Special Ethical and Compliance Issues Regarding Property Valuation Reports: Applicability of Valuations in Responsible Property Investment

Abstract

This paper presents some ethical and compliance aspects of valuations and demonstrates the importance of real estate appraisals in responsible property investment. The basis is fieldwork (interviews with senior Hungarian experts supported by questionnaires) focusing dominantly on the Hungarian practice and experience, combined with a review of the literature. This paper focuses on the operative side of investments: defining a detailed investment process, highlighting the unique features of ethical, responsible investments and then selecting the steps where an independent valuation is necessary and highlighting which aspects of ethical property investment should be supported by appraisals. The aims of this paper are 1) presenting the necessity of valuations, 2) giving examples when the independence of valuations is questionable.The conclusion is straightforward: independent appraisals are essential in all major milestones, but the independence aspect is critical. There are two practical ways to support this: 1) full implementation of professional standards (in developed property markets) and 2) centralized and common frameworks, rules and some “nudges” established by financial administration (in semi-developed markets like in Hungary).