Immovable Property Valuations & Immovable Property Appraisals in Zimbabwe: When Each is Appropriate:
“To everything there is a season, a time for every purpose under heaven.”(Ecclesiastes 3vs1; New King James)
Not infrequently, inquiry is made as to the nuances between immovable property valuations and immovable property appraisals in Zimbabwe, as well as when one or the other is apropos to a particular scenario at hand. This brief treatment aims to explore all such elements.
Definitions of immovable property valuation and immovable property appraisal:
What is an immovable property appraisal? Section 65 of the Estate Agents Act (Chapter 27:17) states:
"65) Estimation of sale price not to constitute valuation."
"A registered estate agent who, in connection with a sale, proposed sale, lease or proposed lease of immovable property, gives the seller, purchaser, lessor or lessee an estimate of the price at which the property or any part of it may be sold or leased, shall not thereby be regarded as practising or carrying on business as a valuer in contravention of the Valuers Act [Chapter 27:18].”
In short, an immovable property appraisal is an estimation (methodology via combination of reporting to the immovable property in question, obtaining an appreciation of it, and then subsequently comparing it to similar other immovable properties, ideally in the same or similar locale[s] ) arrived at, either for sale or letting.
What is an immovable property valuation then? Section 2 of the Valuers Act (Chapter 27:18) states:
“valuation of immovable property” means the preparation of a written estimate of the value of any immovable property.”
Key differences between immovable property valuations and immovable property appraisals:
A) An immovable property valuation involves a more detailed and thorough estimate of the likely pecuniary sum an interest in an immovable property in question will fetch by an informed and dispassionate purchaser (whether for sale or letting): There is additional technical rigor and analysis involved.
B) Immovable property valuations can and usually are presented as prima facie evidence in legal proceedings, as they must stand legal and professional scrutiny: Immovable property appraisals do not necessarily have to hold up to such scrutiny, yet, nevertheless, there is always an impetus for the registered estate agent to conduct the estimation at hand as conscientiously as possible, if only for professional pride, as well as to garner a favorable reputation in the estate agency industry among peers and clients.
C) Some immovable property valuations have a statutory imperative behind them: (such as, for instance, rating purposes by local authorities, sworn valuations in the matter of probate/winding up deceased estates, etc).
D) Lastly, by nature of some immovable properties having little to no comparable evidence in the market place (e.g. power plants, cathedrals): The immovable property valuer has to employ some mathematical and professional technical analytical techniques so as to obtain a good-faith, conscientious estimate of the pecuniary value of the immovable property in question.
Metaphorically speaking, if immovable property valuations and immovable property appraisals are like gold and silver, the former is the “gold standard” wherein a professional, vetted and accredited opinion (grounded in empiricism where possible) as to the likely monetary worth of an immovable property interest in question at a certain point in time is arrived at.
Reasons for immovable property valuations (as well as scenarios wherein immovable property appraisals are an option):
The main reasons why immovable property valuations occur (as well as scenarios wherein immovable property appraisals may be an option), are, inter-alia:
1) Mortgage or other hefty loan applications*
2) Mortgage purchases*
3) The levying of rates by a local authority*
4) Immovable property (building) insurance*
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5) Legal proceedings such as divorce*
6) Probate (deceased estates)*
7) Letting purposes (typically prevalent in the Occident, wherein leasehold interests may be sold through subletting, with the sub-lessor obtaining profit-rent and/or otherwise positioning themselves to obtain “key-money”)*
8) Letting purposes (a prospective landlord or tenant seeking estimates of market rentals for an immovable property in question).
9) Mergers and acquisitions of juristic persons (companies) which have significant immovable property and/or plant and equipment holdings or interests*
10) Valuation of mining claims*
11) Valuations of farms and other immovable properties prior to compulsory acquisition and compensation by the State (e.g. relocations due to dam construction, highway construction, the finding and imminent exploitation of a valuable mining claim, etc)*
12) Valuation for accounting purposes (namely plant and equipment; typically by publicly traded companies)*
13) For a proposed immovable property sale (either by a prospective immovable property seller or prospective immovable property purchaser).
14) Valuation for foreclosure and auctioneering (typically forced sale via court order of attachment of immovable property, so as to satisfy judgement debt)*
15) Querying by ZIMRA prior to assessment of capital gains tax in an immovable property sale, if the tax body raises an issue, and there are no readily available market comparables for the immovable property in question.*
16) Valuation of immovable property for development or re-development purposes.*
The reasons appended with an asterisk (i.e. the * symbol) are reasons where, because of either customary, professional/technical or statutory precedents, there is no equivocation in that an immovable property valuation is an imperative. Where there is no asterisk, one has an option to either go for an immovable property valuation, or an immovable property appraisal, with the latter usually being the cheaper option (in terms of monetary outlay).
Conclusion:
There it is, in a nutshell; the nuances between immovable property valuations and immovable property appraisals in Zimbabwe, as well as their use-cases.
Generally speaking then, unless there are specific technical complexities and/or statutory imperatives at play or brought to bear, an immovable property valuation has to be carried out, yet, if not, an immovable property appraisal will suffice.
Thanks very much for the time and attention accorded.
Good-speed.
Tatenda Kangwende is proud and honored to be a real estate professional. For serious and productive business pertaining to real estate in Zimbabwe, please reach him via:
Mobile (SMS, Calls, WhatsApp): +263 714 729 043