UNIVERSITY
KYAMBOGO
FACULTY OF ENGINEERING
DEPARTMENT OF LANDS AND ARCHITECTECTURAL STUDIES
A REPORT SUBMITTED TO THE DEPARTMENT LANDS AND
ARCHITECTECTURAL STUDIES, KYAMBOGO UNIVERSITY IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF A BACHELOR’S
DEGREE IN LAND ECONOMICS (MAY-AUGUST 2017)
AT
BY
NUWAGIRA ANDREW
14/U/5272/BLE/PE
13 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
DECLARATION
I, Nuwagira Andrew, hereby declare that the presented report of internship titled is uniquely
prepared by me and are true & correct to the best of my knowledge after the completion of my
valuation training at Futures Properties Consultants.
I also confirm that, the report is only prepared for my academic requirement not for any other
purpose. It might not be used with the interest of opposite party of the corporation.
…………………………….
NUWAGIRA ANDREW
14/U/5272/BLE/PE
Department of Lands and Architectural Studies
Kyambogo University
14 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
APPROVAL
This is to certify that Mr. Nuwagira Andrew, Student of Bachelor of Science in Land Economics
(BLE) under Department of Lands and Architectural Studies, Kyambogo University, has
successfully completed his Valuation Internship Training at Futures Properties Consultants.
He was placed in the Valuation Department but also given all the possible training opportunities
in all other firm activities.
I wish him every success in his academics and Valuation profession.
Yours Faithfully,
Supervisor, Principal Valuer;
Obali Godwin
MSc. Real Estate (UoR, UK), R.S.U, M.I.S.U., BSc. (Hons) Land Econ.(MUK).
For: Futures Properties Consultants.
15 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
ACKNOWLEDGEMENT
First and foremost I would like to honor my sincerest gratitude to God for His protection, favor
and guidance.
My special thanks go to my supervisor, Obali Godwin, Principal Valuer FPC and his department
team and my University supervisor, who have supported me for my training with their patience
and knowledge whilst allowing me the opportunity to work in my own way. I attribute the level
of Valuation Knowledge to their encouragement and effort and without whom this internisp, too,
would not have been completed. One simply could not wish for a better or friendlier supervisors
and mentors you were to me.
I express my greatest honor to the FPC Partner; Mr. Patric Kairu-Senior Partner, Ms. Rachel
Kimani-Managing Partner, Ms. Barbra Kisakye-Partner, Obali Godwin-Partner and Principle
Valuer for their kind permission to grant me an internship opportunity at Futures Properties
Consultants. I cannot fail to express my sincere thanks for it has been a great opportunity and
very key to note that you have offered my full facilitated training since February 2016. It is once
again my radiant sentiment to place on record my best regards, deepest sense of gratitude to you
all.
I would like to thank Ms. Ebifa FPC Operation‟s Manager, for guidance always to train and work
up-to FPC standards and environment.
I would also like to express my highest gratitude to the sister Survey Department for their
corporation and Guidance.
Finally, I thank my parent and relatives for supporting me throughout all my studies at the
Kyambogo University, and for providing for me to successfully complete my internship.
16 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
DEDICATION
To the entire FPC community
17 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Figure 1: Company structure
Figure 2: Primary sketch of the location to the subject property.
Figure 3: Sample of the terms of reference
Figure 4: Sample of Executive Summary
Figure 5: Sample of Certification of value
Figure 6: Sample of General assumptions
Figure 7: Sample of Basis and methods of valuation
Figure 8: Sample of the limiting conditions
Figure 9: Sample of the SWOT analysis
Figure cc: review committee
Figure cc: review committee
Figure tools: Tools used
Figure h: Improved sketch of the location to the subject property.
18 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
LIST OF ACRONYMS
FPC
Futures Properties Consultants
CBD
Central Business District
GPS
Global Positioning System
FMV
Fair Market Value
DRC
Depreciation Replacement Cost
FMV
Fair Market Value
FSV
Forced Sale Value
IVS
International Valuation Standards
19 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Table of Contents
DECLARATION .................................................................................................................................... 14
ACKNOWLEDGEMENT .......................................................................................................................... 16
CHAPTER ONE; INTRIDUCTION ...................................................................................................... 23
1.0 Introduction. ...................................................................................................................................... 23
1.1.0 Internship Background ................................................................................................................... 23
1.1.2 General Objective .......................................................................................................................... 23
1.1.3 General Objective .......................................................................................................................... 23
1.2.0 Company Organisational Background; Futures Properties Consultants. ....................................... 24
1.2.2 Introduction. ................................................................................................................................... 24
1.2.3 Vision ............................................................................................................................................. 25
1.2.4 Mission........................................................................................................................................... 25
1.2.5 Goal ................................................................................................................................................ 25
1.2.4 Organization Structure of the Company ........................................................................................ 27
CHAPTER TWO; VALUATION OVERVIEW .................................................................................... 28
2.0 Literature review/ Class Theory and Knowledge on Valuation ........................................................ 28
2.1.2 A philosophical basis for valuation................................................................................................ 28
2.1.3 Approaches to value ....................................................................................................................... 29
