpose like for wealth tax, municipal taxation, etc.
– Valuation is an art of judgment based on experience and relevant
statistical data to forecast the value of a property at present.
– The estimated value of property depends upon its power to serve
man’s need, location, amenities, purpose and supply and demand
of a property type.
– It continuously varies with age, physical state and characteristics of
the property itself.

4. Cost & Value
 Cost
– It is the amount of expenditure incurred to produce or acquire a
commodity having a value.
– To this cost of Product, agents’ commission and stamp duty etc. is
also added.
Value
– Value is the price estimated to be realized in a sale proceed
between a willing buyer and willing seller.

5. Value
– In order to have value for commodity, it should posses the following three essential characteristics;
a) It must possess utility.
b) It must be scare.
c) It must be marketable or transferable.
– In the absence of any one of above qualities, the commodity may not have any value.
– For eg. Rotten Mangoes though scarce do not have any value because they have no utility. On the
other hand Land has got value because it satisfies all above essentials.
Value also depends upon outside factors such as:
 Location of Property
 Time
 Supply and Demand Condition

6. Purpose of Valuation
– Valuation is done for Following Purpose:
 For Buying or Selling:
Valuation of the property is always done both by the seller and
prospective buyer so as to arrive at a reasonable price.
 For Mortgage, Security of loans etc:
While advancing any sum of money on the mortgage or security of
a property, the mortgager estimates the cost of property.

7. Purpose of Valuation
 Determination of Rent:
Valuation of property is also done to work out the amount of fair rent of a
building etc., especially when it is requisitioned by the government or semi
government organization.
 Assessment of tax:
The value of the newly built property for the purpose of assessing the
amount of expenditure incurred is determined by income tax authorities so as to
ensure that the expenditure commensurate with the known sources of income of
the owner. Similarly, to determine property tax, house estate duty, gift tax, etc,
valuation of property is done before levying these taxes.

8. Purpose of Valuation
 Acquisition:
Sometimes property is compulsorily acquired by the government. Hence
valuation of property has to be carried out for paying compensation to the owner.
 Other purpose:
Similarly there are many other occasions, when the probable value of the
property is required. Such as:
– Insurance against fire of a building
– Compensation for any lose due to war, earthquake etc.
– Borrowing Money from Insurance Company, Bank or such other Institution.
– Auction Bids.

9. Principles of Valuation
– Following Principles should be observed at the time of evaluating a fair and
reasonable value of property.
1. Cost depends upon supply and demand of the property.
2. Cost depends upon its design, specifications of the materials used and its location.
3. Cost varies with the purpose for which valuation is done.
4. In valuation, a vender must be willing to sell and so the purchaser willing to purchase
5. Present and future use of any property should be given due weightage in valuation.
6. Cost analysis must be based on statistical data as it may sometimes require, evidence
in a Court of law

10. Factor affecting the value of the
Property
1. Supply and Demand (Market Conditions)
– Basically the value of a property is determined by supply and demand.
– For eg: plentiful supply of a commodity and little or no demand, lower the
value of commodity, whereas, if there is little supply and a great demand,
higher the value of property.
– In the property market the supply of property is relatively fixed at any one time.
In order to increase the supply, more properties need to be built. However, this
process takes time. Demand, in contrast, can change relatively quickly.
Therefore property values tend to be influenced by demand rather than supply.

11. Factor affecting the value of the
Property
2. Location
– Property proximity to public transportation, train stations, shopping facilities,
schools, etc., plays an import factor in determining your property’s market
value. Every area has a high end and a low end. The market value of your
property is affected by that reality. People that purchase homes in “lower end”
areas expect to pay less than they would if they bought the same home in a
“higher end” neighbourhood.

12. Factor affecting the value of the
Property
3. Features
– One of the key factors in property’s value is the features it provides. For
example, some house styles are more popular with buyers than others. The age
and size of your home compared to other available properties also plays a part
in affecting your home’s value.
4. Condition
– The value of Property also depend upon its condition and its functional utility.
For eg: A home in immaculate condition has a much higher potential for a top
dollar sale than one that is lacking the most basic routine maintenance.

13. Factor affecting the value of the
Property
5. Property Improvements
– For eg: Improvements like room additions, bedrooms, bathrooms, kitchens and
other items like floor tiles, swimming pools, etc., can increase the value of your
home.
6. Age
– The age of a property can be a factor in value. If a property has historical
connections, it can make it more valuable and imperfections such as uneven
walls and sloping floors that would not be tolerated in a new property would
perhaps be seen as quaint and charming.
– Some older properties may need more maintenance and repairing than a
modern property and a newer property would meet all the latest up to date
regulations thus increasing its value.

14. Factor affecting the value of the
Property
7. Seller Motivation
– Seller motivation is also a major factor which affects the offer price made by the
buyer. For example, if you bought a home in a new area you may be willing to
accept a lower price to quickly complete the sale your current house.
8. Marketing
– The marketing plan that your agent executes on your behalf will determine the
amount of interest that is shown in your property. Your agent’s level of skill and
expertise in the negotiating process will affect the amount of money you’ll be
able to get for your Property.

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