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The Role of Estate Surveyors and Valuer in the Banking Industry

The Role of Estate Surveyors and Valuer in the Banking Industry in Abia State

Literature Review

Introduction

The picture is not however as rosy because the view trend is the employment of graduates from all field of study not withstanding relevance to finance or banking.

In any case, some jobs functions or duties or roles in these financial institutions have remained difficult to understand resulting in those having are, to consultants at times. One of such courses of this state of affair is the inability of these institutions to appreciate and/ or recruit people from the relevant allied professions. One of such professions is Estate Management whose professionally are otherwise called Estate Surveyors and valuers.

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The inability to appreciate the need and/or recruit the appropriate persons may only be a symptom of a more serious cause. Lack of awareness of certain allied professions such as state management.

THE CONCEPT OF BANKING

A bank is a company that provides financial services of various sorts to various types of customers. Its major function is to gather money from various people and to lend that money out to other people.

One of the most visible things that a bank does is to take deposits from customers and act as a place for them to store their money. The customers put money in the bank and they can draw the money out (by check of in cash form for example) when they need it. The bank provides them services in that it allows them to have a secure way to store their money and convenient ways to get that money back or to pass it on to others.

Banks use the money that has been deposited by customers. This is one way in which banks make money (they also make money through various fees that they charge customers for some services). A bank will take in money and hold it while paying only a very low interest rate to depositors, it will then lend that money out to others. It may loan it to someone who wants a mortgage, for example, or to a business that wants to expand, it charges a much higher interest rate to lend the money than it pays to borrow it. In this way, it makes money.

Banks are very important part of our economy because they provide us with many financial services that make it easier to use our money.

TYPES OF FINANCIAL INSTITUTION IN ABIA STATE AND THEIR FUNCTION

Financial institution can be broadly classified into two:

Financial institution in the banking sector and non bank financial institution. In the banking sector we have banks like First bank plc, First City Monument Bank, Wema Bank, Access Bank plc and in non bank financial institution we have Microfinance Banks which is formerly called postal address of financial institution, Insurance company.

BANKS

This is a financial institution that gather money from various people and let it out to another people and they provide financial services of various sorts to various types of customers.

FUNCTIONS

They are made up of two function:

  1. Primary function

A primary function is also known as banking function they are the main function of a bank and these function are:

  1. Accepting deposits

The bank collects deposits from the public, these deposits can be of different types.

  1. Saving deposit
  2. Fixed deposit
  • Current deposit
  1. Recurring deposit
  2. Granting loans and advances

The bank advances, loan to business community and other members of the public. The rate charged is higher than what it pays on the deposit. The type of bank loans advert are Overdraft, cash credit, loans, discounting of bill exchange.

  1. SECONDARY FUNCTION OF BANKS

The bank perform a number of secondary function also called as non banking functions:

These important function are explained below:

  1. Agency function

The bank acts as an agent to its customers, the bank perform a number of agency function which include:
i. Issue of draft letter of credit

Banks issue draft for transferring money from one place to another, it also issue letter to credit especially in case of import trade.

  1. Locker facility

The bank provides a locker facility for the shaft custody of valuable documents gold ornaments and other valuables.

iii. Underwriting shares

The bank underwrites shares and debentures through its merchant banking division.

  1. Dealing in foreign exchange

The commercial banks are allowed by RBI to deal in foreign exchange.

  1. Project reports

The bank may also undertake prepare project reports on behalf of its clients.

  1. Social welfare programmes

It undertakes social welfare programmes such as adult literacy programmes.

  • Other utility function

It acts as a referee to financial standing of customers. It collects credit worthiness information about clients of its customers. It provides market information to its customers, etc it also provides travelers check facility.

  1. MICROFINANCE BANK

Microfinance bank exist in a variety of forms that provide needed financial help in under developed economics. Microfinance banks exist in different forms, some which include non-governmental organization, credit union-type business, wire services and commercial and state banks.