2.1.3.1 Sales Comparison Approach ....................................................................................................... 30
2.1.3.2 Investment/Income Capitalisation Approach .............................................................................. 31
2.1.3.3 The Cost Approach ..................................................................................................................... 33
2.1.4 Types of Value ............................................................................................................................... 34
2.1.4.1 Market Value .............................................................................................................................. 34
2.1.4.2 Investment Value ........................................................................................................................ 34
2.1.4.3 Synergistic Value ........................................................................................................................ 35
2.1.4.4 Liquidation Value ....................................................................................................................... 35
2.1.4.5 Premise of Value – Highest and Best Use .................................................................................. 35
2.1.4.6 Premise of Value – Forced Sale .................................................................................................. 36
2.1.5 Purposes to value ........................................................................................................................... 36
20 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
CHAPTER THREE; TASKS ACCOMPLISHED .................................................................................. 38
3.0 Internship activities ........................................................................................................................... 38
3.1 Property Inspection ........................................................................................................................... 38
3.1.1 Learning benefits. .......................................................................................................................... 41
3.2 Appraisal/valuation report preparation ............................................................................................. 41
3.2.1 Terms of reference. ........................................................................................................................ 42
3.2.2 Executive summary ........................................................................................................................ 42
3.2.3 Certification of value ..................................................................................................................... 43
3.2.4 General Assumptions ..................................................................................................................... 44
3.2.5 Basis and Methods of valuation. .................................................................................................... 45
3.2.6 Limiting conditions ........................................................................................................................ 45
3.2.7 SWOT Analysis ............................................................................................................................. 46
3.2.1 Learning Benefits. .......................................................................................................................... 47
3.3 Presentation to the review committee ............................................................................................... 48
3.3.1 Learning Benefits. .......................................................................................................................... 49
CHAPTER FOUR; CONCLUSION ............................................................................................................ 50
4.1 RECOMMENDATIONS ...................................................................................................................... 50
4.1.1 To the university .................................................................................................................... 50
4.1.2. To the company .................................................................................................................... 51
4.1.3. To Students............................................................................................................................ 51
4.2 CONCLUSION ................................................................................................................................... 51
21 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
A B S T RA CT
The internship report on valuation is prepared after my successful training at Futures Properties
Consultants.
Chapter one is generally the introduction but also gives a detail of the Firm of placement of my
internship.
I clearly describe the overview of the theoretical knowledge acquired in valuation both from
literature review and from the University by our lectures in chapter Two.
In chapter Three, detail explanation of the tasks done during internship is highlighted each with
the learning benefits obtained.
Finally chapter four gives the conclusions but also with recommendations both to the Students,
University and the Firm at which I did the internship
22 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
CHAPTER ONE; INTRIDUCTION
1.0 Introduction.
1.1.0 Internship Background
Internship is generally defined as the position of a student or trainee who works in an
organization, sometimes without pay, in order to gain work experience or satisfy requirements
for a qualification. It is simply an opportunity that employers offer to students interested in
gaining work experience in particular industries.
Internships offer students a hands-on opportunity to work in their desired field. They learn how
their course of study applies to the real world and build a valuable experience that makes them
stronger candidates for jobs after graduation.
Like is the case in some colleges where internships count towards course credit, It is mandatory
for Bachelor of Science in Land Economics students at Kyambogo University to undergo
Industrial Training in a reputable firm/organization for a period of at least ten weeks. I therefore
did this final internship of my Bachelor of Science in Land Economics at FPC to apply the
acquired knowledge and theories to practical work situation.
1.1.2 General Objective
Building a very firm foundation of my valuation profession.
1.1.3 General Objective


