16 OCT 2018
Words by Lance W. Doré MAI, FRICS – President, The Doré Group | International Real Estate Consultation and Forensic Valuation
In the United States, standards in appraisal practice have been in place since the late 1980s following the savings and loan crisis and the passing of the Financial Institution’s Reform, Recovery and Enforcement Act (FIRREA).
This legislation formalized the creation of The Appraisal Foundation and set out the Uniform Standards of Professional Appraisal Practice (USPAP) as the required standard for the valuation of real property in the United States.
Since the 1970s, the “Red Book” has been part of the profession’s commitment to ensuring high standards in valuation delivery worldwide. While the standards include the ethical principles that any professional should be working to, it outlines methodology around valuation practice that helps ensure the transparency that international markets require. While not a how-to guide, the Red Book delivers confidence by instructing valuers to explicitly lay out the approach and how they reach the opinion of value.
The International Valuation Standards Council (IVSC), an independent not-for-profit organization has set a global standard for valuation practice. With nearly 100-member organizations from all over the world, International Valuation Standards (IVS) provide a framework for consistent application of local standards regardless of location. This standard was adopted in 2017 as part of the “Red Book” known as the International Valuation Standards (IVS) which provides valuation standards on a true global platform.
As transactions are increasingly global in nature, the need for a common methodology in the valuation of assets across borders becomes critical to protect the public and ensure transparency in the valuation process.
The integration of these standards has cumulated over the past several years to now align IVS, Red Book, Canadian USPAP and US USPAP.
While each market will have its own nuances around language and technical practice, there are common elements that can be included in valuations that help facilitate a basis of comparison across markets. IVS sets out the high-level standard to capture these common valuation principles while the local coalition member organizations apply that standard in a way that’s appropriate given the local requirements. As a result, lenders, end-users and the general public have a global valuation standard to increase confidence and reduce risk in the valuation process by addressing common valuation methodology and standards. IVS will be used in any region from China, the U.S., South America or Europe.
Join me as I explain International Valuation Standards, IPMS, IVS, Red Book, Hotel Valuation, Development Appraisals and Leasehold Appraisals.