Functions

  1. The microloans made available by microfinance banks enable communities with limited resources to develop small business opportunities.
  2. Microfinance bank plays an active role in supporting individual business working to stimulate each community existing potential for economic growth.
  • Microfinance bank provide a level of stability within under developed regions by creating multiple outlets for daily banking activities. Within communities location through aims, mobile phones and locally based mini branch offices.
  1. They specialize in providing small loans to people who would otherwise limited or no access in financial assistance.
  2. INSURANCE COMPANY
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The purpose of insurance companies is to spread risk out among all the policy holders, to accomplish this and stay economically viable they have to do several things correctly.

Functions

  1. They create proper policy language and most insurance policies must be approved by the insurance commissioner.
  2. At times smaller insurance companies will buy re-insurance to protect against excessive losses and they pay a premium for that re-insurance.
  • They safeguard your business against losses liability. Insurance they pay the legal fees and judgments associated with accidents, negligence and professional errors.

PROBLEMS OF ABIA STATE BANKS

The problem of keeping customers informed about the state of their account including error in rendering bank statement of account.

  1. Inadequate information about the rules and regulation governing the banking business. Some banks in Abia state do not use their professionals adequately.
  2. The reluctance of bank: In adopting the charging pattern in business especially delay in applying modern technology to accelerate some of the more routine function of their operation.
  3. Inability of providing adequate collateral security for granting of loan. Which otherwise could yield a lot of profit to the bank. It is the duty of the estate surveyor to ensure that collateral presented by the mortgage/borrower is worth more than the loan being granted. But it is unfortunate that some banks in Abia state prefer using lawyers and by so doing, the lawyer may not give the adequate mort value of the property.

WHO IS AN ESTATE SURVEYOR AND VALUER

According to Olajide (1996) on Estate Surveyor and valuer is a member of surveying professionals who is charged with the responsibility of directing and supervising interests in land and landed property with the purpose of yielding optimum return which may not only be financial but social, political and prestigious in nature. He also determines the capital worth of an interest in land and buildings. He further explained that an Estate surveyor and valuer is a person that is registered in Nigeria as an Estate Surveyor and valuer under the Estate Surveyors and valuer Registration Board of Nigeria (ESVARBON) as recognized under decree 24 of 1975 (Cap III, law of federation of Nigeria, 1990).

In the same vein, he also said that an Estate Surveyor is a person who performs function under land management and valuation and is referred to as Estate manager, Estate Agent, Auctioneer, Land Economist, Estate Valuer, Project manager and may other function relating to his role in their respect.

THE ESTATE SURVEYOR AND VALUER IN BANKING INDUSTRY

The banking industry supports lots of economic activities ranging from lending for construction of residential properties, commercial properties, industrial properties, license premises like hotels and recreation parks. They also lend money for provision of infrastructure, water, electricity, roads, and all these activities lead to one study-appraisal properties.

The Estate Surveyors and valuers as a person who has declared publicity by learning and experience to practice the real estate profession in accordance with the approved standards of (ESVARBON) by decree No.24 of 1975 or Cap III law of federation of Nigeria 1990 for the living and sustenance, of his family. There are rules of conduct limiting him and the ethics of his profession binding him. He is only chartered by the profession and so cannot float a limited liability company while practicing in his name or in the name of the principle partner.

In all that he does, in practice, he has to project the interest of the public first, the interest of his client, the profession, his colleagues and then his own interest.

SOURCE: HEMUKA N.N (2002).

Test of professional competence. A handbook for Estate Surveyors and valuers.

Estate Surveyors and valuers are more concerned with real estate. Real estate as we know it, is related to land simply for a fixed point of reference with which we can locate building improvements and identity mineral resources deep in the crust of the earth or airport landing zone high above normal building heights. What Estate surveyors and valuers do in practice in banking industry is to identify the variety of activities carried on by the bank and manage them judiciously.

The major role he plays in the banking industry generates lots of economic activities benefiting the government, the finance house, the individual and group of individuals. This major role according to Olesugun Kuye (2000) is in form of valuation for all purposes including mortgage and mortgage financing, insurance, lease and leaseback, transaction, compensation or condemnation appraisal, development appraisal and other valuations aimed at putting land and its improvements to its highest and best use”.