To apply the acquired knowledge and theories to practi cal work situation.

To acquire appropriate skills and techniques directly applicable to their careers.

To enter into full-time employment in my area of specialization upon graduation.

To create job exposure and enhance employment opportunities.
To develop attitudes conducive to effective interpersonal relationships
23 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
1.2.0 Company Organisational Background; Futures Properties Consultants.
1.2.2 Introduction.
Futures Properties Consultants is a private firm registered in the Republic of Uganda on 24th
September 2008 under the Partnership Act Cap 114 Laws of Uganda 2000. Our Registered
Office is located at the Head Office branch at Plot 1 Lourdel Street Lourdel Towers House,
Nakasero, Kampala.
1.2.2 Statement of Philosophy
FPC Uganda wishes to maintain a work environment that fosters personal and professional
growth for all employees. Maintaining such an environment is the responsibility of every staff
person. Because of their role, heads of department have the additional responsibility to lead in a
manner which fosters an environment of respect for each person.
It is the responsibility of all staff to:


Foster cooperation and communication among each other

Promote harmony and teamwork in all relationships

communicate routinely to reinforce that understanding

participation in decisions that affect their work and their careers

goals at the organization and beyond

the means to resolve it

Treat each other in a fair manner, with dignity and respect
Strive for mutual understanding of standards for performance expectations, and
Encourage and consider opinions of other employees or members, and invite their
Encourage growth and development of employees by helping them achieve their personal
Seek to avoid workplace conflict, and if it occurs, respond fairly and quickly to provide
Administer all policies equitably and fairly, recognizing that jobs are different but each is
important; that individual performance should be recognized and measured against

