Prepared by: RAMON R. ALBEUS, IE.MM.ICCV,ALAF,REA

City Assessor, LGU-Naga City

APPRAISAL – is the act or process of determining the value of a property as of a specific date for a specific purpose. (Sec 199 (e), LGC)

It may also defined as the act of estimating the value of a property. It is an estimate or opinion of value , usually market value or value as defined by the appraiser. It is

made as of a specific date and is conclusion which results from a logical and orderly analysis of facts.

  The act or process of determining the value of a property as of a specific date for a specific purpose (Sec. 199(e), RA 7160)

  The process of estimating value (PVS)

  It is an estimate or opinion of value, usually market value or value as defined by the appraiser. (MAG)

  it is a supportable or defensible estimate of value as of a particular point in time.

  An estimate expressed as a single peso amount, of the scarcity and utility , i.e, economic nature, of a specific property at a specified time and place, assuming a specific use.

  Real Estate Appraiser – a duly registered and licensed natural person who, for a professional

fee, compensation or other valuable consideration, performs or renders, or offers to perform services in estimating and arriving at an opinion of or acts as an expert on real estate values, such services

of which shall be finally rendered by the preparation of the report in acceptable written

form.

- one who conducts appraisals; specifically, one who possesses the necessary

qualifications, ability and experience to execute or direct the appraisal of real or

personal property;

  1. Oral Report

  2. Letter Report

  3 Narrative Report

  4.Form Report

  1. Sale or Purchase   2. Mortgage Loans / Lending   3. Insurance   4. Tax Assessment   5. Eminent Domain (Condemnation)   6. Property Disputes   7. Inheritance/ Partitioning of Estate   8. Options- right to renew/ to buy   9. Corporate Realty- mergers, etc.   10. Urban Renewal   11. Foreclosure   12, Other uses

 – is the act or process of determining the value of a property or proportion thereof subject to tax, including the discovery, listing, classification and appraisal of

properties.

  The appraisal of real property shall be based on the latest

schedule of Fair Market Value (SFMV) prepared by the

provincial, city, or municipal assessors with MMA, as

embodied in an ordinance passed by the Sanggunian

concerned. (Sec. 212, LGC)

  MV = UBMV X AREA

  AMV = MV ± AF

  Where:   MV = Market Value   UBMV = Unit Base Market Value   AMV = Adjusted Market Value   AF = Adjustment Factor

  Narrow Definition:

– The act or process of determining the value of property, or proportion thereof subject to tax.

  Broad Definition:

– It includes the discovery, listing, classification, and appraisal of properties. (sec. 199 (f) LGC)

  Refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof. (Sec. 199 (b),

LGC)

  “For Real Property Tax (RPT) purposes, Actual use should not be construed as a limiting factor in the basis for the classification and valuation of the property, but as a determining factor in establishing the assessment level in order to set the taxable value”

  AV or TV = AMV X AL     Where:

  AV or TV = Assessed Value or Taxable Value   AMV = Adjusted (Fair) Market Value   AL = Assessment Level (to be applied

based on actual use)

  As a general rule, the classification, appraisal, and assessment of real property for taxation purposes, shall

be governed by the provisions of R.A. 7160 and its implementing rules and regulations and other existing

laws and rules issued by the Department of Finance thru the Bureau of Local Government Finance (DOF-BLGF)

and the Sangguniang concerned.

  For purposes of computing the internal revenue tax, the value of the property shall be either the

zonal value, the value shown in the SFMV, or the amount of consideration appearing in the Deed of Absolute Sale, whichever is higher. (Sec 6E,NIRC

of 1997)

◦ The general standards for valuation of real property for tax purposes is the market value. Zonal Value is a value set by the government for internal revenue tax

purposes derived from a deversified valuation procedures adopted by the committees or

recommending body. The zonal values takes effect after approval by the Secretary of Finance. These zonal values remain in force until the subsequent

revision/ amendment.

◦ There are four (4) types of taxes that can be collected from the transfer, exchange or disposition of real properties.

 1. CGT- Capital Gains Tax  2. ET - Estate Tax  3. DT - Donor’s Tax  4. DST- Documentary Stamp Tax

  The estimated amount for which a property should exchange on the date of valuation between a

willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the

parties had each acted knowledgeably, prudently and without compulsion.