Again, the estate surveyor/valuer acts as an expert witness before judicial tribunal, land tribunal, independent experts and arbitrators, has a primary duty to give unbiased opinion on all matters within his expertise. This duty applies regardless of who is his employer/ultimate payer of his fee and bills.

In this vein, the estate surveyors strengthens his hold on:

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-Management of engineering projects in the banking industry including project management, selection of management team, project stages-completion and start up, risk identification and management.

-Insurance, types of insurance indemnities current practice, insurance condition and warrantee, bond and guarantees.

-Planning, planning organization, levels of planning network techniques, critical path and float progress and measurement.

In the banking industry, the Estate Surveyor and valuer play a vital role which including the following:

-Auction valuation

-Fixing of reserve prices.

-Inventory collection.

-Advising on insurance benefit (cover)

-Arbitration services.

– Loan and advances.

-Estate Agency

-Valuation.

AUCTIONEER SURVEYOR AND VALUER

The Estate Surveyor and valuer takes into account the open market value of a property in valuing the property for sale by auction. The open market value of a property is defined as “the best price at which an interest in property might reasonably is expected to be sold by a private treaty at the date of valuation assuming:-

  1. A willing seller/vendor.
  2. A reasonable period within which to negotiate the sale taking into account the nature of the property and the state of market.
  • That value will remain static within the period.
  1. The property will be freely exposed to the market.
  2. No account is to be taken of any additional bid by a special purchaser with special interest.

Valuation for auction is more akin to a forced sale valuation. The reduction is negotiation period of such a sale is referred to as forced sale which is defined as the open market value with a provision that the vendor has imposed a time limit for the completion which cannot be regarded as a reasonable period.

Auction valuation requires the experience and knowledge of the Estate Surveyor and potential bidders who are likely to be present at the auction. He will predict price that the buyer at the auction would assign to the properly and thereby advice the vendor on the value.

FIXING OF RESERVE PRICE

According to Nwankwo P.C (1998), Estate surveyors are expected to work with guidelines provided by the sales auction law, it is also his duly to the following:

-Advertise by placing in a strategic place poster indicating that their will be an auction, the venue and time of the auction.

-He should be in position to make arrangement as regard clearing and arranging auction particulars.

-Prior to the auction day, he should on agent or to be able to open the auction site for inspection by interest prospective bidders.

-The lot numbers and reserve price of those item should be also indicated before the auction day.

-As he work with an already established reserved price, he has to go through the valuation list, indicating the missing item and assigning value on them.

-On the auction day, he must ensure that there is adequate security and make proper arrangement as regards to the lodging in of the money realized after the auction sales.

Finally, he renders accounts as regards to the proceeds made after auction.

RECORDS OF INVENTORY

The Estate Surveyor and valuer keeps a proper inventory of all the properties belonging to the banks that employees him. He will ensure that the property is not encroached upon or taken over. This is a very vital function of the Estate surveyor which cannot be overlooked in the industry.

ADVISING ON INSURANCE BENEFITS (COVER)

There is always the tendency for property owners in this country to feel sale that nothing will happened to their investment. But this is not true as there have been cases of houses being touched or destroyed either by natural or man-made selection.

It is therefore the duty of the Estate Surveyor as the property manager to advice the bank on the necessary to insure building improvement against such loss. In other words there should be adequate. Insurance cover on the buildings, facilities and other infrastructure.

LOAN AND ADVANCES

This is another important role played by the Estate Surveyor and valuer in the banking industry. They make sure that borrower’s security is at least secured and marketable.

Ajayi (1981) states that the banks granting of loans is co extensive to response for repayment. But there are other conditions to be fulfilled by the borrowers before they can obtain loan from the bank. There conditions vary with the amount of loan to be granted. With regards to mortgage loans. The following conditions must be must before loan is granted.