predetermined standards; and that each employee has the right to fair treatment
Recognize that employees in their personal lives may experience crisis and show
compassion and understanding
24 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
1.2.3 Vision
We strive to ―Become a leading regional brand‖
1.2.4 Mission
FPC exists to provide feasible solutions to our Customers, Staff, Suppliers, Shareholders and
Society by becoming a Leading Service Provider.
1.2.5 Goal
Our Goal as FPC is to exceed the expectations of every client by offering outstanding service.
1.2.6 Business
FUTURES PROPERTIES is a multi-faceted, provincial film established to service the East
Africa Region, with particular emphasis, knowledge and expertise within Uganda. Our experts
have completed and obtained tertiary qualifications, and are members of appropriate Professional
bodies. We are duly registered and regulated by the Insurance Regulatory Authority of Uganda
and are duly registered by Uganda Registration Services Bureau.
Futures Properties Consultants is a regional business dealing with three main facets that include
but are not limited to specialist departments in Asset and property Valuation, Loss Adjusting and
Insurance Survey and Property Management, with competent staff and state-of-the-art equipment
that provides comprehensive yet professional state of the art solutions to our clients. One of
Uganda‟s leading consultancy service providers in the Field of Assets Valuations, Loss
Assessing, Technical Consultancy and Insurance Valuations, having consultants with more than
twenty five years of experience, we undertake valuation of Fixed Assets such as Plant &
Machinery, Building for legal / financial / insurance purposes and provide insurance valuations
across a diversity of asset classes.
As investigators, values and corporate members of the insurance institute of Uganda, Uganda
association of Engineering values and loss assessors, agents authorized and regulated by the
Insurance Regulatory Authority of Uganda (IRA) and the Surveyors Registration Board, we
25 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
provide the highest standard of professional valuations for insurance purposes and comply with
the International Valuation Standards (IVS) and the regional standards as well.
FPC has positioned itself strategically as a leader in the valuation and insurance survey sector by
optimising on ICT systems and improving efficiency. Our greatest value lies in our strong
culture and human capital that is committed to the goals of the Firm and promotion of local
economic development. The day to day operations of the Firm are overseen by competent
management teams with experience and expertise in the various disciplines they represent. The
Partners are also functionally involved in the running of the Firm.
26 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
1.2.4 Organization Structure of the Company
SENIOR PARTNER
HOD
SURVEYING
HOD
VALUATION
HOD LOSS
ADJUSTING
TEAM LEADERS
TEAM
LEADER
Assistant
Surveyor
PARTNER
MANAGING PARTNER
PARTNER
Assistant
Valuer
Ass. Motor Claims
KATEGAYA&
BEYANGA
HOD REAL
ESTATE
OPERATIONS
MANAGER
EDGEWOOD
LIMITED
PROCUREMENT
OFFICER
ACCOUNTANT
HR OFFICER
IT OFFICER
Ass. Non-Motor
Claims
ADMIN
ASSISTANT
Figure 1: Company structure
27 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
OFFICE
ASSISTANT
FRONT
DESK
CHAPTER TWO; VALUATION OVERVIEW
2.0 Literature review/ Class Theory and Knowledge on Valuation
2.1.0 Introduction
This will mostly reveal the literature review and general acquired theories and knowledge of
valuation from the University.
It will provide a general introduction about valuation as so far known to the student. It defines
valuation, types of valuations, methods of valuation, definition of the valuation problem, types of
values and the reasons of valuation. The therefore is aimed understanding the theoretical work in
class in relation to the practical skills learnt during the internship.
2.1.1 Definition.
The dictionary defines valuation as an estimation of something's worth, especially one carried
out by a professional appraiser.
Valuation according to Millington is the art, or science of estimating the value for a specific
purpose of a particular interest in property at a particular moment in time, taking into account all
the features of the property and also considering all the underlying economic factors of the
market including the range of alternative investments.
It is generally the process of making an estimate of worth of real property or real property or
other assets for a particular purpose say letting, purchase, sale, audit, rating, compulsory
purchase or taxation. That purpose and the relevant circumstances will determine assumptions
and facts that are appropriate and hence the process used.
2.1.2 A philosophical basis for valuation
A postulate of sound investing is that an investor does not pay more for an asset than it is worth.
This statement may seem logical and obvious, but it is forgotten and rediscovered at some time
in every generation and in every market. There are those who are disingenuous enough to argue
that value is in the eyes of the beholder, and that any price can be justified if there are other
28 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
investors willing to pay that price. That is patently absurd. Perceptions may be all that matter
when the asset is a painting or a sculpture, but we do not and should not buy most assets for
aesthetic or emotional reasons; we buy financial assets for the cash flows we expect to receive
from them. Consequently, perceptions of value have to be backed up by reality, which implies
that the price we pay for any asset should reflect the cash flows it is expected to generate.
Valuation models attempt to relate value to the level of, uncertainty about and expected growth
in these cash flows.
There are many aspects of valuation where we can agree to disagree, including estimates of true
value and how long it will take for prices to adjust to that true value. But there is one point on
which there can be no disagreement. Asset prices cannot be justified by merely using the
argument that there will be other investors around who will pay a higher price in the future. That
is the equivalent of playing a very expensive game of musical chairs, where every investor has to
answer the question, "Where will I be when the music stops? before playing. The problem with
investing with the expectation that there will be a bigger fool around to sell an asset to, when the
time comes, is that you might end up being the biggest fool of all.
(Aswath Damodaran,
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/background/valintro.htm)
2.1.3 Approaches to value
There are three traditional groups of methodologies for determining value. These are usually
referred to as the "three approaches to value" which are generally independent of each other
(wikipedia.org/wiki/Real_estate_appraisal).
Consideration must be given to the relevant and appropriate valuation approaches. The three
approaches described and defined below are the main approaches used in valuation. They are all
based on the economic principles of price equilibrium, anticipation of benefits or substitution.
(IVS 2017)
The goal in selecting valuation approaches and methods for an asset is to find the most
appropriate method under the particular circumstances. No one method is suitable in every
possible situation. The selection process should consider, at a minimum:
29 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
(a) The appropriate basis (es) of value and premise(s) of value, determined by the terms and
purpose of the valuation assignment,
(b) The respective strengths and weaknesses of the possible valuation approaches and methods,
(c) The appropriateness of each method in view of the nature of the asset, and the approaches or
methods used by participants in the relevant market, and
(d) The availability of reliable information needed to apply the method(s).
(IVS 2017)
It should also be noted that there are other methods which include option pricing methods
(OPMs),
Simulation/Monte Carlo methods and probability-weighted expected-return methods (PWERM).
2.1.3.1 Sales Comparison Approach
The Sales Comparison Approach compares recently-sold local similar properties to the subject
property. Price adjustments are made for differences in the comparable and subject property.
(James Kimmons, June 07, 2016)
The sales comparison approach is the foundation for the real estate professional's CMA,
Comparative Market Analysis. This is a process used to determine the current market value of a
property based on recent sales of comparable properties in the area.
There is a structured process in doing a CMA, and there are some important basic requirements:

Comparable properties selected should be as similar to the subject property as possible:




number of bedrooms
number of baths
square footage size
lot size
30 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E


