1、中原工学院经济管理学院外文翻译Method of ValuationThe Comparative MethodThere are conventional five methods of valuation: the comparative method, the contractors method, the residual method, the profits method, and the investment method. The comparative method is probably the most widely used method and even if one
2、 of the other four methods is used by a valuer he will still almost inevitably have recourse to comparisons as well. The method entails making a valuation directly comparing the property under consideration with similar properties which have been sold, finding its value from these past transactions.
3、 Although this sounds simple and straightforward, there may be many pitfalls to trap the unwary. In using the method it is desirable that the comparison should be made with similar properties situated in the same are. and with transactions, witch have taken place in the recent past. The less the com
4、parable property complies with these requirements, the less valid will be the comparison. Often a valuer is able to get evidence of sales witch do accord with these requirements, particularly when a valuation is of a property such as a semi-detached suburban house. However, the more uncommon a prope
5、rty is, and the more specialized the type of property, the less likely is it that the valuer will be able to finding good comparables, and it is not unusual for there to be a complete lack of evidence of sales of comparable properties. Even when properties appear to be similar, close inspection ofte
6、n reveals that they are in fact different. A row of apparently identical houses may on internal inspection prove to have many differences, and thee skill of the valuer will be required to make an allowance in money terms for such difference in value caused by a different geographical situation. It i
7、s essential in using this method to have as much evidence as possible readily available and good office records are invaluable. Any valuer should ensure that he has an efficient filing system which is regularly kept up to date, and which contains as much information as can be obtained of each market
8、 transaction which is recorded. Modern computer filing systems greatly facilitate good record keeping and the almost instantaneous recall of information. However, for helpful records to be kept, there must be evidence of suitable comparables available, and unfortunately, in the real world, this is o
9、ften locking. The word recent is a relative term. At some points in time a sale which took place a year earlier may be recent enough to be a valid comparison if the market has remained relatively stable in the intervening period. If the market has been volatile or has changed in any way during this
10、time, then market evidence might need to be much more recent past, a valuer may be able to get some guidance from considering market evidence over period of earlier years or months, as it possible that a clearly defined trend of values might be detected. The valuer may decide that this trend would h
11、ave continued through to be date on which he is making his valuation. In using the comparative method a most through inspection of all the underlying factors in the market must be made in order to decide whether they have been changes in conditions since other transactions take place. The method inv
12、olves few dangers if the market is stable. When it is not stable, valuer may encounter problems in its use, and this may also be the case if there are few comparables, or if there are no true comparables, that is if the range of properties sold does not contain anything truly identical to the proper
13、ty under consideration. Some differences may be relatively unimportant, and differences in architectural design, for example may often make little difference to value. However, if a particular design renders a building inefficient in use, the difference may be very important, and in using the method
14、 the valuer should always consider such possibilities. The age of a building can be important in that it may be such as to render it either more or less fashionable and in many instances the structural condition and state of repair will be directly related to the age of the building. Valuers should
15、also pay considerable attention to the accommodation offered by different properties, and try to make allowances for variations in the amount of floor space and differences in the lay-out and the number of rooms provided. Allowance should also be made for differences in the quality of fixtures and f
16、ittings, and for differences in the size of plots on which properties stand. Location is always very important, and valuers should be wary of assuming that values should be similar because the size and accommodation of properties is identical. A slightly different location can make a vast different
17、to market value. In using this method the valuer should always bear in mind the fact that property is heterogeneous, and should always ask himself whether any special factors affected the market value of the comparables that he is using, or whether any special factors are likely to affect the value
18、of the property which he is considering.The Contractors MethodThe contractors method(summation)is used to value the type of properties which seldom change hands and for which there are therefore few comparablesIt must at this point be stressed that cost and value are rarely tell same, but this metho
19、d of valuation is based loosely on the assumption that they are related. It should therefore be appreciated that it is a method used only infrequently，and which is something of a last resortThe basic theory of the contractors method is that the cost of the site plus the cost of the buildings will gi
20、ve the value of the land and buildings one unit. With the majority of properties there is ample evidence to show，that this proposition is not correct，but the Contractors method is used to value properties for which there is little general market demand and which are consequently rarely soldThe types
21、 of property for which it could be appropriate are hospitals，town halls，schools，librariespolice stations，and other such buildingIt will be noted that this list comprises principally public buildings，although the use of the method is not necessarily restricted to public building alone. Cost is normal
22、ly only one factor of many which may affect supply and demand and which therefore affect value, but it is probably true that with true that with this type of building it is a predominant factor. It would always be possible for the would-be users of such buildings to acquire alternative sites and to
23、construct new buildings rather than purchase an existing property at greater overall costCompetition between rival potential users would be unlikely and it is therefore reasonable to assume that cost and value are not unrelated with such special buildings However if an alternative building were cons
24、tructed it would be a new propertv，whereas with an existing property it is obvious that there would be some wear and tear resulting from is previous use and there might also be a degree of obsolescence which had arisen since it was new. In using the contractors method the valuer must therefore make