  1. The loan applicant must have an operating account with the bank. The implication of this is that non-customer of the bank may not be able to benefit from the arrangement except on some other arrangement with the bank.
  2. The bank also put into consideration the status of the borrower this means, his or her ability o redeem the loaned sum before or at its maturity date.
  3. The borrower must show the feasibility study of the project or in some cases. The bank through his Estate Surveyor will carry out the feasibility study themselves. Where this does not satisfy the bank’s anticipation, they will then judge, the loan as inadmissible.
  4. The borrower must present/show his property either a building or land that an Estate Surveyor will go and value. By showing his property, the borrower must present his certificate of ownership must to bank. The certificate of ownership must include title document and other documents relating to such property.
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ESTATE AGENCY

The Estate Surveyor/valuer in his role as an Estate agent negotiates on behalf of his employer (the bank) of the purchase, sale or lease of a property. He offers advice on the market or rental value of the property. A typical example can be seen where a bank is willing to dispose off their block of flats to tenant or they may be interested outright sale of building. In order to achieve this, it is the duty of the Estate Surveyor who will market the property to find a suitable buyer to negotiate the terms of the sale or lease. The valuer may also assist the employer in purchasing or leasing property for the bank’s use. Therefore it work involves three different aspect which are:

  1. Lease
  2. Purchase
  3. Sale
  4. LEASE: If the aim of the property is to gain annual returns in the form of rent or rate, the Estate Surveyor who is the Estate agent could be involved in the following:
  5. SELECTION OF TENANTS: According to guidance role on property development and management by Uzere D. (2003), he says that the valuer is involve in choosing tenant who are suited to occupy the premises although the bank have final say, it is important that a satisfactory tenant is chosen. Even if the rent he paid is well above the market value, he does not make up for the cost and burden of harboring a troublesome tenant. It is therefore the Estate agents duly to investigate as much prospective tenant.
  6. NEGOTIATION OF TERMS: Another role played by the valuer in agency is negotiating suitable terms in order to attract the right tenant. These include the rent, the tenant’s repair liability and the length of the terms. The terms may be adjusted to favour a tenant who wish to renew his lease (Uzere, D. 2003).
  • AGENCY CONCERNING SALE AND PURCHASE OF PROPERTY

The valuer assists in the sale and purchase of property for his employer (the bank). This involves the transfer of property ownership from one person to another. The valuer negotiates a fair price for the assignment and it is usually based on a fair open market value. He ensures that all necessary document are obtained and property witnessed e.g certificate of occupancy, receipt of payment, deed of conveyance.

VALUATION

Valuation is the basic and attributive discipline of the Estate Surveyor and valuers because the ability to place a monetary value on an interest in land and property underlines all the other professionals pursuit of agency, management and investment.

The valuer’s special expertise is to assess the capital or fair market value of any property at a certain time. His services maybe sought by anyone with an interest in or contemplating a transaction involve land and building e.g the bank may require the advice of the valuer on the price they should ask for their property on side, a prospective tenant on the mortgage he can advance, and a person disposed under compulsory acquisition powers on fair and adequate compensation he can claim. The valuer takes into account the basic purpose for which the valuation is required before embarking on his job.

DEVELOPMENT AND PROJECT MANAGEMENT

According to Chikezie Okoronkwo’s lecture notes on property development (2005), the valuer may act as a project manager or coordinator in the development of property for his employer. He constitutes parts of the development team and his duties entails the following activities:

  1. Feasibility and viability study: This report is prepared by the valuer on behalf of the bank to determines if it is possible for the development in question to be actually carried out while viability study is done to determine the profitability of the project i.e if it will produce optimum return or if it will be a waste of capital. In which case, the valuer will advice on the alternative projects.
  2. As the project manager, he co-ordinates all activities of the building team, unlike the other professional in the team who have specific duties on the construction site and disappear when they have played their part.
  3. At the end of the project, he hands it over to his employer (the bank) and sees to its disposal or management, if so required by the bank.

The Role of Estate Surveyors and Valuer in the Banking Industry in Abia State

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