The comparable properties should be as nearby as possible, in the same neighborhood or
subdivision is best.
Their sales date should be as recent as possible. If comps' (comparables') sold dates are
too far in the past, they're already too old to be accurate for the current market. If there
aren't enough close-by properties for comps, then moving a little farther out in distance is
necessary
The comparison approach is also referred to as the market approach. The market approach
provides an indication of value by comparing the asset with identical or comparable (that is
similar) assets for which price information is available
(IVS 2017)
The market approach should be applied and afforded significant weight under the following
circumstances:
(a) The subject asset has recently been sold in a transaction appropriate for consideration under
the basis of value,
(b) The subject asset or substantially similar assets are actively publicly traded, and/or
(c) There are frequent and/or recent observable transactions in substantially similar assets.
2.1.3.2 Investment/Income Capitalisation Approach
Investment Approach is also referred to as the Income Capitalization Approach. It is a real estate
appraisal method that allows valuers to estimate the value of a property by taking the net
operating income of the rent collected and dividing it by the capitalization rate.
The income approach provides an indication of value by converting future cash flow to a single
current value. Under the income approach, the value of an asset is determined by reference to the
value of income, cash flow or cost savings generated by the asset.
31 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
You arrive at the value of real estate by multiplying the rent by a factor. The logic here is that the
value of real estate is determined by how much rent you can get from it. It follows therefore that
the higher the rent, the higher the value. There are three steps in investment approach method of
valuation.
Step 1: Ascertaining the market rent
The first step under the investment approach method of valuation is to ascertain the market rent
of the real estate. So how do you estimate the market rent? You do this by finding out what
similar properties have been let at. You will need to make adjustments for the differences if any.
Like in the sales comparison approach you will exclude properties let under force, coercion,
ignorance, desperation, or involving special relations e.g. brothers or business associates. The
reason for excluding these sales is that they do not reflect the market.
Step 2: Obtaining the multiplier
The second step in investment approach is to obtain the multiplier. The multiplier is simply the
factor by which rent is multiplied to give market value. In valuation, we call this multiplier years
purchase, or simply YP. You obtain the multiplier by dividing sale price of real estate by the
market rent per annum. For example if a property has been sold for 12,000,000 and its market
rent is 50,000 per month, the multiplier will be 12,000,000÷(50,000×12) = 20. The level of
accuracy will improve with the number of sales analyzed in this manner. As a precaution, only
use multiplier from the same sub-market e.g. high income apartments, town houses, middle
income apartments, maisonettes, industrial property, apartment blocks etc.
Step 3: Applying the multiplier
The final step in the investment approach is to apply the multiplier to the rent established in step
1. If your property can be let at a market rent of 65,000, applying the multiplier as above, the
value would be 65,000x12x20 = 15,600,000.
32 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
2.1.3.3 The Cost Approach
The cost approach provides an indication of value using the economic principle that a buyer will
pay no more for an asset than the cost to obtain an asset of equal utility, whether by purchase or
by construction, unless undue time, inconvenience, risk or other factors are involved.
The approach provides an indication of value by calculating the current replacement or
reproduction cost of an asset and making deductions for physical deterioration and all other
relevant forms of obsolescence.
The cost approach should be applied and afforded significant weight under the following
circumstances:
a) Participants would be able to recreate an asset with substantially the same
utility as the subject asset, without regulatory or legal restrictions, and the
asset could be recreated quickly enough that a participant would not be
willing to pay a significant premium for the ability to use the subject asset
immediately,
b) the asset is not directly income-generating and the unique nature of the
asset makes using an income approach or market approach unfeasible,
and/or
c) The basis of value being used is fundamentally based on replacement
cost, such as replacement value.
Cost Approach Methods
Broadly, there are three cost approach methods:
(a) Replacement cost method: a method that indicates value by calculating the cost of a
similar asset offering equivalent utility,
(b) Reproduction cost method: a method under the cost that indicates value by calculating the
cost to recreating a replica of an asset, and
33 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
(c) Summation method: a method that calculates the value of an asset by the addition of the
separate values of its component parts
2.1.4 Types of Value
There are different types of value an appraisal may return given the purposes of valuation. The
word value itself refers to the importance, worth, or usefulness of something. It is an estimate of
the monetary worth of something.
2.1.4.1 Market Value
Market Value is the estimated amount for which an asset or liability should exchange on the
valuation date between a willing buyer and a willing seller in an arm’s length transaction, after
proper marketing and where the parties had each acted knowledgeably, prudently and without
compulsion.
It is in simple terms an estimate of the market value that an interested, knowledgeable but not
desperate buyer is willing to pay an interested, knowledgeable but not desperate seller, assuming
the company or asset is exposed on the open market for a reasonable period of time and the sale
is paid using cash or cash equivalent.
The concept of Market Value presumes a price negotiated in an open and competitive market
where the participants are acting freely. The market for an asset could be an international market
or a local market. The market could consist of numerous buyers and sellers, or could be one
characterized by a limited number of market participants. The market in which the asset is
presumed exposed for sale is the one in which the asset notionally being exchanged is normally
exchanged.
2.1.4.2 Investment Value
Investment value (worth) is defined in IVS 104 paragraph 60.1 as: „the value of an asset to a
particular owner or prospective owner for individual investment or operational objectives.
It is the value of a company or an asset to a particular investor, using the investor‟s specific
judgments and assumptions. It can be much higher than the fair market value to an investor who
34 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
has ability to put the asset to use in its maximum productive way, and it can also be lower than
the fair market value to an investor who has limited ability to make the best use of the property.
2.1.4.3 Synergistic Value
Synergy is the concept that the value and performance of two companies combined will be
greater than the sum of the separate individual parts.
Synergistic Value is the result of a combination of two or more assets or interests where the
combined value is more than the sum of the separate values. If the synergies are only available to
one specific buyer then
Synergistic Value will differ from Market Value, as the Synergistic Value will reflect particular
attributes of an asset that are only of value to a specific purchaser. The added value above the
