Introduction
Why do valuers need to explore non-traditional areas of work? There are
two major reasons why one would conduct such a search. First, and more
conventionally, is the internal drive to expand business horizons.
However, exploring non-traditional areas of work for this reason may
not result in a trend because it depends on the background, expertise,
and initiatives of individual valuers-cum-entrepreneurs. Second, external
environmental forces may drive the exploration of non-traditional areas
of work. In the field of valuation, the demand for and relevance of
conventional areas of work are dwindling and may eventually come to
a point where one can no longer rely on them for a living. Therefore,
non-traditional areas of work need to be explored as supplemental or
alternative sources of income. This second reason may be the major
concern for valuers in the world today.
Is There a Future for Valuers?
Social and economic conditions have changed, and valuers are being critiqued
worldwide. Because in some cases appraised sales value is incongruent
with the value estimated for a buyer, the credibility of valuers is being
increasingly critiqued. McFarquhar (2000, 4) observed that valuers are
on shaky ground in terms of career stability, even in highly developed
countries such as in the United Kingdom where valuation has been an established
profession for centuries. Bates (2001, 5) observed that appraisers in
the USA are subjected to a similar plight.
In 2003, the World Valuation Congress held its 10th bi-annual world congress
entitled “Is There a Future for The Valuation Profession?" at Cambridge
University, United Kingdom (WVC, 2003). Some 250 participants gathered
to discuss this main theme. Greenwood (2003, 6) summarized the discussions
by stating that automated valuation models (AVM) and other technologies
have reduced valuation services to the status of a commodity that can
be produced at the lowest possible cost. He also concluded that in today's
world, valuers will have to actively acquire new innovative skills in
order to survive. These skills, however, have not previously existed
in the domain of the valuers.
There has been increasing concern about the AVM dilemma, which is predicted
to reduce the number valuers and their jobs worldwide. In the 2004, at
the Appraisal Today Conference, Zillious mentioned that AVM is now widely
used for tasks previously carried out by valuers such as pre-qualification,
first mortgage, home equity, wholesale review, quality control, default
and foreclosure, portfolio valuation tracking, and internet marketing.
As a result, the need for valuation is likely to shrink drastically in
the near future, particularly for residential properties, which are the
major source of income for typical valuers.
There is much evidence that may be drawn to support this prediction.
Valuation fees have been declining worldwide. In Australia, Bond (2003,
14-15) pointed out that the high cost of professional indemnity insurance,
Aus$4,000 to Aus$10,000, has discouraged many valuers to the point where
many have moved on to other professions. Ghyoot (2004, 7) identified
the increasing pressure of cost competition among valuers. He suggested
that valuers may consider other work alternatives, such as consultancy
services in the areas of asset, financial, and real estate portfolio
management.
The threat to valuers is not only limited to local valuation firms, but
also to large international firms. Large accounting firms have diversified
into property consultancy services, intruding upon the work opportunities
of valuers. Given this situation, the future of conventional practices
of valuers may not be bright. In a globalized world, issues become inter-related,
but adaptation and development takes time. Therefore, it is critical
that a paradigm shift takes place among valuers if the profession is
to survive and to develop.
Therefore, it is critical that a paradigm shift takes place among valuers,
if the profession is to survive and to develop into the future.
Being Competitive for Survival
There are two paths that valuers can take to become more competitive
and survive in the changing world. First is to become acquainted with
AVM-CAMA and learn to use these tools to the best advantage of the valuer.
Second is to specialize within the field of valuation.
Valuers cannot avoid the use of the AVM or Computer-Assisted Mass Appraisal
(CAMA). These technologies have been developing since the 1970's and
have been accepted in the Uniform Standards Of Professional Appraisal
Practice (USPAP, 2004). The International Association of Assessing Officers
(IAAO, 2002) published the standards for CAMA in 2002. In 2004, IAAO
(2004) also approved standards for AVM. A valuer in the contemporary
world needs to know about the innovations brought on by CAMA and AVM
and must adopt and apply these tools to their best advantage because
CAMA and GIS (Geographic Information Systems) have already become widespread
in the world of valuation.
Specialization
Being strong in a particular field is another way to gain an edge over
one's competitors and survive and grow. In the USA, a considerable number
of valuation firms have begun to specialize in particular types of properties.
For example, HVS International specializes
in global hospitality consulting. Rushmore of HVS International went
further and has written a book on “Hotels and Motels: Valuations and
Market Studies” for the Appraisal
Institute (1992) based in Chicago.
In the Asia-Pacific region, some prospective areas for specialization
are:
• Plantations
including palm, rubber, or fruit orchards
• Utility properties
including facilities projects
• Agricultural
properties
• Environment
concerns and contaminated properties
• Easement,
right-of-way, and appropriation
Even though limits exist for both of these suggested alternatives, they
cannot be ignored and it is important that they are taken seriously.
In the case of AVM, CAMA and other information technology, it is debatable
whether they are a “boon or bane”. Important investment decisions should
not be made without adequate scrutiny and well informed judgement. Therefore
rational and intelligent people should not allow themselves to blindly
believe in the judgements of artificial intelligence. In the case of
specialization, qualified expertise is also needed. This will take a
certain amount of time, and given time constraints, some valuers may
not be able to furnish themselves with the necessary knowledge and experience
in time to make the changes that will enable them to survive.
