What is Valuation?

Valuation is the combination of art and science in assessing the worth of an int erest in a property at a particular point in time for a particular purpose takin g into account all factors affecting value. The keywords and important phrases of the definition are listed below: 1) 2) 3) 4) 5) combination of art and science; worth of an interest; a particular point in time; a particular purpose, and all factors affecting value.

The definition states that valuation should not be taken nor approached as a pur e science. The professional judgement of the valuer in addition to his skills, k nowledge and experience can be far more important at times. In addition, the definition has it that the value or worth of the property lies mainly on its legal interest, not its physical state. While other factors are th e same, a property with a freehold interest would fetch a higher market value th an a similar property with a leasehold interest with 50 years unexpired. In this context, a property without any legal interest would literally have no value. Meanwhile, valuation is also required by the definition to be time-specific as w ell as purpose-specific. The value of a property would change in accordance with time. Valuation for different purposes may need to be carried out under differe nt sets of guidelines and assumptions, which would potentially result in differe nt values. Finally, in assessing the Market Value of a property, a valuer must take into ac count all factors affecting value. He must be observant, skillful and experience in identifying all these factors during his inspection and other investigations . An omission of any of these factors may cause his opinion to err.