Property Valuation 101 for Non-Valuers

• Presentation to BOTP 39 was on April 4, 2025, focusing on Property Valuation 101 for Non-Valuers.

What is Valuation?

• Valuation is a professional estimate of real estate value, or interest, at a specific time for a specific purpose.
• It is a systematic and analytical determination and recording of property facts, investments, and value, based on inspection and inventory.

Basic Valuation Concepts: Real Estate

• Includes land and its natural components.
• Includes items attached to the land.
• Includes all permanent building attachments.

Basic Valuation Concepts: Market Value

• Market Value is the estimated price an asset or liability should fetch on the valuation date.
• The exchange occurs between a willing buyer and seller in an arm's length transaction.
• Each party acts knowledgeably, prudently, and without compulsion, after proper marketing.

Basic Valuation Concepts: Highest and Best Use (HABU)

• HABU is the asset's use that maximizes its potential.
• HABU takes into account if the use is physically possible.
• HABU takes into account if the use is legally permissible.
• HABU takes into account if the use is financially feasible.

Key Elements in Valuation

• Includes Documentation.
• Includes Property Location and Identification.
• Includes Valuation.

Documentary Requirements: Title

• Original Certificate of Title (OCT).
• Transfer Certificate of Title (TCT).
• Condominium Certificate of Title (CCT).

Documentary Requirements: Tax Declaration

• Land.
• Improvement.

Documentary Requirements

• Lot Plan: Approved Survey Plan preferred
• Vicinity Map

Other Documents for Proposed Improvements

• Building Plans.
• Bill of Materials/Material Specifications.

Other Documents for Project Accreditation

• Selling/Price List.
• Developmental Plans.
• Project Brief/Profile.
• Plans/Lay-outs.
• Material Specifications.
• Developmental Permits/Selling Licenses.

Other Documents: Motor Vehicles

• Certificate of Registration.
• Official Receipt – Current.
• Importation Documents (for imported units).

Other Documents: Machinery & Equipment

• Certificate of Registration.
• Official Receipt – Current.
• Invoice.
• Bill of Lading.
• Letters of Credit/Importation Documents.
• Other evidences of ownership.

Other Documents: Merchandise Inventory

• Detailed List.

Real Estate Property Types

• Vacant lots (e.g., Tivoli Royale, Quezon City; Telstar St, Davao City).
• Raw lands (e.g., Emilio Vergara Highway, Cabanatuan City).
• Agricultural Lands.
• Land with Improvement.
• Subdivision Project.
• Improvement on Leased Land (e.g., Gasoline station on Leased land).
• Condominium Unit.

Types of Condominium Buildings

• Low-rise: Up to 5 Storeys.
• Medium-rise: 6 to 15 storeys.
• High-rise/multi-level: More than 15 storeys.

General (Neighborhood) Data

• Type of Community.
• Type of prevalent improvements.
• For residential, income bracket.
• For commercial, type and extent of commercialization.
• For industrial, type of industries.
• Facilities.
• Amenities.
• Property trends.
• Landmarks.

Specific Data for Property Location & Identification

• Frontage.
• Width.
• Depth.
• Shape/Kind.
• Area.
• Topography.
• Elevation.
• Boundaries.

Tools/Aids in Location Pinpointing

• Approved Survey Plans.
• Tax Maps.
• Plotting.
• Subdivision/Development Plans.
• Compass.
• On the ground inquiries.

Property Hazards with Hazard Hunter PH

• Hazard Hunter PH assesses seismic, volcanic, or hydrometeorologic hazards.
• Access Hazard Hunter PH by typing https://hazardhunter.georisk.gov.ph in a web browser.
• There are tools which Navigate map by zooming in/out.
• There are tools which Search by typing the address.
• There are tools which use the device's GPS to use current location.
• There are tools which use coordinates of a location.
• The Assessment Panel summarizes hazards of an area with respect to seismic, volcanic, and hydro-meteorological hazards.
• The view displays blue distance indicators to the nearest active fault segment and nearest volcano

Valuation Approaches for Market

• Market Approach provides value by comparing a subject asset with identical or similar assets for which price information is available.
• Limitations include lack of sales and comparability which may weaken value support and adjustments may be subjective.
• Market Data includes actual transactions, offers, Internet Listings, Previous Appraisals, Fellow appraisers, Real estate practitioners, Property owners, and Developers.
• Compare attributes of each comparable to those of the subject.
• A net adjustment is derived for each comparable and is applied to the sale price.
• Reconcile the adjusted data using qualitative analysis when appropriate.

Elements of Comparison for Market Approach

• Includes non-physical attributes like property rights, bargaining allowance, and market condition/time element.
• Includes physical attributes like location, size, shape, terrain/topography, elevation, and others.

Valuation Approaches for Cost

• Provides value using the economic principle that a buyer will pay no more than the cost to obtain an asset of equal utility.
• Reproduction Cost: estimated cost to construct an exact replica or duplicate of the improvement.
• Replacement Cost: estimated cost to construct a similar building with utility equivalent to the building being appraised.
• Depreciation must be deducted from the Reproduction Cost (New) because of physical, functional and economic obsolescence.
• DRC(N) = RC(N) - Dep, where RCN is the Cost of Reproduction New and Dep is Depreciation.

Valuation Approaches for Income

• Uses the income that the property generates to estimate fair value.
• This is calculated by dividing the net operating income by the capitalization rate.
• Income capitalization applies an all-risk or overall capitalization rate to a single-period income.
• Discounted cash flow discounted a rate for future periods in order to discount them for present value.
• V = I/R, where V is Value, I is Income, and R is the Rate of capitalization.