Principles of Valuation Practices and Code of Ethics

 FOREWORD

In a Society which not only permits but encourages the private ownership of productive property and one which also engages in large and multitudinous public works, there appears, on every hand, a necessity for the valuation of property. In fact, property valuations are used throughout the economic, governmental, legal, and social activities of such a society.

As the vocation of property valuation has developed during past decades from a business occupation into a profession, certain concepts have emerged and become clear. The word “property” is now given to physical things and also to the legal rights of ownership of tangible entities. Valuation is now considered to encompass three classes of operations, namely,

(1)   The estimation of the cost of producing or replacing physical property,

(2)   The forecasting of the monetary earning power of certain classes of property,

(3)   The valuation or determination of the worth of property.

Because of the specialized knowledge and abilities required of the valuer which are not possessed by the layman, there has now come to be established a fiduciary relationship between him and those who rely upon his findings.

The Institute of Appraisers & Cost Engineers (a Division of NSE) occupies a unique position among professional valuation societies in that it recognizes and is concerned with various classes of property: real, personal, tangible, and intangible, natural resources, public utilities, investment securities, and so forth. It is also unique in that it recognizes the threefold character of the valuation function.

In recognizing the need for the highest professional competence among valuers, The Institute of Appraisers & Cost Engineers (a Division of NSE) actively supports recognized institutions of higher learning in their scholastic programs which are designed to provide the necessary academic background to both valuer aspirants and to the qualified professional who desire to update and broaden their professional skills.

The necessity for a set of authoritative principles and code of  ethics, broad enough to cover all classes of property as well as the complexities of the various valuation procedures, is a pressing one.

Violation of any provision or rule of the Code should not give rise to a civil cause of action and should not create any presumption or evidence that a legal duty has been breached nor should it create any special relationship between the valuer or any other person. This code is designed to provide guidance to valuers and to provide a structure for regulating conduct of members of the IA & CE (a Division of NSE) through disciplinary actions. Violations of the Code are not designed or intended to be the basis of any civil liability

To meet the need for a comprehensive set of guideposts and for a specific code of ethics, the IA & CE (a Division of NSE) has amended, adopted The Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers, and herewith presents The Principles of Valuation Practice and Code of Ethics.

 Institute of Appraisers & Cost Engineers
(a Division of The Nigerian Society of Engineers)
Authorized    2003

 

TABLE OF CONTENTS

 1      INTRODUCTION

1.1     Membership Composition of the Institute of Appraisers & Cost Engineers

1.2     Definition of “Valuation Practice” and ‘Property”  

1.3     Purpose of Promulgating the Principles of Valuation Practice and Code of Ethics

 

2        OBJECTIVES OF VALUATION WORK

2.1     Various Kinds of Objectives of Valuation Work

2.2     Objective Character of the Results of Valuation Undertaking

 

3       VALUER’S PRIMARY DUTY AND RESPONSIBILITY

3.1     Valuer’s Obligation to Determine and Describe the Apposite Kind of Value or Estimated Cost

3.2     Valuer’s Obligation to Determine Numerical Results with Whatever Degree of Accuracy the Particular Objectives of the Valuation Necessitate

3.3     Valuer’s Obligation to Avoid Giving a False Numerical Result

3.4     Valuer’s Obligation to Attain Competency and to Practice Ethically

3.5      Professional Character of Valuation Practice

3.6      Valuers Responsibility to Third Parties

 

4         VALUER’S OBLIGATION TO HIS CLIENT         

4.1       Confidential Character of a Valuation Engagement

4.2       Valuer’s Obligation to Give Competent Service

4.3       Valuer’s Obligation Relative to Giving Testimony

4.4       Valuer’s Obligation to Document Valuation Testimony

4.5       Valuer’s Obligation Relative to Serving More Than One Client in the Same Matter

4.6       Agreements and Contracts for Valuation Services

 

5         VALUER’S OBLIGATION TO OTHER VALUERS AND TO THE DIVISION

5.1       Protection of Professional Reputation of Other Valuers

5.2       Valuer’s Obligation relative to Institute’s Disciplinary Actions

 

6          VALUATION METHODS AND PRACTICES

6.1        Various Kinds of Value

6.2         Selection of Valuation Method

6.3         Fractional Valuations

6.4         Contingent and Limiting Conditions Affecting a Valuation

6.5         Hypothetical Valuations

6.6         Valuations in Which Access to Pertinent Data is Denied

6.7         Ranges of Value or Estimated Cost and Reliability Estimates

6.8         Values or Estimated Costs Under Different Hypotheses

6.9         Inspection, Investigation, Analysis, and Description of Subject Property

6.10       Collaboration Between Valuer’s and Utilization of the Services of Members of Other Professions

 