aggregate of the respective interests is often referred to as “marriage value.”
2.1.4.4 Liquidation Value
Liquidation Value is the amount that would be realized when an asset or group of assets are sold
on a piecemeal basis. Liquidation Value should take into account the costs of getting the assets
into saleable condition as well as those of the disposal activity. Liquidation Value can be
determined under two different premises of value:
a) an orderly transaction with a typical marketing period),Or
b) a forced transaction with a shortened marketing period
Liquidation value is the likely price of an asset when it is allowed insufficient time to sell on the
open market, thereby reducing its exposure to potential buyers. Liquidation value is typically
lower than fair market value.
2.1.4.5 Premise of Value – Highest and Best Use
Highest and best use is the use, from a participant perspective, that would produce the highest
value for an asset. Although the concept is most frequently applied to non-financial assets as
35 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
many financial assets do not have alternative uses, there may be circumstances where the highest
and best use of financial assets needs to be considered.
The highest and best use must be physically possible (where applicable), financially feasible,
legally allowed and result in the highest value. If different from the current use, the costs to
convert an asset to its highest and best use would impact the value.
The highest and best use for an asset may be its current or existing use when it is being used
optimally. However, highest and best use may differ from current use or even be an orderly
liquidation.
2.1.4.6 Premise of Value – Forced Sale
The term “forced sale” is often used in circumstances where a seller is under compulsion to sell
and that, as a consequence, a proper marketing period is not possible and buyers may not be able
to undertake adequate due diligence.
The price that could be obtained in these circumstances will depend upon the nature of the
pressure on the seller and the reasons why proper marketing cannot be undertaken. It may also
reflect the consequences for the seller of failing to sell within the period available.
Unless the nature of, and the reason for, the constraints on the seller are known, the price
obtainable in a forced sale cannot be realistically estimated. The price that a seller will accept in
a forced sale will reflect its particular circumstances, rather than those of the hypothetical willing
seller in the Market Value definition. A “forced sale” is a description of the situation under
which the exchange takes place, not a distinct basis of value.
2.1.5 Purposes to value
There are different purposes for which a valuation is undertaken. Different values are returned to
different purposes;
36 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Valuation for Mortgage purposes
Mortgage valuations are carried out for all classes of property. When you buy a house and need
a mortgage, a lender will commission a mortgage valuation. The valuation advises the lender of
the value of a property and of any characteristics of the property including significant defects
which might affect its value as security for the proposed loan. They are not surveys, which have
more detail, but are for the benefit of the lender, rather than you.
Valuation for Insurance purposes
Insurance valuations can be prepared for all types of property. Insurance valuations include
replacement cost of the subject building on a „replacement cost new‟ basis, allowances for
demolition and removal of debris, professional and consultants‟ fees, and future escalation in
building costs. If required by the client, loss of rent during the rebuilding period can be included
within the valuation.
Valuation for Sale and Acquisition Purposes
These are valuations prepared for clients wishing to sell property as well as for clients wishing to
acquire property.
Valuation for Compulsory Acquisition Purposes
This valuation purpose provides advice to the acquiring body or landowner in accordance with
the Land Acquisition (Just Terms Compensation). It‟s normally done for the government to
acquire land for Government projects which should be for the good of the general public.
Valuation for Rating and Taxing Objections purposes
This valuation where the governing bodies (Local governments and councils) are to base on
when levying taxes on specific properties in a selected area.
37 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
CHAPTER THREE; TASKS ACCOMPLISHED
3.0 Internship activities
In this chapter, I shall describe the tasks involved during my Internship each with its
experience/learning benefits.
Internship activities were important to complement the training philosophy and developmental
needs of valuation students as they become professionals in the field of Valuation surveying.
3.1 Property Inspection
On receiving the assignment through instructions, an inspection of the property has to be
executed.
This is majorly taking and getting informed of the subject property for which the value opinions
are to be stated.
Property inspection of the involved among others, confirming of boundaries, taking details of
any developments by sketching and measuring, observing the construction details and
accommodation details.
Furthermore a market research is carried out to ascertain and obtain comparables to the subject
property, general neighborhood, amenities and accessibility
Confirming/Opening boundaries
This is very important to confirm that the subject property exists and reduce the risks of fraud to
the bank whereby clients may wish to use fraud Titles are securities to the loans.
This was done majorly to know if we were at the property and confirm the existence in that
place.
Confirming of the boundaries of the plot involved comparing the plot on the print with the one
on ground in both shape and dimensions. We would also measure the different sides of the plot
and that of the immediate neighborhood to see if it matched with the dimensions on the print.
38 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Obtaining the details of the developments on the plot.
Once the boundaries were confirmed, there follows sketching of the subject property including
the developments on it if any.
Furthermore, we would measure the building using the tape measure to obtain the external gross
areas.
Notes as to details of the buildings are taken which among others include different design
specifications, materials, finishes and accommodation.
Taking of pictures
Pictures of different detail views say front, rear, interior and neighborhood are taken for evidence
of the property described on the date of valuation.
Simple Market research.
This is meant to acquire comparables for the subject property around the neighborhood and the
general conditions and factors in the subject property market. This was through asking
knowledgeable people such as brokers in that area where we always went as they were always
informed of the various properties in the neighborhood that were on sale. This was acquired
through conducting a market research around the subject property so as to come out with the
most suitable comparable.
A well undertaken market research enables us to obtain the value affecting factors which help
us come up with an informed market value opinion.
This also involves marking a study of the SWOT analysis.
39 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
On leaving the site, a sketch of the location of the subject property was always drafted which is
improved and corrected with Google earth using the coordinates picked on ground.
Figure 2: Primary sketch of the location to the subject property.
40 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Figure h: Improved sketch of the location to the subject property.
3.1.1 Learning benefits.
From the above task, I learnt the following;






