VLIEG Business Appraisals

For proper valuation, the European Valuation Standards (EVS) are becoming increasingly important. Indeed, with EVS, commercial property valuations in different EU member states are unambiguous and therefore easily comparable. EVS is an initiative of the “non-profit” organization TEGoVA, The European Group of Valuers’ Association, which brings together more than 70,000 valuers.

VLIEG appraiser Jan Gielis is a Recognized European Valuer (REV). TEGoVA has developed the Recognized European Valuer (REV) program to allow individual valuers, through their professional organizations, to be granted enhanced status beyond TEGoVA’s Minimum Education Requirements and thereby assure clients of their expertise in valuation.

If an independent appraiser is to estimate the Market Value of a particular property, he should use the following definition: ‘The estimated amount at which property would be transferred at the value date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties would have acted knowledgeably, prudently and not under duress.’

When using a valuation basis other than market value, an appraiser may – except where not otherwise permitted by European and national laws and regulations, use only recognized valuation bases that are consistent with the purpose of the appraisal.

In doing so, he must, of course, respect the principles of transparency, coherence and consistency.
If other valuation principles must be used in due to requirements of law, circumstances or the directions of a client that make it impossible to meet the principles of market value, the result is no longer a market value.

Fair Value, Article 17(2) means, “The value shall be determined on the basis of the value to be assigned to the immovable property if full and unencumbered ownership thereof could be transferred and the transferee could immediately and to the fullest extent put the property to use in its condition.

Pursuant to Section 17(3) of the Valuation of Immovable Property Act, except in the case of dwellings and national monuments (1988 Monuments Act), the value is determined at the replacement value if this leads to a higher value than the fair market value. The adjusted replacement value of immovable property is defined as: ‘The amount required to acquire or manufacture an immovable property that has an economically equal significance for the conduct of business, the determination of which takes into account the nature and purpose of the property as well as the technical and functional obsolescence that has occurred since the foundation of the property, taking into account the influence of subsequent changes.’

The concept of fair market value differs from the standard Market Value definition due to the use of the so-called vacancy fiction and the acquisition fiction as well as the valuation date to be used.

VLIEG Business Brokers is a member of the Appraisal Management Institute. A TMI appraiser is not only tested on his skills before he can join TMI, he is also mandatorily retrained through the TMI Academy. The appraisals are processed within the Valuation Management System and comply with TMI’s Commercial Real Estate Valuation Guidelines.
appraisers Jan Gielis and Xander Blankestijn are both qualified commercial real estate appraisers.

The use of foreclosure value is not permitted for a TMI appraiser. Indeed, an appraisal for the purpose of securing loans must be in compliance with the Commercial Real Estate Appraisal Guideline, which in turn is compliant with the EVS and the EVS Bluebook. According to these Standards, foreclosure value may not be applied as a value concept.

All industry associations have recognized the gaps in the use of the value concept of foreclosure value and, in cooperation with the Valuation Chamber, have developed a guideline. Since August 1, 2011, the new Mortgage Financing Code of Conduct, drawn up by the Dutch Banking Association and the Association of Insurers, has been in effect. This code of conduct also no longer mentions foreclosure value, and deliberately makes an assessment on income and assets.

Of course, a term used for many years cannot be eliminated overnight, and so an opinion of the expected proceeds at foreclosure sale is provided instead.

If an independent appraiser is to estimate the Rent of a particular property, he should use the following definition: ‘The estimated rent at which the property would have been leased on the valuation date, after proper marketing, under the terms of the actual or assumed lease in an arm’s length transaction by a willing landlord to a willing tenant, each of the parties having acted with knowledge, prudence and not under duress.’