Alozius Gonza | Managing Director
November 21, 2014 09:06 AM

Real Estate appraisal commonly termed as Property Valuation or Land Valuation is the practice of developing an opinion of value of a given piece of real estate at a particular moment in time.

According to the International Valuation Standards and the Royal Institute of Chartered Surveyors, this opinion of value is what is referred to as Market Value. It defines the value for which the property should exchange of the date of valuation between a willing seller and a willing buyer in an arms’ length transaction wherein each party acted knowledgably, prudently and without compulsion.

“willing buyer willing seller”

Simply put, I’m willing to sell, you are willing to buy; as long as we agree on a price, then we have a deal. For starters, willing buyer willing seller is respected in most transactions and it is used to justify many transactions as being a reflection of Market Value just because the sale occurred under a willing buyer, willing seller concept.

“arms’ length transaction”

This serves to reduce conflict of interest. In other words, no relationship should exist between the buyer and the seller. The seller intends to achieve the best price possible for the property being sold while the buyer intends to buy at the lowest price possible depending on how far the bargaining power can drive such a price down. Save for a few cases, most transactions in real estate are in an arms’ length transaction.

“acting knowledgably and prudently”

How about acting knowledgably and prudently?

This is where the problem arises for the majority of property transactions in Uganda. For the most cases, the seller has sufficient knowledge about the property as for the buyer, it is a complete reverse not forgetting a few buyers that make the necessary due diligence.

Unlike other markets like the Vehicles (Car) Market where a big percentage of the population both buyers and sellers are familiar with the prices of the vehicles (Noah, Carina, Prado, Range Rover, etc) and the factors that affect such prices, the real estate market is completely different.

The challenge lies with the heterogeneous nature of the real estate market. No two properties are completely similar, they may differ in location, level of finish, or workmanship which in the end affects the value of each particular piece of real estate differently from one another. The case for our country with regard to location, level of finish and workmanship of each property cannot be overstated.

We are also familiar with the fact that many so called brokers not only earn commission on the sale of the property but also input what can only be referred to as top-ups on the sale price of the property. At times, brokers market the property at double what the seller is likely to get and unsurprisingly, they get a buyer. 

Need for an appraiser/valuer

Therefore the need for an appraiser/valuer to conduct a market valuation that can guide your decision before you buy or sell can be seen. By definition, a Valuer is the person with the necessary competence and skills (and licensed by Institution of Surveyors of Uganda and the Surveyors’ Registration Board) to undertake a market valuation for a property. He/she will make the necessary due diligence and also attach a value that can guide your decision so that you buy or sell at the best price possible.

The benefits of engaging these professionals in our decisions are so immense compared to the small cost that you have to offer for their service. And if most of us can engage them, at some point in time, property values can become more stable that they are today to the benefit of all.

Land being at the center of every social and economic activity, stability of prices would be very instrumental in promoting sustainable urban development and a harmonized environment for both social and economic transformation.

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GMT Consults LTD

Plot 112 Bukoto Street

Kamwokya, Kampala Uganda

Tel: +256(0) 701 478 636/701 108 262

       +256(0) 772 369 624

Email:gmt@gmtconsults.com

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