Taking of field notes and sketches on the developments
Obtaining comparables through a market research
Locating and giving directions to the subject properties
General ideas to area verification and boundary opening
Analytical skills
Confidence developed in meeting and interacting with clients in a professional manner
3.2 Appraisal/valuation report preparation
Have successfully inspected the property, an appraisal report where all the findings and value
opinions are reported.
The IVS 2017 states that it is essential that the valuation report communicates the information
necessary for proper understanding of the valuation or valuation review. A report must provide
the intended users with a clear understanding of the valuation.
Therefore the valuation reports prepared at Futures Properties Consultants were in line with the
IVS Standards which requires the following at a minimum;
(a) The scope of the work performed, including the elements noted in para 20.3 of IVS 101
Scope of Work, to the extent that each is applicable to the assignment,
a) The approach or approaches adopted,
(c) The method or methods applied,
(d) The key inputs used,
(e) The assumptions made,
(f) The conclusion(s) of value and principal reasons for any conclusions reached, and
(g) The date of the report (which may differ from the valuation date).
Therefore the following were some of the important information prepared and included in the
valuation report at Futures Properties Consultants.
41 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
3.2.1 Terms of reference.
This is where the scope of work is acknowledging receipt of instructions and indicating the values to be
returned according to instructions given and the dates of inspections and valuations.
Figure 3: Sample of the terms of reference
3.2.2 Executive summary
In the executive summary, I explained briefly about the subject property, indicating its general
specifications like size, developments on the, interest being valued, neighbourhood and the
values. Key to note is that in case of any effects on the value and property like squatters and
encroachments are also reported.
42 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Figure 4: Sample of Executive Summary
3.2.3 Certification of value
This I prepared to confirm that the facts reported are correct and confirm that the work is done in
a good will professionally without individual interest.
43 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Figure 5: Sample of Certification of value
3.2.4 General Assumptions
These are included to generally state the details obtained from which the valuing has relied.
Figure 6: Sample of General assumptions
44 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
3.2.5 Basis and Methods of valuation.
Here I indicated the basis of valuation as different valuation purposes have different basis. Also this is
the section in the report where we indicate the methods of value applied.
Figure 7: Sample of Basis and methods of valuation
3.2.6 Limiting conditions
This is meant to indicate the limitation of use to which the report is. We clearly start who to use
and for what purposes given the limits within which it has been prepared to the instructions.
45 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Figure 8: Sample of the limiting conditions
3.2.7 SWOT Analysis
SWOT stands for:
•Strengths
•Weaknesses
•Opportunities
•Threats
It is the study undertaken on the project to identify its internal strengths and weaknesses, as well
as its external opportunities and threats.
This is included in the report as it‟s very important and has an influence on the values reported.
46 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Figure 9: Sample of the SWOT analysis
The rest among others included developments on the plot where we described the construction
details, accommodation, gross external area and general state of the structure.
Another section is the market analysis and valuation considerations indicating the comparables
used to arrive at the rates used for the land values.
The report also included pectoral evidential of the subject property and neighborhood.
Finally the survey report on the details of area verification and boundary opening is attached
which also indicates the location of the subject property.
3.2.1 Learning Benefits.
From the above task, I learnt the following;