7         UNETHICAL AND UNPROFESSIONAL VALUATION PRATICES

7.1       Contingent Fees

7.2        Percentage Fees

7.3        Disinterested Appraisals

7.4        Responsibility Connected with Signatures to Appraisal Reports

7.5        Advocacy

7.6         Unconsidered Opinions and Preliminary Reports

7.7          Advertising and Solicitation

7.8          Misuse of Membership Designations

7.9          Causes for Disciplinary Action by the Institute

 

8             VALUATION REPORTS

8.1           Description of the Property Which is the Subject of a Valuation Report

8.2           Statement of the Objectives of the Valuation Work

8.3           Statement of the Contingent and Limiting Conditions to Which the Valuation Findings Are Subject

8.4           Description and Explanation in the Valuation Report of the Valuation Method Used

8.5           Statement of the Valuer’s Disinterestedness

8.6           Valuer’s Responsibility to Communicate Each Analysis, Opinion, and Conclusion in a Manner That is Not Misleading

8.7            Mandatory Recertification Statement

8.8            Signatures to Valuation Reports and the Inclusion of Dissenting Opinions

 


1                    INTRODUCTION

 

1.1    Membership Composition of the Institute of Appraisers & Cost Engineers (a Division of NSE)

The Institute of Appraisers & Cost Engineers (a Division of NSE) is a professional organization of individuals. Each of its members who has demonstrated, to the satisfaction of the Institute, that he is qualified to value or cost  one or more of the personal or specialised kind of real property, is granted the right to use the identification, Accredited Valuer or Certified Cost Engineer. Members and Senior Members may use the appropriate designations authorized by the Board of Governors of the Institute.

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1.2    Definition of "Valuation Practice" and "Property"

1.2.1  The term valuation practice, as defined by the Institute, applies to any of the four following operations, singly or in combination, these operations being executed within a framework of general principles of technical procedure and personal conduct:

(1)      Determination of the value of property (the transitive verb determine having meaning: “to come to a decision concerning, as the result of investigation, reasoning, etc”);

(2)      Forecasting of the earning power of property;

(3)      Estimation of the cost of

(a)      Production of a new property (production having the meaning: brought into being by assembly of elements, fabrication, construction, manufacture, or natural growth of living things”)

(b)      Replacement of an existing property by purchase or production of an equivalent property

(c)      Reproduction of an existing property by purchase or production of an identical property.

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(4)     Determining non-monetary benefits or characteristics that contribute to value. The rendering of judgments as to age, remaining life, condition, quality, or authenticity of physical property, amenities; an estimate of the amount of a natural resource, population increase, nature of market, rate of absorption, etc

1.2.2   In a valuation and in a forecast of earning power, the word property is used to describe the rights to the future benefits of something owned or possessed to the exclusion of other persons. The “something owned” may be tangible, intangible or both.

            In a cost estimation, the word property is used to describe the “something owned” without regard to its ownership.

1.3      Purpose of promulgating the Principles of Valuation Practice and Code of Ethics

           The Principles of Valuation Practice and Code of Ethics of the Institute of Appraisers & Cost Engineers (a Division of NSE) are promulgated to:

1.3.1   Inform those who use the services of valuers what, in the opinion of the Institute, constitutes competent and ethical valuation practice:

1.3.2   Serve as a guide to its own members in achieving competency in valuation practice and adhering to ethical standards;

1.3.3   Aid in the accomplishment of the purposes of the Institute, which include:

(a)       Fosterage of valuation education,

(b)       Improvement and development of valuation techniques,

(c)        Encouragement of sound professional practices,

(d)        Establishment of criteria of sound performance for use of employers of staff valuers

(e)        Enforcement of ethical conduct and practice by its members;

1.3.4   Provide means, auxiliary to those used in examining applicants for admission to the grades of members and Senior Member of the Institute, for judging their skill, competence, and understanding of ethical principles;

1.3.5   Epitomize those valuation practices that experience has found to be effective in protecting the public against exploitation.

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2          OBJECTIVES OF VALUATION WORK

2.1       Various Kinds of Objectives of Valuation Work

A valuation is undertaken for one or more of several objectives, namely: to determine the value of a property; to estimate the cost of producing, acquiring, altering, or completing a property; to estimate the monetary amount of damages to a property; and to forecast the monetary earning power of a property. In specific instances, the work may have additional objectives, such as: the formulation of conclusions and recommendations or the presentations of alternatives and their consequences) for the client’s actions.

