In valuation engineering, we use scientific methods governed by NBR 14653 to ensure the resulting figure reflects the reality of the market. In this article we explore how statistical inference and the different valuation methods bring legal and financial certainty to your assets.

1. The power of statistical inference

Unlike a subjective appraisal, statistical inference uses mathematical models to explain how prices are formed. Through linear regression we can isolate variables and understand how much each characteristic of the property influences the final value.

  • Quantitative variables: built area, number of parking spaces, age of the property.
  • Qualitative variables: finishing standard, location and state of conservation.

The engineering software processes this data and generates an equation that reduces subjectivity, making it possible to identify outliers (atypical data) that could distort the result.

2. Valuation methods: which one to use?

Depending on the type of property and the data available, the engineer chooses the most accurate route:

A. Direct market data comparison method

This is the gold standard. It consists of comparing the property being valued with similar ones recently sold or offered. Statistical (or factor) treatment adjusts the differences between the samples — for example, a corner property compared with one in the middle of the block.

B. Cost (evolutionary) method

Widely used for detached houses or industrial properties where there are few direct comparables. The logic: value of the land + cost of reproducing the improvements (less depreciation) + marketing factor. It is the sum of the parts to arrive at the whole.

C. Residual (involutionary) method

Ideal for large plots and urban land with development potential. It projects a hypothetical development on the site (e.g. a building or a subdivision), calculates total sales revenue and subtracts construction costs, fees and the developer's profit. What is left is the maximum value the land is worth today.

3. Factor treatment

In markets with little data (small samples), where classical statistical inference may fail, we use factor treatment. We apply technical coefficients to homogenise the samples: if a benchmark property has a higher finishing standard than the one being valued, we apply a correction factor to equalise the data, bringing everything to the same basis for comparison.

Why hire a valuation engineer?

A technical valuation minimises risk in:

  • Bank collateral: it prevents the asset from being under-valued or over-valued.
  • Asset division and probate: it ensures fairness between the parties.
  • Lease renewals: it bases the figure on real market data, avoiding contractual losses.

In engineering, the numbers speak, but it is the engineer's technical interpretation that guarantees they tell the truth.