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Valuations

Our Advisory Services division provides consultancy services including market appraisals, rental reviews, portfolio reviews as well as highest and best use studies.

Our valuations are used to support various transactions between buyers and sellers in the open market, as well as to assist various parties in making equitable transfers of ownership.  The following list represents circumstances for which a valuation may be required: -

  • To set an asking price for the sale of a property
  • To establish an offer price for the purchase of a property
  • For insurance purposes
  • To secure a loan/mortgage
  • For financial reporting
  • For recoveries/foreclosures
  • For divorce settlements
  • For estate settlements

Anyone who has an interest in real property can request a valuation. Our clients typically include private individuals, banks (local and international), attorneys, corporate organizations and conglomerates, hotel groups, property funds and insurance companies.

Terra Caribbean is accredited by the Royal Institute of Chartered Surveyors (RICS) and we adhere to valuation guidelines as set by the International Valuation Standards (IVS).

In accordance with the IVS, the definition of market value is recorded as: - “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion”.

Our valuation process entails the application of the three approaches to value as relevant. One or more approaches to value may be used depending on their applicability to the particular appraisal assignment, the nature of the property, the needs of the client and the availability of data.

Sales Comparison Approach

The Sales Comparison approach is the most useful in establishing current market value when a number of similar properties have recently been sold or are currently for sale in the subject property’s market. The appraiser produces a value indication by comparing the subject property with similar properties called ‘comparable sales’. The sale prices of the properties that are judged to be most comparable tend to indicate a range in which the value indication for the subject property will fall.

The appraiser estimates the degree of similarity or difference between the subject property and the comparable sales by considering various elements of comparison. Adjustments are then applied to the sale price of each comparable  property to derive an indicated value for the subject property. Based on these adjustments, the appraiser then renders an opinion of value as of a specific date.

Being a full service firm with a developed and experienced brokerage department we have access to transactional data from the market and can rely on current sales prices and rental rates provided by our agents. Our knowledge officer’s role to actively seek out current transactions on a daily basis means that our comparable property database is robust and second to none on the island.

Replacement Cost Approach

In the cost approach, the value of a property is derived by adding the estimated land value to the current cost of constructing a reproduction or replacement for the improvements (i.e. buildings and other permanent structures attached to the land) and then subtracting the amount of depreciation from the improvements. This approach is particularly useful in valuing new or nearly new improvements and properties that are not frequently exchanged in the market.

Income Capitalisation Approach

In the Income capitalisation approach, the present value of the future benefits of property ownership is measured. This approach utilises the current actual and potential rents for a property and calculates the value of the property based on a return on investment that an investor would anticipate. It can be based on one year’s income return or several years’ stablised income and a reversionary value at the end of the designated period.

Reconciliation of Values

The final step in the valuation process is the reconciliation of the value indications derived in a single figure or a value range. The nature of the reconciliation depends on the appraisal problem, the approaches that have been used and the reliability of the indicators. When the three approaches have been used, the appraiser considers the relative dependability and applicability of each approach and renders an opinion of value based on such.