 

2.2       Objective Character of the Result of Valuation Undertaking

he primary objective of a monetary valuation is determination of a numerical result, either as a range or most probable point magnitude- the Naira amount of a value, the Naira amount of an estimated cost, the Naira amount of an earning power. This numerical result is objective and unrelated to the desires, wishes, or needs of the client who engages the valuer to perform the work. The amount of this figure is as independent of what someone desires it to be as a physicist’s measurement of the melting point of lead or an accountant’s statement of the amount of net profits of a corporation. All the principles of valuation ethics stem from this central fact.

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3    VALUER’S PRIMARY DUTY AND RESPONSIBILITY

The valuer’s duty and responsibility, in each subject case, is two fold.

3.1  Valuer’s Obligation to Determine and Describe the Apposite Kind of Value or Estimated Cost

First, because there are several kinds of value and several kinds of cost estimates, each of which has a legitimate place as the end point of some class of valuation engagemnt, it is the valuer’s obligation to ascertain which one of these is pertinent to the particular undertaking. In meeting this obligation, the valuer may consider his client’s instructions and/or may obtain legal or other professional advice, but the selection of the apposite kind of value or estimated cost is the valuer’s sole responsibility. Also, it is his obligation, in this connection, fully to explain and describe what is meant by the particular value or cost estimate which he has determined, in order to obviate misunderstanding and to prevent unwitting or deliberate misapplication. For example, a valuation engagement which calls for the determination of the current market value of a multi-tenant office building leasehold estate, would not be properly discharged by a determination of the depreciated new cost of replacement of the improvements.

 3.2    Valuer’s Obligation to Determine Numerical Results with Whatever Degree of Accuracy the Particular Objectives of the Valuation Necessitate

Second, it is the Valuer’s obligation to determine the appropriate and applicable numerical results with as high a degree of accuracy as the particular objectives of the valuation necessitate.

 3.3       Valuer’s Obligation to Avoid Giving a False Numerical Result

Obviously, the valuer has every obligation to avoid giving false figure. The numerical result of a valuation could be false for one of two reasons: it could be false because it is a grossly inaccurate estimate of the apposite kind of value or cost estimate, or it could be false, even though numerically accurate, because it is an estimate of an inapposite kind of value of cost estimate.

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3.4       Valuer’s Obligation to Attain Competency and to Practice Ethically

In order to meet his obligations, the valuer must be competent in his field. This competency he attains by education, training, study, practice, and experience. He must also recognize, understand, and abide by those ethical principles that are interwoven with and are an essential part of truly professional practice.

 
3.5
       Professional Character of Valuation Practice

The members of the Institute are engaged in a professional activity. A profession is based on an organized body of specific knowledge – knowledge not possessed by laymen. It is of such a character that it requires a high degree of intelligence and considerable expenditure of time and effort to acquire it and to become adept in its application. A valuer’s client relies on the valuer’s professional knowledge and abilities to whatever extent may be necessary to accomplish the objectives of the work. Members of the Institute recognize this relationship.

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3.6
       Valuer’s Responsibility to Third Parties

Under certain specific circumstances a valuation report may be given by a client to a third party for their use. If the purpose of the valuation includes a specific use by a third party, the third party has a right to rely on the validity and objectivity of the valuer’s findings as regards the specific stated purpose and intended use for which the appraisal was originally made. Members of the Institute recognize their responsibility to those parties, other than the client, who may be specifically entitled to make use of their reports.

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4       VALUER’S OBLIGATION TO HIS CLIENT

The valuer’s primary obligation to his client is to reach complete, accurate, and pertinent conclusions and numerical results regardless of the client’s wishes or instructions in this regard. The relationship between client and valuer is not one of principal and agent. However, the valuer’s obligation to his client go somewhat beyond this primary obligation. These secondary obligations are set forth in the following sections.

 

4.1       Confidential Character of a Valuation Engagement

The fact that a valuer has been employed to make a valuation is a confidential matter. In some instances, the very fact of employment may be information that a client, whether private or public agency, prefers for valid reasons to keep confidential. Knowledge by outsiders of the fact of employment of a valuer may jeopardize a client’s proposed enterprise or transaction. Consequently, it is improper for the valuer to disclose the fact of his engagement, unless the client approves of the disclosure or clearly has no interest in keeping the fact of the engagement confidential, or unless the appraiser is required by due process of law to disclose the fact of his engagement.

