The Importance of Qualified Property Valuations in the Commercial Property Sector
Category General
The Importance of Qualified Property Valuations in the Commercial Property Sector
In the dynamic world of commercial real estate, property valuations play a crucial role in guiding the decisions of investors, developers, and buyers. However, recent concerns have arisen regarding the practice of estate agents conducting valuations without the necessary qualifications. The South African Institute of Valuers (SAIV) has raised strong objections to this practice, emphasizing the potential risks it poses to the credibility of both the property and valuation industries.
The heart of the matter lies in the Property Practitioners Regulatory Act, which explicitly states that property practitioners must refrain from offering services or engaging in activities for which they are not qualified. The Property Valuers Profession Act 47 of 2000 further specifies the categories of registration for property valuers, including Professional Valuer, Professional Associated Valuer, and Candidate Valuer. To become a property valuer, one must possess an accredited property valuation qualification, undergo intensive practical training, and successfully complete a board exam. Ongoing professional development activities are also required to maintain registration.
Beyond the legal restrictions and educational requirements, property valuations hold significant weight as definitive statements of value. If an error occurs in a valuation report that is relied upon and subsequently found to be incorrect, it can lead to civil action to recover losses. Importantly for estate agents, their Property Practitioner Indemnity Insurance will not cover activities for which they lack the appropriate qualifications.
Given these considerations, it raises the question: Can estate agents conduct valuations?
The SAIV President, Dianne de Wet, suggests a solution lies in revising the terminology used. She appeals to estate agents to refrain from using the terms "valuation" or "value" and instead consider alternative language that does not imply qualifications in valuation work. De Wet proposes that agents employ a Comparative Market Analysis (CMA) as an acceptable way to demonstrate expertise and advise clients on the optimal price point to list a property for the best and quickest results. This approach relies on statistics from recent property transfers registered at the deeds office, as well as information on comparable properties currently on the market or unsold due to being overpriced.
A key point emphasized by de Wet is that a Professional Valuer, armed with years of rigorous education and adhering to international best practices, is equipped to produce a Valuation Report that can withstand scrutiny in a court of law. Even in the rare event of an error, the Valuer benefits from the support of Professional Indemnity Insurance.
The consequences of continuing to use the terms "valuation" or "value" without the necessary qualifications are significant:
- Erosion of trust and integrity in the valuation profession among the public and consumers due to non-qualified individuals conducting valuations. Some reports brought to the attention of the SAIV demonstrate limited market information and incorrect valuation methodologies that fail to meet industry standards.
- Misuse of valuations conducted by unqualified individuals for rates objections on municipal valuations, leading to broader economic implications.
- Risks and potential financial consequences for consumers when incorrect values are assigned to properties due to property practitioners' lack of knowledge regarding valuation principles and methodologies.
- Adverse effects on the livelihood of registered property valuers and their ability to generate income.
- Reduction of opportunities for young graduates entering the valuation profession when unqualified individuals perform their work.
By implementing a simple change in terminology, property practitioners can mitigate the risks of being held liable for any legal action resulting from clients perceiving loss due to a "valuation" performed by unqualified individuals. This shift will promote trust, maintain professional standards, and safeguard the interests of all stakeholders in the commercial property sector.
Author: Property Professional