25、a deduction to allow for both depreciation of the buildings and obsolescence of design. The basic valuation approach then becomes as below： Cost of site Plus Cost of building Less Depreciation Allowance and Obsolescence Allowance Value of Existing Property This method is most frequently used for rat
26、ing purpose where rates are levied on the value of buildings and sites together and it is also sometimes used in valuations for compensation when property of a special nature has been compulsorily acquiredThe Residual MethodThe residual method (hypothetical development method) is used when a propert
27、y has development or redevelopment potential. It is needed when there is an element of latent value which can be released by the expenditure of money on a property. Residual valuations are quite regularly made by people who purchase residential; properties which they consider could be made more valu
28、able id money were spent on improvement and modernization. This would-be purchaser may look at a house and decide that it is worth 20000, after which it will have a market value of 90000. A quick inspection of the figures shows that latent value of 20000 has been in use, but even when much more comp
29、licated calculations are involved, the basic approach to the method is still exactly the same. Value of the completed development Less Total expenditure on improvements or development (including developers profit) Value of site or property in its present condition (Residual value) The value of the c
30、ompleted development is sometimes referred to as the Gross Development Value, or as the Gross Realization.The use of the residual method involves considerable skill and it is first necessary to decide what is the best form of development suitable foe or property, and then to task, as apart from the
31、skill involved in choosing the best use for a site, the vaguer also has to estimate the value of a building which does not as yet exist. He has to cast his mind forward to estimate the Gross Development Value.Even when this has been done with great skill accuracy, all the costs of improvement and de
32、velopment must then be estimated. These may include such items as the cost of site clearance, architects fees, site engineers quantitys fees, and all other professional fees incurred in creating the development, the costs of building must be estimated, and these could well increase during the time-l
33、ag between the acquisition of the property and the completion of the development. Once a property has been developed it has to be let or sold, and the valuer must make an allowance for all costs which would be incurred in letting or disposing of the property he envisages as one day standing on the s
34、ite. These costs will include estate agents fees, advertising fees, and the solicitors fees and legal expenses, to purchase the site and subsequently develop or redevelop it will usually require a considerable amount of finance, and the cists of obtaining this must be deducted as a development cost.
35、 No one will wish to take all the risks involved in a project without any reward, and a developers profit must be allowed.The may be other items of expense to consider, and the more variables there are the more difficult it will be to maintain an acceptable degree of accuracy in the calculations. Ho
36、wever, a skilled valuer with a special knowledge of the type of development for which he is valuing, who is in touch with the market and who id familiar with the costs of development, can use this method with a considerable degree of accuracy.There will doubtless be instances in which, in retrospect
37、 a purchaser will be seen to have paid too much for a property because the figures on which the residual valuation was based have changed in the period since the property was purchased. The method is nevertheless acceptable for finding market value, as it must always be remembered that this value i
38、s the figure which would be paid in the market at a definite point in time, taking into account future expectations.The method is often is often criticized as being clumsy and containing too many variables, but there is little doubt that it is the only real method of valuation applicable when there
39、is latent value in a property.The Profits Method The profits method (accounts method, treasury method) is based on the assumption that the value of some properties will be related to the profits which can be made from their use. The method is not used where it is possible to value by means of compar
40、ison, and is generally only used where there is some degree of monopoly attached to a property. Such a monopoly may be either legal or factual, a legal monopoly existing where some legal restraint exists to prevent competition to the property user from the users of other property. Such a situation m
41、ay occur when a licence is required for the pursuit of a particular trade. A factual monopoly may arise when there is some factors, other than a legal restraint, which restricts competition. An instance of a factual monopoly is the restaurant at the top of Mount Snowdon in Wales where there is no ot
42、her property to offer competition and where none is likely to be built. Whenever there is an element of monopoly it is obviously not possible to use the comparative method lf valuation, as there could be no true comparison to a property which enjoys a monopoly, and it is also reasonable assumption t
43、hat any rent which would be paid for the use of such a property would relate to the earning power in that use. It should be noted that with this method the valuer attempts to estimate the rental value of a property and not the capital value. Profits are made on an annual basis, and any figure obtain
44、ed from them will also be on an annual basis. The basic equation on which the profits method is based is as follows: Gross Earnings Less Purchases Gross profit Less Working Expenses (Except Rent) Net ProfitPart of the profit which the business earns must be allocated to pay the tenant for his work i
45、n the business, a further allocation must be made to cover his risk and enterprise, and a final allocation to allow interest on the capital he has put into the business. Care should be taken that a deduction for the tenants wages has not previously been made in calculating the net profit, as double
46、counting must be avoided. After allowance has been made for these various items, a sum of money will remain which would be available to pay for the use of the premises. This figure will vary, depending upon the size of the deductions for other items, and skill is required, and a knowledge of trading
47、 returns, for a valuer to be able to make a reasonable assessment of the division of net profit between these various items.Much care is also needed in the calculation of the net profit and in the use of the various figures involvedIf a business is already in existence there will be accounts which c
48、an be inspected. The obvious approach is to base a valuation on those accountsHowever，care is necessary，as a business may have been badly run and the use of the accounts figures in such circumstances would give too low a net profitAlternatively，a business may have been run by an exceptional，astute and hard working businessman，and no other trader might be able to achieve the same level of pro
