Appraisal and Inspection Fundamentals

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Questions and Answers

What is the primary purpose of appraisal in the context of securing loans?

To establish the aesthetic value of the property

To estimate potential future income from the property

To determine the insurance value of the property

To determine the fair market value of properties or chattels (correct)

Which method uses recent sales of similar items to assess value?

Market Residual Method

Cost Approach

Sales Comparison Approach (correct)

Income Approach

What does the Cost Approach involve when appraising property?

Using insurance values to determine worth

Estimating the historical cost of the property

Calculating the replacement cost less depreciation (correct)

Assessing the potential rental income

Which type of property includes vehicles, machinery, and equipment?

Personal Properties (Chattels) Signup and view all the answers

In which approach is fair market value determined using recent auction results for industrial machinery?

Market Comparison Method Signup and view all the answers

What is a characteristic of intangible properties?

They possess no physical presence Signup and view all the answers

What does determining collateral value assist with in financial considerations?

Assessing credit risk Signup and view all the answers

Why is the appraisal of properties essential for investment decisions?

It helps in making informed decisions in lending and investment Signup and view all the answers

What is the maximum loan amount a borrower can receive against a vehicle valued at PHP 1,140,000?

PHP 798,000 Signup and view all the answers

Which factor is NOT mentioned as influencing land values?

Cultural significance Signup and view all the answers

Which document serves as proof of legal ownership for a land parcel?

Certificate of Title Signup and view all the answers

In urban areas, which aspects contribute to high land values?

High commercial and residential demand Signup and view all the answers

What is required for a landowner to claim title through adverse possession?

Occupation for a prescribed period Signup and view all the answers

What role does the Land Registration Authority fulfill?

Issues Certificates of Title Signup and view all the answers

Which of the following statements is true regarding land values in rural areas?

They are based on agricultural potential. Signup and view all the answers

What is a factor that can enhance the accessibility of land?

Infrastructure development projects Signup and view all the answers

What is the total market value of the pledged shares if Jollibee Foods Corporation shares are trading at PHP 250 each and 10,000 shares are pledged?

PHP 2.5 million Signup and view all the answers

What role do creditors play in insolvency proceedings?

They are essential for maintaining a sustainable business model. Signup and view all the answers

What is the Loan-to-Value (LTV) ratio applied by the bank for the loan?

50% Signup and view all the answers

What is a characteristic of secured debts?

They are settled first from the sale of secured assets. Signup and view all the answers

Which assessment method was used to establish the appraised value of the collateral vehicle?

Market Comparison Method Signup and view all the answers

Which statement correctly describes voluntary insolvency?

It is initiated by the debtor seeking legal relief due to financial distress. Signup and view all the answers

Which claim is prioritized after secured debts when settling debts?

Salaries and wages of employees. Signup and view all the answers

What is the final appraised value of the Toyota HiAce after considering depreciation adjustments?

PHP 1,140,000 Signup and view all the answers

During the vehicle inspection, which of the following is NOT mentioned as part of the inspection process?

Service history of the vehicle Signup and view all the answers

How are unsecured debts treated in comparison to secured debts?

They are subordinate to secured debts in the settlement process. Signup and view all the answers

What document is used to verify the vehicle's ownership as part of the loan process?

Certificate of Registration Signup and view all the answers

What type of claims includes unpaid taxes and customs duties?

Government claims. Signup and view all the answers

How many kilometers has the Toyota HiAce been driven according to the inspection?

40,000 km Signup and view all the answers

What is a primary benefit of the bankruptcy process for businesses?

It facilitates business rehabilitation and recovery. Signup and view all the answers

Which of the following best describes unsecured debts?

They are not backed by any collateral. Signup and view all the answers

What must the borrower do with the shares while the loan is active?

Keep the shares in a restricted account Signup and view all the answers

What is the primary purpose of legal documentation in acquiring land titles?

To ensure clear and undisputed ownership Signup and view all the answers

Which of the following best describes 'double titling' in land acquisition?

Issuing conflicting titles for the same parcel of land Signup and view all the answers

When acquiring land through donation, which document is essential for proving ownership?

Deed of donation Signup and view all the answers

What aspect is critical in conducting a land survey during the acquisition of land titles?

Establishing precise boundaries to avoid disputes Signup and view all the answers

Which of the following is NOT a method of acquiring land titles?

Merger of estates Signup and view all the answers

What is a potential risk associated with agricultural land in certain regions?

Geohazard areas susceptible to typhoons Signup and view all the answers

What is the maximum amount reimbursable according to the Supreme Court Administrative Matter No. 08-8-7-SC?

PHP 1,000,000.00 Signup and view all the answers

What type of agreement is necessary when a buyer and seller engage in the purchase of land?

A notarized sale agreement Signup and view all the answers

Which of the following is considered a key element of a collection policy?

Grace Periods Signup and view all the answers

What does the term 'Utang na loob' refer to in the context of repayment behavior?