The application AVM, CAMA, and GIS technologies as well as specializing
in a particular field of valuation are thus two major ways out of the
present dilemma. In addition, there is still a need to diversify into
related real estate business.
Diversification
There are a diverse set of fields that should be considered when thinking
about ways to expand one's business under normal conditions or as alternative
fields during lean times. The following are some valuation-based services:
• Survey. There
are a several types of surveys that can be considered, such as building inspection,
land title survey and certification,
quantity survey, traffic count surveys and the like. Surveys in
these areas can complement and
supplement a valuer's main services.
• Research. This
includes a wide range of services such as market feasibility studies (market
survey,
site analysis), financial feasibility
studies for project development and/or investment, product tests,
surveys of clients and consumers
(questionnaires, focus groups, etc.).
• AVM-
CAMA. Expertise in AVM-CAMA can be applied to various fields of services,
types of real
estate, and sectors of the markets.
In the case of Thailand, AVM-CAMA is essential for property
tax purposes for over 1,000 municipalities,
7,000 sub-district administrations, and 100 other local
authorities.
• GIS. For
most local authorities, the preparation of tax maps is very essential. Using
GIS helps
authorities by allowing for easy survey,
remote-sensing interpretation, user-friendly programming,
database management and other follow-up
jobs. The need for this service can be very broad.
• Education. In
Thailand, since 1995, the Agency for Real Estate
Affairs has taught valuation, and in
2002 has established and managed the Thai
Real Estate Business School. The school operates
under the supervision of the Ministry of
Education of the Royal Thai Government. As of August
2004, over 44 batches of its ‘fundamental
course' have been organized, producing some 2,000
students nationwide.
• Publications. Real
estate publications can be another line of valuation-related business. This
includes the publishing of text books,
reference books, pocket books and journals for sale to the
public. Publications can help improve
name recognition for firms as well.
In addition, there are also non valuation-based fields of business that
can be expanded or shifted into. The following are some examples:
• Agency
/ Brokerage. In Thailand, there is the Real
Estate Brokers Association with some 200
brokerage firms. However, if one wants
to be a broker, he should not be a fee valuer at the same
time so as to avoid potential conflicts
of interest.
• Estate
management. . Again, in Thailand there is the Property Management Association
of
Thailand made up of over 50 property
management firms.
In addition, there are other real estate-related fields such as property
development, facility management, relocation, finance and the like that
valuers may be able to branch into.
Conclusion
The need to explore non-traditional areas of work is internally driven
by the expansion of professional services and externally driven by the
shrinkage of the conventional valuation profession. Impediments to further
development of the profession include consumer doubts in the credibility
of valuers, the introduction of AVM – CAMA, and the intrusion of other
related professions.
To survive and develop further, valuers must seek to create opportunity
amidst the impending threat by making friends with AVM-CAMA to make the
most out of these technologies. In addition, they must become more specialized
in their valuation expertise, applying their valuation capabilities to
the field of plantations (oil palm, rubber, or fruit orchards), utility
properties (including facilities projects), agricultural properties,
environment concerns and contaminated properties as well as easements,
right-of-way and appropriation projects.
In considering the shift to alternative fields where valuation capabilities
may be of value added, the valuer may consider offering a diverse set
of valuation-based services such as survey, research, AVM-CAMA, GIS,
education, and publications. On the other hand, valuers must also take
into consideration non valuation-based alternatives, such as brokerage,
property management, facilities management and the like.
REFERENCES
Web-based References
1. Appraisal
Institute, Hotels and Motels: Valuations and Market Studies, 1992.
2. International Association
of Assessing Officers, Annual Conference, 2002.
3. International Association
of Assessing Officers, Annual Conference, 2004.
4. Rushmore,
Steve in HVS International website, 2004.
5. Uniform
Standards of Professional Appraisal Practice, 2004..
6. World
Valuation Congress, 2003.
7. Appraisal
Today Conference, 2004, Zillious, Vicky Cassens.
Hard-Copy References
1. Bates, Mark F (2001). Interview: Our Appraisal Visitors to Thailand.
Published in the VAT News, Vol.
1/2001, January-March 2001, p.5.
2. Bond, Sandy (2003). Issues Facing Valuers in Australia: Lessons for
Thai Appraisers. Published in
the ThaiAppraisal Journal, Vol. 2, No. 2, April-June
2003, p.14-15.
3. Greenword, David (2003). Is there A Future for the Valuation Profession?
Published in the
ThaiAppraisal Journal, Vol. 2, No. 3, July-September
2003, p.6.
4. Ghyoot, Valmond (2004). International Perspectives - Valuation in
South Africa (an interview).
Published in the ThaiAppraisal Journal, Vol. 3, No. 2,
April-June 2004, p.7.
5. McFarquhar, Alister (2000). Valuation Profession Under Critique. Published
in the VAT News,
Vol.2/2000, April-June 2000, p.4. |
