ABSTRACT
This chapter discusses the problems and criticisms of the initial appraisals. It explains that when the technique is used to appraise projects where land has been purchased for a known sum and a building cost consultant/quantity surveyor has provided accurate cost information, the technique can become more robust. The chapter details the issue of sensitivity to changes in variables and how such techniques can be used to explore these sensitivities and make them explicit. It shows that the residual approach may produce a negative value, which should be reported, although in some cases sites will sell in market even where they may have a negative residual valuation. The main costs to be deducted from the completed development value will include pre- and post-development costs. Construction costs in initial appraisals or residual valuations are typically assessed on a price per square metre basis. The professional fees for architects, quantity surveyors, engineers need to be added to the construction costs.