Cultural expectations of gratitude in financial exchanges Signup and view all the answers

In the context of land titles, what is a significant concern related to fake titles?

They are difficult to detect and may result in legal disputes Signup and view all the answers

What should a collection procedure include to handle disputes effectively?

Dispute Resolution Protocols Signup and view all the answers

Which factor is NOT inclusive among those influencing paying habits?

Government Regulations Signup and view all the answers

What type of collection letter is sent after a payment has become overdue?

Past Due Letter Signup and view all the answers

Which of the following best defines a collection's interest and penalties element?

Defined charges for late payments Signup and view all the answers

What is the primary purpose of implementing a follow-up system in collections?

To automate reminders or calls for payments Signup and view all the answers

Study Notes

Nature and Purpose of Inspection and Appraisal

Appraisal involves determining the fair market value of properties or chattels.
Appraisal is essential for securing loans and assessing credit risk.
Appraisal determines the collateral value for credit transactions and aids in making informed decisions in lending and investments.

Types of Properties

Real properties: Land, buildings, and improvements.
Personal properties (chattels): Movable assets like vehicles, machinery, and equipment.
Intangible properties: Shares of stocks, intellectual property, and royalties.

Valuation Procedure Approaches

Sales comparison approach: Compares the property to recently sold similar properties.
Cost approach: Calculates the replacement or reproduction cost, less depreciation.
Income approach: Focuses on the income-generating potential of the asset.

Guidelines in Conducting Actual Appraisal

Conduct a physical inspection of the property or chattel.
Obtain necessary documentation (e.g., proof of ownership, tax declarations).
Research market trends and recent sales of similar assets.
Verify the condition, age, and usability of the chattel.
Follow professional appraisal standards such as the Philippine Valuation Standards (PVS).

Appraisal of Chattels

Chattels are personal properties used as collateral in credit transactions.
Steps in appraisal: Inspection of the asset’s condition, review of ownership documents and application of the appropriate appraisal method.

Shares of Stocks as Collateral

Shares of publicly listed companies can serve as collateral for loans.
Appraisal methods include market value based on stock prices and intrinsic value based on financial statements.
The market value is used from the Philippine Stock Exchange (PSE)
Example: If the JFC shares are trading at PHP 250 per share, the total market value = PHP 2.5 million.
Banks would also assess the loan-to-value ratio (LTV), Example: a 50% LTV ratio for JFC.

Vehicle Appraisal for a Business Loan

Physical inspection (condition, mileage, and accessories) of the vehicle is crucial.
Verification of documents (OR/CR) and checking for encumbrances or liens on the vehicle is necessary for approval.
Determining the market value of comparable models and adjusting for mileage and condition is essential for appraisal.
The application of LTV ratio ensures approval, Example: applying a 70% LTV ratio means PHP 1,140,000 x 70%=PHP 798,000 available.

Land as Collateral

Land value depends on location, use, and market demand, Examples: Urban areas have higher land values compared to rural areas.
Factors influencing land values include location, infrastructure, and economic activity.
Modes of acquiring title include purchase, inheritance, donation, and government grants.
Common issues in land ownership include double titling, encroachments, and fraudulent titles.
Crucial factors for land ownership include legal documentation (TCT, tax declarations, and notarized documents), and land surveys.

Zonal Valuation

Zonal valuation is the assigned value of real property by the Bureau of Internal Revenue (BIR) for tax purposes.
It serves as a basis for taxation and loan evaluation.
Example: Zonal value of PHP 100,000 per square meter (sqm) in Makati, versus PHP 5,000 per sqm in rural Mindanao.

Collection Policies and Procedure

Establishing clear payment terms is crucial for avoiding bad debts.
Compliance with relevant laws, like the Philippine Lending Company Regulation Act, is vital.
Maintaining transparency and fairness in customer relationships can help avoid disputes.
Types of collection letters include reminder letters, past-due letters, final notices, and legal actions.

Bad Debts

Bad debts are accounts that cannot be collected due to customer insolvency.
Effective collection policies safeguard cash flow and reduce bad debts.

Bankruptcy

Bankruptcy is a legal process providing relief to individuals or entities unable to meet financial obligations.
It's governed by the Financial Rehabilitation and Insolvency Act of 2010.
Voluntary or involuntary bankruptcy is a process allowing debtors to seek relief or for creditors to petition the court.
Processes involve filing a petition in court, acknowledging inability to pay obligations and fulfilling legal requirements, examples: (secured creditors, unpaid wages, unpaid suppliers invoices)

Suspension of Payments

A temporary halt on debt payments, approved by the court.
Allows businesses to restructure or settle debts.

Discharge

Release of the debtor from specific post-bankruptcy debts, following proceedings.
A fresh start for the debtor and options to write off debt portions for creditors.

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Description

This quiz explores the essential concepts of appraisal and inspection, focusing on valuing real and personal properties. It covers various valuation procedures like the sales comparison, cost, and income approaches, as well as guidelines for conducting an actual appraisal. Test your understanding of these key appraisal methods and their significance in lending.