In the absence of an express agreement to the contrary, the identifiable contents of a valuation report are the property of the valuer’s client or employer and, ethically, cannot be submitted to any professional society as evidence of professional qualifications, and cannot be published in any identifiable form without the client’s or employer’s consent.

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4.2       Valuer Obligation to Give Competent Service

It is not proper for a valuer to accept an engagement to make a valuation of property of a type he is not qualified to value or in a field outside his Institute membership classification, unless (a) he fully acquaints the client with the limitations of his qualifications or (b) he associates himself with another valuer or valuers who possess the required qualifications.

As a corollary to the above principle, the Institute declares that it is unethical for a valuer to claim or imply that he has professional qualifications which he does not possess or to state his qualifications in a form which may be subject to erroneous interpretation (See Sec. 7.8)

4.3    Valuer’s Obligation Relative to Giving Testimony

When a valuer is engaged by one of the parties in a controversy, it is unethical for the valuer to suppress any fact, data, or opinions which are adverse to the case his client is trying to establish; or to over-emphasize any facts, data, or opinions which are favorable to his client’s case; or in any other particulars to become an advocate. It is the valuer’s obligation to present the data, analysis, and value without bias, regardless of the effect of such unbiased presentation on his client’s case. (Also see Sec. 7.5)

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4.4       Valuer’s Obligation to Document Appraisal Testimony

When a member accepts employment to make a valuation or to testify as to value of property before a court of law or other judicial or quasi-judicial forums, the valuer shall, before testifying, complete an adequate written valuation report, or have complete documentation and substantiation available in his files.

 

4.5       Valuer’s Obligation Relative to Serving more Than one Client in the Same Matter

When two or more potential clients seek a valuer’s services with respect to the same property or with respect to the same legal action, the valuer may not properly serve more than one, except with the consent of all parties.

 4.6       Agreements and Contracts for Valuation Services

It is good practice to have a written contract, or at least a Letter of intent, between valuer and client, covering objectives and scope of work, time of delivery of report and amount of fees. In certain circumstances, it may be desirable to include in the valuation service contract a statement covering the objective character of valuation findings and a statement that the valuer cannot act as an advocate or negotiator

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5    VALUER’S OBLIGATION TO OTHER VALUERS AND TO THE DIVISION

5.1       Protection of Professional Reputation of Other Valuers

The valuer has an obligation to protect the professional reputation of all valuers (whether members of the Institute or not) who subscribe to and practice in accord with the Principles of Valuation Practice of the Institute. The Institute declares that it is unethical for a valuer to injure, or attempt to injure by false or malicious statements or by innuendo the professional reputation or prospects of any valuer.

 
5.2
       Valuer Obligation Relative to Institute’s Disciplinary Actions

A member of the Institute, having knowledge of an act by another member which, in his opinion, is in violation of the ethical principles incorporated in the Principles of Valuation Practice and Code of Ethics of the Institute, has the obligation to report the matter in accordance with the procedure specified in the Constitution and Bylaws.

It is the valuer’s obligation to cooperate with the Institute and its officer in all matters, including investigation censure, discipline, or dismissal of members who are charged with violation of the Principles of Valuation Practice and Code of Ethics of the Institute.

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6    VALUATION METHODS AND PRACTICES

6.1       Various Kinds of Value

The Institute recognizes that different kinds of property may have different kinds of value depending on the particular attendant circumstances and, further, that there are both basic and subordinate kinds of value. Good professional practice requires that the valuer describe in sufficient detail, in each case, the nature and meaning of the specific value that he is determining

6.2    Selection of Valuation Method

The procedure and method for determining the particular value in question is a matter for the valuer himself to determine-he cannot be held responsible for the result unless he has a free hand in selecting the process by which that result is to be obtained. However, good valuation practice requires that the method selected be adequate for the purpose, embrace consideration of all the factors that have a bearing on the value, and be presented in a clear and logical manner

6.3    Fractional Valuations

Certain classes of properties (real estate, business enterprise, collections of chattels, for example) can be considered as made up of components (for example, in case of real estate: land, buildings, machinery and equipment, contracts, and goodwill). If an element is considered as an integrated part of the whole property, its value, in general, is different from the value the same element has if considered as a fraction separated from the whole property.

