TEGoVA

The European Group of

Valuers Associations
www.tegova.org
About TEGoVA
The European Group of Valuers Associations (TEGoVA)
- is the European umbrella organisation of national
property valuation associations
- was established in 1977 by valuation associations
from Belgium, Germany, France Great Britain and
Ireland in order to establish common valuation
standards in accordance with the 4th company
directive law
Members
Today TEGoVA represents
the interests of 40
professional associations
from 27 countries with a
total of 100.000
professional valuers.
TEGoVAs Role
The European Union is integrating rapidly, removing barriers
and creating links between more and more citizens and
states.
Real estate is the bedrock of the European economy,
- through housing
- through ever-adapting accommodation for businesses
and industry
- through public economy and
- as an asset class.
TEGoVAs Role
A dynamic European economy serving its citizens needs
cross-border property investment. To invest in property,
people need to be able to compare. Valuation is at the heart of
this, as essential to transparency and comparison as the euro
itself. Properties across the Union need to be valued on the
basis of common European standards applied by valuers with
a common high level of competence and integrity
TEGoVAs Role
TEGoVA organises and achieves this
- by drafting European Valuation Standards (EVS),
- through its systems of approval of valuer certification
bodies according to EN 45013 and ISO 17024,
- through its system of professional recognition and
- through its minimum education requirements and
corporate governance rules for valuers.
TEGoVAs Role
Headquartered in Brussels, TEGoVA is positioned to
collaborate with the European authorities as they draft the
European Internal Market legislation affecting real estate and
valuation in the Union and beyond.
TEGoVA Secretariat
Place de la Vieille Halle aux Bls 28
1000 Brussels Belgium
EVS 2003 (the blue book)
The Fifth Edition
The fifth edition of European Valuation
Standards 2003 breaks new ground by
including material on valuations for
securitisation purposes, the effect of
market shock, corporate governance and
much expanded sections of the valuation
of agricultural properties. The section on
country-specific matters has also been
greatly expanded to cover most member
countries.
EVS 2003 (the blue book)
The Purpose
EVS 2003 provides a benchmark against
which consistent and coherent reports can
be prepared for clients, compatible with
international practice international
accounting standards and European
Legislation.
EVS 2003 (the blue book)
The Structure
The book comprises Standards, Guidance Notes
and Appendices.
Standards are concerned with fundamental
valuation principles, and Guidance Notes are
concerned with interpretation and application of
those principles.
Appendices give further assistance in the
interpretation and application process.
EVS 2003 (the blue book)
The blue book contains nine current European
standards, 14 guidelines and eight appendices.
New guidance notes have recently been introduced
on:
The valuation of mortgage portfolios for
securitisation purposes,
Reflecting market shock, and
Amended appendices on valuation
methodology and corporate governance.
Amended guidelines can be found concerning:
The valuation of agricultural property for
lending purposes
Business valuations
Country-specific legislation and practice
EVS 2003 (the blue book)
The Nine Standards
Standard 1: Compliance Issues
International Standards
European Directives and National Law And Practice
Derogation from European Standards
EVS 2003 (the blue book)
Standard 2: The Qualified Valuer
European Accreditation, Mutual Recognition, Local Regulation
and Licensing.
The Qualified Valuer - definition, competence, and qualifications
and relations with the Client.
Independence of valuers
The Qualified Valuer's relationship with the Auditor
Professional Code:
- Certification
- Qualification
- Probity
- Acknowledgement of outside assistance
- Conflicts of interest
- Support and promulgation of standards set out by
- TEGoVA and IVSC
EVS 2003 (the blue book)
Standard 3: Conditions of Engagement
The importance of clear and unambiguous conditions in writing;
Summary of what should be included in the conditions of
engagement;
Special considerations in the following circumstances:
- Valuations carried out with limited
information
- Valuations which are inconsistent with the
Standards
- Reviewing valuations by other parties
- Sub-contracted valuations *
- Valuations passed to a third party
EVS 2003 (the blue book)
Standard 4: Valuation Bases
Valuation principles and reporting practice
The purpose of valuation and uniform bases of valuation
Market Value
Market Rental Value
EU Market Value
Highest and Best Use value
Fair Value
Existing Use Value
Value in Use
Alternative Use Value
Negative Values
Depreciated Replacement Cost
Mortgage Lending Value
Enterprise Value
Equity Value
EVS 2003 (the blue book)
Standard 5: Valuations for the purpose of
Financial Reporting
Background
Classification of Assets
The Selection of Consistent Bases of Valuation
Definitions Apportionment between Land and Buildings
Disclosure Provisions
Methodology under EC Directive 91/647/EEC
Special Properties
EVS 2003 (the blue book)
Standard 6: Valuations for Bank Security Purposes
and in relation to the Issue of Asset and/or Mortgage
Backed Securities
The importance of consistent valuation across the European Union
The valuation basis
Market Value
Mortgage Lending Value
Special fiduciary responsibilities and obligations of a valuer
The independence of the valuer
Specialist knowledge
Conditions of Engagement
Investment Properties
Owner occupied properties
Development properties
Properties usually valued on the basis of their trading potential
Wasting assets
Forced sale value, or liquidation value
EVS 2003 (the blue book)
Standard 7: Estimates, forecasts and other
appraisals
The Concept of Worth (or Value in Use) - Investment Value
Replacement Valuation
Value in Use
Forced Sale Value
Bricks and Mortar Valuations
Forecasts
Retrospective
Valuations Valuation Reviews
Other Bases of Appraisal
EVS 2003 (the blue book)
Standard 8: Valuations for Investment - Insurance
Companies, Property Unit Trust, and Pension
Funds, etc
The EC Directive on the annual and consolidated accounts of
insurance undertakings;
The EU definition of Market Value;
Categories of property;
Reporting Practice;
Transaction costs;
The Qualified Valuer (Summary of parts of Standard 2;)
Independence and conflicts of interest;
Departure provisions;
The Valuation Certificate;
Methodology.
