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In finance, valuation is the process of determining the present value (PV) of an asset. Valuations can be done on assets or on liabilities. Valuations are needed for many reasons such as investment analysis, capital budgeting, merger and acquisition transactions, financial reporting, taxable events to determine the proper tax liability.
Market value or OMV is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with open market value, fair value or fair market value, although these terms have distinct definitions in different standards, and may or may not differ in some circumstances.
Real estate appraisal, property valuation or land valuation is the process of developing an opinion of value, for real property. Real estate transactions often require appraisals because they occur infrequently and every property is unique, unlike corporate stocks, which are traded daily and are identical. The location also plays a key role in valuation. However, since property cannot change location, it is often the upgrades or improvements to the home that can change its value. Appraisal reports form the basis for mortgage loans, settling estates and divorces, taxation, and so on. Sometimes an appraisal report is used to establish a sale price for a property.
Contingent valuation is a survey-based economic technique for the valuation of non-market resources, such as environmental preservation or the impact of contamination. While these resources do give people utility, certain aspects of them do not have a market price as they are not directly sold – for example, people receive benefit from a beautiful view of a mountain, but it would be tough to value using price-based models. Contingent valuation surveys are one technique which is used to measure these aspects. Contingent valuation is often referred to as a ''stated preference'' model, in contrast to a price-based revealed preference model. Both models are utility-based. Typically the survey asks how much money people would be willing to pay to maintain the existence of an environmental feature, such as biodiversity.
In economics, hedonic regression or hedonic demand theory is a revealed preference method of estimating the demand for a good, or equivalently its value to consumers. It breaks down the item being researched into its constituent characteristics, and obtains estimates of the contributory value of each characteristic. This requires that the composite good being valued can be reduced to its constituent parts and that the market values those constituent parts. Hedonic models are most commonly estimated using regression analysis, although more generalized models exist, such as sales adjustment grids.
Comparables is a real estate appraisal term referring to properties with characteristics that are similar to a subject property whose value is being sought. This can be accomplished either by a real estate agent who attempts to establish the value of a potential client's home or property through market analysis or, by a licensed or certified appraiser or surveyor using more defined methods, when performing a real estate appraisal.
Business valuation is a process and a set of procedures used to estimate the economic value of an owner's interest in a business. Valuation is used by financial market participants to determine the price they are willing to pay or receive to effect a sale of a business. In addition to estimating the selling price of a business, the same valuation tools are often used by business appraisers to resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of partners' ownership interest for buy-sell agreements, and many other business and legal purposes such as in shareholders deadlock, divorce litigation and estate contest. In some cases, the court would appoint a forensic accountant as the joint expert doing the business valuation.
In economics, valuation using multiples, or “relative valuation”, is a process that consists of:
Intellectual property assets such as patents are the core of many organizations and transactions related to technology. Licenses and assignments of intellectual property rights are common operations in the technology markets, as well as the use of these types of assets as loan security. These uses give rise to the growing importance of financial valuation of intellectual property, since knowing the economic value of patents is a critical factor in order to define their trading conditions.
An appraised value or mortgage valuation (Australia) pertains to the assessed value of real property in the opinion of a qualified appraiser or valuer. It is usually used as a pre-qualification & risk-based pricing factor related to the issuance of mortgage loans by a financial institution.
Farmland development rights in Suffolk County, New York began in 1975 in Suffolk County as the state of New York began a program to purchase development rights for farmland to insure they remained as farms and open space rather than being developed for housing.
The following outline is provided as an overview of and topical guide to finance:
A house price index (HPI) measures the price changes of residential housing as a percentage change from some specific start date. Methodologies commonly used to calculate a HPI are the hedonic regression (HR), simple moving average (SMA) and repeat-sales regression (RSR).
The Appraisal Foundation (TAF) is the United States organisation responsible for setting standards for the real estate valuation profession. The organization sets the Congressionally-authorized standards and qualifications for real estate appraisers, and provides voluntary guidance on recognized valuation methods and techniques for all valuation professionals. The aim is to ensuring appraisals are independent, consistent, and objective.
The income approach is one of three major groups of methodologies, called valuation approaches, used by appraisers. It is particularly common in commercial real estate appraisal and in business appraisal. The fundamental math is similar to the methods used for financial valuation, securities analysis, or bond pricing. However, there are some significant and important modifications when used in real estate or business valuation.
Valuation is considered as one of the most critical areas in finance; it plays a key role in many areas of finance such as buy/sell, solvency, merger and acquisition.
Appraisal may refer to:
The German income approach is the standard approach used in Germany for the valuing of property that produces a stream of future cash flows.
Brand valuation is the job of estimating the total financial value of the brand. Like the valuation of any product, or self review, a conflict of interest exists if those that value the brand also were involved in its creation. The ISO 10668 standard sets out the appropriate process of valuing brands, and sets out six key requirements:
- transparency,
- validity,
- reliability,
- sufficiency,
- objectivity, and
- financial, behavioural, and legal parameters.
A broker's price opinion is a report that is performed by a licensed real estate agent, broker or appraiser. It is similar to doing a CMA but most times the real estate professional gets paid to do a BPO. A BPO can be either an Exterior Drive-By or a Full Interior report. When doing a BPO, the real estate pro researches the ‘subject property,’ they take pictures of it, they also scope out the neighborhood as well as pull 6 comparable properties in their MLS. They then take all of this information, the pictures they took of the subject and their knowledge of the local real estate market and they input it into a BPO form. The final BPO is used to support their professional opinion that will help determine the potential selling price or estimated value of a real estate property.