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I am auditing a 2022 SMSF with a rental apartment as its major investment in Melbourne CBD.. The trustee relies on a professional valuation dated 30 June 2019 for the 2022 accounts. As auditor, I rejected this valuation and requested the trustee to obtain a fresh valuation/appraisal for the 30 June 2022 accounts. A local real estate agent prepared an appraisal with the following disclaimer:
This market analysis has been prepared on 16/01/2024 and all information given has been based on a current market analysis for the property listed above. Based on this, we believe this property to be estimated in the following range.
3 comparative property data were provided in the appraisal with sale dates all around August 2022. For the purpose of the 2022 accounts, is this acceptable given that the agent is comparing current market condition, being January 2014 with sales history of Aug 2022? He is not comparing on the same market condition. Your comments please.
Hello Stephen, thanks for the question.
It could be that the disclaimer is generic in nature. It appears that the comparable sales that were used to assist in forming the valuation range provided by the real estate agent were from around August 2022 (and not January 2024). It would seem odd if the appraisal, was based on sales from a particular period, and then prevailing market sentiment/market conditions from another period.
There is little utility that can be gained in second guessing what the real estate agent might have meant by the words used in the disclaimer.
The simplest way forward here is to have the real estate that provided the appraisal to confirm in writing that the range provided is intended to assist in valuing the property as at 30 June 2022, based on comparable sales and the prevailing market conditions at or about that time (i.e. June to August 2022).
As an aside, it should not be a concern that for a valuation that is intended to be useful for the purposes of the validating the closing balance of an asset on 30 June 2022, is based on sales that occurred in August 2022. It is not as if the comparable sales needed to have occured as at 30 June. If this was the case, it could be that no valuation is even possible.