A valuation of an element of a whole property considered by itself and ignoring its relation to the rest of the whole property, is called a “fractional valuation.” There are legitimate uses for fractional valuations (valuation of buildings for fire insurance purposes; valuation in connection with public utility rate-making, etc.) but good practice requires that a fractional valuation be labeled as such and that the limitations on its use by the client and/ or third parties be clearly stated.

 
6.4   Contingent and Limiting Conditions Affecting a Valuation

In many instances the validity of the valuer’s conclusions as to the value of a subject property is contingent upon the validity of statements, information, and/or data upon which he has relied, supplied to him by members of other professions or secured by him from official sources. Such material may be obtained, for example, from architect, engineers, lawyers, accountants, government officials, government agencies, etc. it is proper for the valuer to rely upon and use such material provided (1) he states in his report that he has done so, (2) he stands ready to make his sources and/or the material itself available for any required verification, and (3) he does not pass to others the responsibility for matters that are, or should be, within the scope of his own professional knowledge.

Good valuation practice requires that the valuer state any other contingent or limiting conditions which affect the valuation, such as, for example, that the vaue is contingent upon the completion of projected public or private improvements, etc.

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6.5      Hypothetical Valuations

A hypothetical valuation is a valuation based on assumed conditions which are fact or which are improper of realization or consummation. The Institute takes the position that there are legitimate uses for some hypothetical valuations, but that it is improper and unethical to issue a hypothetical valuation report unless (1) the value is clearly labeled as hypothetical (2) the legitimate purpose for which the valuation was made is stated, and (3) the conditions which were assumed contrary to fact are set forth. 

A hypothetical valuation showing the value of a company which it is proposed to form by merging two existing companies, would he deemed to serve a legitimate purpose. On the other hand, a hypothetical valuation of a projected industrial facility based on an assumed product pricing which is so much above the market that it is practically impossible for it to be realized, would not serve any legitimate purpose and its issuance might well lead to the defrauding of some unwary investor.
 

6.6         Valuations In Which Access to Pertinent Data is Denied

Situations sometimes occur in which data that the valuer considers pertinent to the making of a valid valuation are in existence but access to them is denied to the valuer, either by the client or some other party (for example: the past production records of an oil field; the records of prior revenue and expense of an industrial property; etc.). In such a case, the valuer, at his option, may properly decline to carry out the assignment. In the event he considers such data essential to the making of a valid valuation, he may not properly proceed with the assignment.
 

6.7           Ranges of Value or Estimated Cost and Reliability Estimates  

Some valuation engagements call for the determination of a probable range of value or estimated cost, either with or without a collateral statement of the most probable figure within that range. It is entirely within the scope of good valuation practice to give a range of value or estimated cost.

Inasmuch as the valuer’s determination of the amount of a value or an estimated cost cannot, by its very nature, be exact, it is good valuation practice to append to such numerical results a statement as to the degree of reliability to be accorded thereto. Such reliability estimates are usually expressed as plus and minus percentages.

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6.8   Values or Estimated Costs Under Different Hypotheses

The objective of a valuation undertaking may be the determination of different values or different cost estimates based on different hypotheses. It is entirely within the scope of good valuation practice to give such differing numerical results, provided the valuer adheres to the principles set forth in Sec. 3.1 and Sec. 6.5

 
6.9   Inspections, Investigation, Analysis, and Description of Subject Property

The valuation of a property is a procedure based on an analysis of  all the characteristics of all the property which contribute to or detract from its value; good valuation practice requires that the valuer’s inspection, investigation, and study be thorough enough to cover all of the pertinent characteristics.

Good valuation practice requires that the description of the property, tangible or intangible, which is the subject of a valuation, cover adequately (a) identification of the property (b) statement of the legal rights and restrictions comprised in the ownership, and (c)the characteristics of the property which contribute to or detract from its value.

In the case of chattels and prospective real estate improvements, identification is particularly important in order to prevent unscrupulous persons from representing the valuation as applying to substituted inferior property.

In general, the legal rights of the ownership of chattels are obvious and need not be stated; but, in the case of real property, statements of zoning restrictions, building codes, easements, leases, etc., are essential elements of the description. It is understood, however, that the legal rights of the ownership of an interest in real property are matters of legal, not valuation opinion, and that the valuer discharges his obligations in this regard by stating the sources of these data. (See Sec 6.4) In the case of intangible properties (patents, contracts, franchises, etc.) the documentary provisions not only define what the property is, they also set forth the legal rights and descriptions.

The physical condition of chattels or real property is an element contributing to or detracting from their value; good valuation practice requires adequate inspection and investigation to determine it.