EVS 2003 (the blue book)
Standard 9: Valuation Reporting
The form of certificate used
The contents of the certificate, including: The instructions, time period,
identification, basis of valuation, compliance statement, condition of
the property, environmental issues, risk assessment, valuation
schedules, the treatment of process plant and machinery, the currency
or currencies in which the valuations are to be reported, publication
and confidentiality clauses, third party liability, taxation, financial
liabilities, model clauses for the valuation certificate
Model Clauses
EVS 2003 (the blue book)
14 Guidance Notes
Guidance Note 1: Special Factors affecting Value
Guidance Note 2: Valuations of Special Properties
Guidance Note 3: Valuation of Plant and Machinery
Guidance Note 4: Valuations of Assets for Development
Guidance Note 5: Valuations of Agricultural Properties
Guidance Note 6: Valuation of Historical Properties
Guidance Note 7: Business Valuations
Guidance Note 8: Valuations of Intangible Assets
Guidance Note 9: Valuations for real estate indices
Guidance Note 10: Cross-Border Valuations
Guidance Note 11: Valuations for Joint Ventures, and Limited
Partnerships
Guidance Note 12: Apportionment between Land and Buildings
Guidance Note 13: Country-Specific Legislation and Practice
Guidance Note 14: Valuation of Mortgage Portfolios for securitisation
Purposes
EVS 2003 (the blue book)
8 Appendices
Appendix 1: Valuation Methodology
Appendix 2: Certification
Appendix 3: Reviewing Valuations
Appendix 4: Ethics
Appendix 5: Model Conditions of Engagement and Valuation Check List
Appendix 6: European Code of Measuring Practice
Appendix 7: Glossary of terms used in valuation and related subjects
Appendix 8: List of TEGoVA members
EVS 2006 - sixth Edition
New Structure to be presented at the General
Assembly
November 2005, Vienna
Transparency in Property Valuation Through Cross-Border
Harmonisation of Valuers Qualification
Methods
Qualification of
the user
Transparency in Property Valuation Through Cross-Border
Harmonisation of Valuers Qualification
Certification 'Approved by TEGoVA
Certification bodies that have been accredited by
a national accreditation body according to EN
45013/ISO 17024 and fulfil certain criteria set by
TEGoVA can obtain a mark of excellence
'Approved by TEGoVA'
Professional Recognition
MER - Minimum Educational Requirements
European Property and Market Rating
A Valuers Guide
Property and Market Rating is a versatile instrument for
assessing the quality of property, or the risk related to the
investment in property rights.
As a result of the requirements emanating from the second
consultative paper of the Basel Committee on Banking
Supervision for rating systems determining minimum capital
requirements of banks, TEGoVA has decided to create an
instrument for a quality assessment of property rights.
PROPERTY AND MARKET
RATING
Procedure for assessing the quality or risk
related to the investment in property rights
under consideration of the existing use
(Rating for completed or existing real estate)
PROJECT RATING
Procedure for assessing the quality or risk
related to the investment in property
rights under consideration of an
alternative use
(Rating for projects)
European Property and Market Rating
A Valuers Guide
Fields of application of PaM
- Risk analysis of portfolios for securitisation purposes
- Property analysis in the context of investment and disinvestment decisions
- Portfolio analysis and control
- Loan analysis in the process of granting property loans
- The rating can be required by the Internal Ratings Advanced Approach
according to Basel II
European Property and Market Rating
A Valuers Guide
Rating Scale
The property and market rating employs a scale following the pattern used by rating
agencies and internal rating scales used by banks.
It consists of 10 grades, with 1 representing an excellent rating and 10 representing a
disastrous one. The average rating is set at 5.
1=excellent; 2=very good; 3= good; 4=slightly above average; 5=average; 6=slightly below
average; 7=mediocre; 8=poor; 9 = very poor; 10=disastrous
European Property and Market Rating
A Valuers Guide
4 models for Property and Market Rating
Residential
Retail
Offices
Warehousing, distribution and production
European Property and Market Rating
A Valuers Guide
Criteria Classes for the Property and Market Rating
are related to
- macroeconomic aspects and to the property market
- the location of the propertty
- typological aspects of the property, preservation condition
- the cash flow
European Property and Market Rating
A Valuers Guide
Criteria Classes for the Project Rating are related to
- macroeconomic aspects and to the property market
- the location of the propertty
- typological aspects of the property
- the cash flow
- legal, tecnical and economic aspects related to the project
Project Rating
To arrive at a rating for projects the sales prospects of the fictitiously completed property have to
be rated in a first step, as this represents the exit of the project development.
The second step is to consider as a fifth criteria class the development risks and chances inherent
in the project. The rating for the sales prospects of the project as per the rating date will be
determined using a matrix that takes into account all possible combinations of the rating for the
fictitiously completed property and the rating for the risks and chances of the development.