Duhaime's Law Dictionary


Valuation Definition:

An expert's assessment, appraisal or opinion as to the market value of an item of property.

Related Terms: Appraisal, Fair Market Value, Appraisement

Synonymous with appraisal; the 1988 edition of Butterworth's Words and Phrases Legally Defined, under "appraiser" simply says "see valuer".

A valuation is an informed and objective inspection and estimation of the value or the worth of a thing.

In selling items of property not commonly sold in a public market, but for which a value is needed to, such as shares, businesses or pensions, buyers and sellers need to know the value of an item, in order to calculate the consideration to be given for the transfer of the thing.

Valuation is the art (or, depending on who you ask, the science) of inspecting and thereafter giving an opinion as to fair market value, expressed in cash or dollars, of the price which, in the opinion of the independent and neutral expert, such property would fetch if presented for sale to the public at the relevant time.

It is always a difficult exercice as fair market value may not represent the actual value to the seller or the buyer, for whom the particular asset may have far greater (or lesser) value. Other items are not generally on the public market (such as a share of a pension).

A valuation is conducted by a valuator (companies or businesses), appraisor (the term preferred when the item being valued is real property or a vessel) or actuary (pensions), or a board or committee of them, and is usually as of a specified date, and to the best of the expert's abilities.

The valuator must be objective and not have any conflict of interest, unless this is disclosed and accepted by interested parties.

Valuations are often required in law such as the buying and selling of shares of private corporations or to assess the fair compensation to give a person for their share in a business, a pension or a house.

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