Download Module 9

EUROPEAN VALUATION APPLICATION - 2
VALUATION FOR LENDING PURPOSES
Defvas Project
In Partnership with TEGoVA and the IRRV
INTRODUCTION
•
Applies to all circumstances
•
Applies to valuations prepared prior to, and in contemplation
of, a new loan, a renewal or an additional loan
•
Lending institutions rely on sound valuations
•
It must take account of, among other factors:
- The purpose of valuation
- The basis required by the client
- The objective assessment of risk linked to the structure of the loan
- The duration of the proposed loan facility
Defvas Project
In Partnership with TEGoVA and the IRRV
COMMENTARY ON LAND AND
PROPERTY CATEGORIES
• Investment properties;
• Owner occupied properties;
• Development properties;
• Properties normally valued on the basis of trading potential;
• Wasting assets, mineral assets, etc
Defvas Project
In Partnership with TEGoVA and the IRRV
USUAL BASIS OF VALUE
• Market Value (MV), as the paramount basis of
valuation
• Mortgage Lending Value (MLV) as defined in EU
Legislation
Defvas Project
In Partnership with TEGoVA and the IRRV
APPLICATION OF MORTGAGE
LENDING VALUE
• Mortgage lending value is distinguished between
Market Value
• Differences between Market Value and Mortgage
Lending Value
• Very stable markets
• Can be used as a risk management measure
• The assessment of Mortgage Lending Value
Defvas Project
In Partnership with TEGoVA and the IRRV
RESPONSIBILITIES AND OBLIGATIONS
OF THE VALUER
•
Valuers advising on matters relating to secured property
lending must not undertake suck work unless, as a
minimum, they can comply with the educational and
experience requirements set out in EVS3.
•
The valuer must be competent to give advice on comparative
property and sector-related risks if this is required
•
As far as the valuation is concerned, these matters relate to, and
depend on, the type of property, property’s geographical or sector
context, client bias and, particularly, on the effects of liquidation
procedures in the country
Defvas Project
In Partnership with TEGoVA and the IRRV
FORCED SALES AND LIQUIDATION
SALES
• Lending institutions may request valuations on a forced,
or liquidation, sale basis or impose a time limit for
disposal of the security
• It should be noted that, as sated in EVS2, such valuations
do not meet the definition of Market Value
• Any circumstances where a valuer is requested to provide
valuations on a basis other than Market Value, the valuer should
proceed only if that valuation is not in breach of local laws or
regulations.
Defvas Project
In Partnership with TEGoVA and the IRRV