In this post we briefly look at the valuation methodologies used for assets other than real estate.
The Cost Approach is another valuation methodology for real estate. The post provides a step by step process of how the Cost approach works and presents situations where it should or should not be used. It also covers the type of data and data sources used for carrying out the analysis.
The Income Capitalization Approach is another valuation methodology for real estate. The post provides a step by step process of how the income capitalization approach works and presents situations where it should or should not be used. It also covers the type of data and data sources used for carrying out the analysis.
The Sales comparison approach is an estimation methodology for valuing real estate. The post details how the sales comparison approach works and presents situations where it should or should not be used.
We discuss the two-step process of real estate valuations in this post. We also briefly review the criteria that appraisers use for selecting the most appropriate valuation approach.
Before moving on to the specific techniques for valuing collateral we will consider some of the general principles of undertaking a valuation.
Just as important as the existence of sufficient collateral sources is, it is also essential that collateral valuation methods are accurate. In this post we consider how collateral valuation impacts capital and profits.
Earlier we considered how collateral helps with financial intermediation. However the extent to which it can help or play its role is dependent of the collateral law applicable. The next section covers what is meant by collateral law and what facets of collateral would normally be impacted by collateral law. It also compares the effectiveness of modern collateral law systems against the restrictions of unreformed traditional systems.
Financial intermediation refers to the channeling of funds from those who have money (the lender) to those that do not have sufficient money to carry out a desired activitiy (the borrower). Collateral plays a very important role in this process. In this post we will look at the benefits of collateral to the lender and borrower and how it promotes and enhances the financial intermediation process. We also consider the situations where collateral is not easily available and the resultant impact on the financial intermediation process and the economy as a whole.
Earlier we defined collateral in general. However, the basic definition of collateral can be extended to include other elements of the pledged asset, such as asset proceeds, which is elaborated below. We also briefly review some of the performance indicators for collateral with regard to its impact on the timely repayment of outstanding debt.