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6.10     Collaboration Between Valuers and Utilization of the Services of Members of Other Professions

Collaboration Between Valuers is desirable, in some situations, to expedite the completion of work and, in other situations, to obtain the benefits of combined judgment or combined data. Such collaboration is entirely proper providing these dissenting opinions are made a part of the report.

In some cases, the nature of the valuation undertaking calls for special professional knowledge and abilities in addition to those possessed by the valuer. In such an instance, it is both necessary and proper for the valuer to employ other valuers and/or members of other professions to obtain data and derive conclusions relative to specific parts of the work. The principal valuer builds his final conclusions, in part, on these contributions, taking responsibility for the final result but subject to the validity of the underlying or constituent contributions. (See Sec. 6.4)

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 7    UNETHICAL AND UNPROFESSIONAL VALUATION PRACTICES

The principles of valuation practice given in Sec. 6 relate to the primary objective of a valuation undertaking, namely the determination of the apposite numerical result with that degree of accuracy required by the attendant circumstances, whereas the principles given in this section (Sec. 7) relate to the establishment and maintenance of the confidence of clients and other interested parties in the validity of the results of valuation undertakings. To this end, certain practices are declared by the Institute to be unethical and unprofessional.

7.1 Contingent Fees

If a valuer were to accept an engagement for which the amount of his compensation is contingent upon the amount of an award in a property settlement or a court action where his services are employed; or is contingent upon the amount of a tax reduction obtained by a client where his services are used; or is contingent upon the consummation of the sale or financing of a property in connection with which his services are utilized or is contingent upon his reaching any finding or conclusion specified by his client; then, anyone considering using the results of the valuer’s undertaking might well suspect that these results were biased and self-serving and therefore, invalid. Such suspicion would militate against the establishment and maintenance of trust and confidence in the results of valuation work, generally; therefore the Institute declares that the contracting for or acceptance of any such contingent fee is unethical and unprofessional.

As a corollary to the above principle relative to contingent fees, the Institute declares that it is unethical and unprofessional for a valuer (a) to contract for or accept compensation for valuation services in the form of a commission, rebate, division of brokerage commissions, or any similar forms and (b) to receive or pay finder’s or referral fees.

 
7.2       Percentage Fees

The Institute takes the position that it is unprofessional and unethical for the valuer to contract to do work for a fixed percentage of the amount of value, or of the estimated cost (as the case may be), which he determines, at the conclusion of his work.

 
7.3       Disinterested Valuations

 Anyone using a valuer who has an interest or a contemplated future interest in the property valued, might well suspect that the report was biased and self-serving and, therefore, that the findings were invalid. Such suspicion tends to break down trust and confidence in the results of appraisal work, generally.

Interests which a valuer may have in a property which is to be valued, include ownership of the subject  property; acting, or having some expectation of acting, as agent in the purchase, sale, or financing of the subject property; and managing, or have some expectation of managing, the subject property. Such interests are particularly apt to exist if the valuer, while engaged in professional valuation practice, is also engaged in a related retail business (real estate, jewelry, furs, antiques, fine arts, etc.).  

The Institute declares that, subject to the provision for disclosure given in the following paragraph, it is unethical and unprofessional for a valuer to accept an assignment to value a property in which he has an interest or a contemplated future interest.

However, if a prospective client, after full disclosure by the valuer of his present or contemplated future interest in the subject property, still desires to have the valuer do the work, the latter may properly accept the engagement provided he discloses the nature and extent of his appraisal report.

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7.4       Responsibility Connected with Signatures to Valuation Report

The user of a valuation, before placing reliance on its conclusions, is entitled to assume that the party signing the report is responsible for the findings, either because he did the work himself or because the work was done under his supervision.

In cases where two or more valuers are employed to prepare a joint report, the user thereof is entitled to assume that, if all of them sign it, they are jointly and severally responsible for the validity of all of the findings therein; and , if all do not sign, he has a right to know what the dissenting opinions are.

In cases where two or more valuers have been engaged by a single client to make independent appraisals of the same property, the client has the right to expect that he will receive opinions which have been reached independently and that he may use them as checks against each other and/or have evidence of the range within which the numerical results lie.

To implement these principles, the Institute declares that it is unethical (a) to misrepresent who made a valuation by appending the signature of any person who neither did the work himself nor had the work done under his supervision, (b) in the case of a joint report to omit any signatures or any dissenting opinions, (c) in case two or more valuers have collaborated in a valuation undertaking, for them, or any of them, to issue separate valuation reports, and (d) in case two or more valuers have been engaged by a single client to make independent valuations of the same property, for them to collaborate or consult with one another or make use of each other’s findings or figures.