Report preparation and arrangement
Improved my Microsoft word skills
Analytical skills
SWOT analysis
47 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
3.3 Presentation to the review committee
Having successfully drafted the report and handed it for review to the Principal valuer, I
presented my findings to the review committee to defend my values and correct any mistakes.
At the review committee, I presented my findings in detail and justified the reasons as to what
methods and rates used in the subject valuation.
Figure c: review committee
48 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Figure cc: review committee
3.3.1 Learning Benefits.
From the above task, I learnt the following;



Presentation skills
Improved confidence and abilities
More valuation knowledge from the contributions of the committee members.
49 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Figure tools: Tools used
CHAPTER FOUR; CONCLUSION
4.1 RECOMMENDATIONS
4.1.1 To the university
 Increase on the financing of internship to have enough supervision of students
on internship wright from the start of securing places of placement.
50 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
 Supplement internship by introducing practical sessions as part of the semester
activities
4.1.2. To the company
 Coordinate supervision of interns by building a relationship between the
University and firm supervisors
4.1.3. To Students
 Take internship very serious and utilize all the learning opportunities
 All take note and express willingness to learn.
4.2 CONCLUSION
This internship was good enjoyable given the learning benefits acquired but also was
my last University internship for the Bachelor of Science in Land Economics. I once
again am surely grateful for all my supervisor, lecturers, family and friends who are
behind my every success
References;
Dictionary of Real Estate Appraisal, 4th ed., Appraisal Institute, 2002
Home Appraisal Standards Stiffened, (http://thismatter.com/money/real-estate/real-estateappraisal.htm)
51 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E
Essentials of Strategic Planning in Healthcare by Jeffrey P. Harrison (Health Administration
Press, 2010).
The SWOT Analysis (Using your Strength to overcome Weaknesses, Using Opportunities to
overcome Threats) by Lawrence G Fine, 2009
http://www.mindtools.com/pages/article/newTMC_05.htm Last accessed 11.21.2011
A.F.Millington (2000) An Introduction to Property Valuation (fifth edition), London: Bell and
Bain Ltd., Glasgow.
Paul M.Syagga (1994) Real Estate Valuation Handbook with special reference to Kenya,
Nairobi: Interface Printers Ltd.
M.L.Geho (June, 2002) ‘The Cost Method of Valuation’ in Principles, Techniques and
Methods of Valuation, 132-152.
The Appraisal Institute (2001) The Appraisal of Real Estate (twelfth edition),
Chicago: The Appraisal Institute.
52 | N U W A G I R A A N D R E W 1 4 / U / B L E / P E