•  Refers to a price expressed in terms of money (normally in local

currency), payable for the property in an arm’s length market

transaction. •  It is the best price reasonably

obtainable by the seller and the most advantageous price

reasonably obtainable by the buyer.

•  Refers to the fact that the value of a property is an estimated amount

rather than a predetermined amount or actual sale price.

•  It is the price at which the market expects a transaction that needs all other elements of the Market Value definition to be completed on the

date of valuation.

•  Requires that the estimated Market Value is time-specific as

of a given date. •  Markets and market conditions

may change, the estimated value may be incorrect or inappropriate

at another time.

•  Refers to one who is motivated, but not compelled to buy.

•  This buyer is neither over-eager nor determined to buy at any

price.

  Is neither an over-eager nor a forced seller, prepared to sell at any price, nor one prepared to

hold out for a price not considered reasonable in the

current market.

 Means that the property would be exposed to the market in the

most appropriate manner to effect its disposal at the best price reasonably obtainable.

 Presumes that both the willing buyer and the willing seller are reasonably

informed about the nature and characteristics of the property, its actual and potential uses, and the

state of the market as of the date of valuation.

  establishes that each party is motivated to undertake the

transaction, but neither is forced or unduly coerced to complete it.

1.  Market value is not determined, it is estimated.

2.  Market value is affected by the actions of the buyers and sellers involved in the transactions.

3.  Valuers and appraisers do not create value, they effectively uncover the value that is already in the property.

4. Value is estimated thru the application of valuation methods and procedures.

VALUATION APPROACHES TECHNIQUES

AND METHODS

THREE VALUATION APPROACHES:

1. Sales Comparison / Market Data 2 Cost Approach 3. Income Capitalization Approach

In ALL valuation cases, the ultimate values established rely on:   Proper collection of Data   Sound Analysis   Intelligent application of the

resulting analyzed information

Considers the sales of similar or substitute properties and related market data, and establishes a value estimate by processes involving comparison.

Listings and offerings may also be considered as data.

Assumes that an informed buyer would pay no more for a property than the cost of acquiring an existing property of similar nature. (Principle of Substitution)

♦  Recognizes that property prices are determined by the market ♦  Market Value can be calculated from studying market prices for properties that

compete with one another for market share ♦  Method is applicable when there is an active market with sufficient number of

verifiable transactions

  Considers the possibility that, as an alternative to the purchase of a particular property, one

could acquire a modern equivalent asset that would provide equal utility.

  Estimates the cost of acquiring an equivalent land and the cost of constructing an equivalent new structure while adjusting for depreciation to

reflect obsolescence.   Assumes that an informed purchaser would pay

no more for a property than the cost of land improvements required in reproducing a

substitute property with the same utility as the subject property.

 

  Establishes the upper limit of what the market would normally pay for a given property when it is new.

  For an older property, some allowance for various forms of accrued depreciation is deducted to estimate

a price that approximates market value such as:   Physical Deterioration

  Functional or Technical Obsolescence   Economic or External Obsolescence

REPRODUCTION COST NEW: Cost to create a virtual replica of the existing

structure, employing the same design and similar building materials.

REPLACEMENT COST NEW: Current cost of constructing a similar property

using modern materials, standards, design, etc. REPLACEMENT COST NEW LESS

DEPRECIATION: Equivalent to the term “Depreciated Replacement

Cost”. This is the effect of the depreciation of a building or other improvement, from all sources.

  Considers income and expense data relating to the property being valued

and then estimates value through capitalization process.

  Applicable to income-producing properties.

Assumes that an informed purchaser would pay no more for a property than the cost of obtaining an Income

Stream of the same size embodying the same risk as that of the subject property.

Determines an income stream (annual net rent) on potential income stream or cash flow.

The approach expresses a fixed relationship between two factors of net income and capital value.

The approach is most applicable in the case of investment or commercial properties

I.  Sales Comparison Approach

a. Sales Comparison Method b. Extraction/Residual Method c. Stripping Method

II. Cost Approach:

a. Civil Engineering or Quantitative Method b. Unit-In-Place Method c. Indexing Method d. Comparative/Repricing Method

III. Income Capitalization Approach:

a. Net Rent/Rental Method b. Hypothetical Development Method c. Discounted Cash Flow Method

THANK YOU VERY MUCH ….   GOOD LUCK …..