A valuation firm or corporation may properly use a corporate signature with the signature of a responsible officer thereof. But the person who actually did the valuation for the corporation must sign the corporate appraisal report or the report must acknowledge the person who actually made the appraisal.

7.5       Advocacy

If a valuer, in the writing of a report or in giving an exposition of it before third parties or in giving testimony in a court action suppresses or minimizes any facts, data, or opinions which, if fully stated, might militate against the accomplishment of his client’s objective or, if he adds any irrelevant data or unwarranted favorable opinions or places an improper emphasis on any relevant facts for the purpose of aiding his client in accomplishing his objectives, he is, in the opinion of the Institute, an advocate. Advocacy, as here described, affects adversely the establishment and maintenance of trust and confidence in the results of professional. (Also, see Sec. 4.3).

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7.6        Unconsidered Opinions and Preliminary Reports

If a valuer gives an opinion as to the value, earning power, or estimated cost of a property without having ascertained and weighed all of the pertinent facts, such opinion, except by an extraordinary coincidence, will be inaccurate. The giving of such offhand opinions tends to belittle the importance of inspection, investigation, and analysis in valuation procedure and lessens the confidence with which the results of good valuation practice are received, and therefore the Institute declares the giving of hasty and unconsidered opinions to be unprofessional.

If a valuer makes a preliminary report without including a statement to the effect that it is preliminary and that the figures given are subject to refinement or change when the final report is completed, there is the possibility that some user of the report, being under the impression that it is a final and completed report, will accord the figures a degree of accuracy and reliability they do not possess. The results of such misplaced confidence could be damaging to the reputation of professional valuers, generally, as well as of the valuers concerned. To obviate this possibility, the Institute declares it is to be unprofessional appraisal practice to omit a proper limiting and qualifying statement in a preliminary report.

 
7.7           Advertising and Solicitation

It is not unethical to advertise the availability of valuation services. It is unethical to use any inaccurate, misleading, false or deceptive claim, promise or representation in connection with any advertisement. These unethical practices are considered by the Institute to be detrimental to the establishment and maintenance of public confidence in the results of valuation work. The Institute declares that such practices on the part of a valuer constitute unethical and unprofessional conduct. It would be unethical to do the following:

(a)   Misrepresent in any way one’s connection or affiliation with the Institute or any other          organization;

(b)   Misrepresent one’s background, education, training or expertise;

(c)   Misrepresent services available or a valuer’s prior or current service to any client, or identify any client without the express written permission of such client to be identified in advertising;

(d)   Represent, guarantee or imply that a particular valuation or estimate of value or result of an engagement will be tailored or adjusted to any particular use or conclusion other than that a valuation will be based upon an honest and accurate adherence to the Principles of Valuation Practice.

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7.8        Misuse of Membership Designations

The Constitution and Bylaws of the Institute establish three professional grades of membership, namely, Member, Senior Member, and Fellow. (An Affiliate or Candidate does not hold a professional grade of membership in the Institute.) The designation “A.V.” meaning an Accredited Valuer, may be used in the grade of a Member. The designation “A.S.V.” meaning Accredited Senior Valuer, may be used only in the grade of a Senior Member. The designation “F.Val.” may be used only by accredited Fellows of the Institute. The Institute declares that it is unethical for a member to claim or imply that he holds a higher degree of membership than he has attained. The applicable valuation discipline/specialization(s) being indicated in bracket.

 
7.9             Causes for Disciplinary Action by the Division
 

Disciplinary action against the members of the Institute is taken in the event of violations of specific provisions of the Institute’s Constitution and Bylaws or of its Principles of Valuation Practice and the Code of Ethics incorporated therein. Such actions are under the jurisdiction of the National Chairman, the Ethics Committee, and the Board of Governors. Violations may fall under six categories:

(1) Deviations from good valuation practice

(2) Failure to fulfill obligations and responsibilities

(3) Unprofessional conduct

(4) Unethical conduct

(5) Conviction in any judicial tribunal of a) any felony or b) any misdemeanor for which the maximum penalty is three (3) years in jail or more regardless of the actual sentence imposed or c) any misdemeanor involving honesty or veracity, i.e., involving theft or false statement regardless of the actual sentence imposed.

