EUROPEAN VALUATION STANDARD 2 VALUATION BASIS OTHER THAN

EUROPEAN VALUATION STANDARD – 2 VALUATION BASIS OTHER THAN MARKET VALUE Defvas Project In Partnership with TEGo. VA and the IRRV

INTRODUCTION AND SCOPE • Circumstances where an alternative basis of valuation may be required • Understanding the distinction between market value and the alternative basis • The impact of an alternative valuation basis – Construction of the valuation – Production of the valuation Defvas Project In Partnership with TEGo. VA and the IRRV

BASIS OF VALUE • The definition of the “Basis of Valuation” • Distinguishing the basis from the methods or techniques used • The importance of transparency when applying the basis of value • Revealing the assumptions • The basis of valuation in context Defvas Project In Partnership with TEGo. VA and the IRRV

FAIR VALUE • The definition of Fair Value • Recognised as a permissible basis of valuation • Special Value – A special purchaser – Going concern value – Synergistic value or marriage value Defvas Project In Partnership with TEGo. VA and the IRRV

INVESTMENT VALUE OR WORTH • Definition of investment value or worth • The individual buyer and the bid • Not expected to be consistent with market value – Such valuations are: – To be determine the value for a specific individual, and – Do not assume an exchange of property Defvas Project In Partnership with TEGo. VA and the IRRV

MORTGAGE LENDING VALUE • Definition of mortgage lending value • The Capital Requirements Directive • The Basel II Accord • The concept of Mortgage Value Lending (MVL) • The “value-at-risk” approach • The exposure risk Defvas Project In Partnership with TEGo. VA and the IRRV

INSURABLE VALUE • The definition of Insurable Value • Mitigating the risk • The relationship with the insurance contract • The implication of the valuation and the unrecoverable loss Defvas Project In Partnership with TEGo. VA and the IRRV

ALTERNATIVE USE VALUE • Definition of the Alternative Use Valuation • Considering alternative uses of the building which may not involve continuing the present business • The value would not reflect any costs of ceasing the business • This basis may be relevant where a depreciated replacement cost valuation has taken place Defvas Project In Partnership with TEGo. VA and the IRRV

FORCED SALE VALUE • Definition of the Forced Sale value • The need for this valuation may arise where the seller is under compulsion to sell • Identification of the constraints • Can only be the basis once the relevant constraints are identified • The value will reflect the specific circumstances Defvas Project In Partnership with TEGo. VA and the IRRV

DEPRECIATED REPLACEMENT COST • Definition of the Depreciated Replacement Cost • Also known as the “Contractors Method” • Used for properties with “non conforming”, unusual or distinctive attributes • A valuation of last resort • Choice of depreciation rate is a valuation judgement Defvas Project In Partnership with TEGo. VA and the IRRV