(6) Any unlawful, illegal or immoral conduct (even if not convicted in a judicial tribunal) which would bring disrepute to the valuation profession or to the Institute of Appraisers & Cost Engineers (a Division of NSE).

After due investigation, the Institute may take action in the form of suggestion, censure, suspension, or expulsion, in which last event the member will be required to surrender his Certificate, membership pin, and other evidences of his membership after its termination.

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8      VALUATION REPORTS

 In preceding sections it was stated that good valuation practice, as defined by the Institute, requires the inclusion of certain specific explanations, descriptions, and statements in a valuation report. These are summarized herewith. (These requirements do not apply to reports prepared by a staff valuer for the exclusive and non-public use of his employer; but do apply to reports prepared by a public valuer, i.e., one who offers his services for a fee to the general public.)

 
8.1     Description of the Property Which Is the Subject of a Valuation Report

It is required that the property with which a valuation report is concerned, whether tangible, intangible, real, or personal, be fully described therein, the elements of such description being: (a) identification, (b) legal rights and restrictions encompassed in the ownership, where these are not obvious, (c) value characteristics, and (d) physical condition, where applicable. (See Sec. 6.8)

 
8.2      Statement of the Objectives of the Valuation Work
 

It is required that a valuation report include a statement of the objectives for which the work was performed: to determine a value, to estimate a cost, to forecast an earning power, to ascertain facts, to reach conclusions and make recommendations for action in specified matters, etc. (See Sec. 2.1) It is required that the meaning attached by the valuer to any specific kind of value or estimated cost which is the objective of the valuation undertaking be described and explained in the valuation report. (See Sec. 6.1)

It is required that a valuation report include a statement as to the date which the value estimate, cost estimate or forecast of income applies.

When appropriate, an analysis of the highest and the best use of the property should be included in the investigation and study.


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8.2.1      Statement of the Contingent and Limiting Conditions to Which the Valuation Findings Are Subject

It is required that statements, information, and/or data, which were obtained by the valuer from members of other professions, or official or other presumably reliable sources, and the validity of which affects the valuation findings, be summarized or stated in full in the valuation report and the sources given, so that verification desired by any user of the report may be accomplished. (See Sec. 6.4)

If a valuation is a hypothetical one, it is required that it be labeled as hypothetical, that the reason a hypothetical valuation was made be stated, and that the assumed hypothetical conditions be set forth. (See Sec. 6.5)

If a valuation is a fractional valuation it is required that it be labeled as fractional and that the limitations on the use of the reported figure be stated. (See Sec. 6.3)

If a preliminary valuation report is issued, namely, one in which the figures are subject to refinement or change, it is required that the report be labeled as preliminary and that the limitation on its use be stated. (See Sec. 7.6)

 

8.3        Description and Explanation in the Valuation Report of the Valuation Method Used

It is required that the method selected by the valuer as applicable to the subject valuation undertaking be described and explained in the valuation report. (See Sec. 6.2)

 
8.4         Statement of the Valuer’s Disinterestedness

It is required that the valuer include a statement in his valuation report that he has no present or contemplated future interest in the subject property or any other interest which might tend to prevent his making a fair and unbiased valuation or, if he does have such an interest, to set forth fully the nature and extent of that interest. (See Sec. 7.3)

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8.4.1      Valuers Responsibility to Communicate Each Analysis, Opinion and Conclusion in a Manner that is not Misleading.

The valuer should state in his report “I hereby certify that, to the best of my knowledge and belief, the statement of fact contained in this report are true and correct, and this report has been prepared in the conformity with the Uniform Standard of Professional Appraisal Practice of the Appraisal Foundation and the Principles of Valuation Practice and Code of Ethics of the Institute of Appraisers & Cost Engineers of the Nigeria Society of Engineers”.  

 
8.5        Mandatory Recertification Statement

All Senior Member valuers should state in each report “The Institute of Appraisers & Cost Engineers has a mandatory recertification program for all of its Senior members. ‘Iam’ or “Iam not’ in compliance with that program.”  


8.6         Signatures to Valuation Reports and the Inclusion of Dissenting Opinions

It is required that the party who makes the valuation or who has the valuation made under his supervision sign the valuation report. (See Sec. 7.4)

It is required that all collaborating valuers issuing a joint report, who agree with the findings, sign the report; and that any collaborating valuer who disagrees with any or all of the findings of the others, prepare, sign, and include in the valuation report his dissenting opinion. (See Sec. 7.4)

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INSTITUTE OF APPRAISERS & COST ENGINEERS

A Division of
The Nigerian Society of Engineers
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