Podcast
Questions and Answers
What is an appraisal in the context of real estate?
What is an appraisal in the context of real estate?
What is the main difference between an appraiser and an assessor?
What is the main difference between an appraiser and an assessor?
What is included in the definition of 'real estate'?
What is included in the definition of 'real estate'?
What is a 'real estate development project'?
What is a 'real estate development project'?
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Who is a 'real estate developer'?
Who is a 'real estate developer'?
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What is 'real property'?
What is 'real property'?
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What is the purpose of an appraisal?
What is the purpose of an appraisal?
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What is important to note about appraisal?
What is important to note about appraisal?
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What is the primary role of an Estate Consultant?
What is the primary role of an Estate Consultant?
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What is the primary purpose of property appraisal for banks/financial institutions?
What is the primary purpose of property appraisal for banks/financial institutions?
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What is the role of a Real Estate Appraiser?
What is the role of a Real Estate Appraiser?
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Who works in a local government unit to perform appraisal and assessment of real properties?
Who works in a local government unit to perform appraisal and assessment of real properties?
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What is the role of a Real Estate Broker?
What is the role of a Real Estate Broker?
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What is the role of a Real Estate Salesperson?
What is the role of a Real Estate Salesperson?
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Who provides professional advice on the acquisition, enhancement, preservation, utilization, or disposition of lands or improvements?
Who provides professional advice on the acquisition, enhancement, preservation, utilization, or disposition of lands or improvements?
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What is the common requirement for Real Estate Service Practitioners?
What is the common requirement for Real Estate Service Practitioners?
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What is the primary purpose of ensuring a satisfactory return to the bank in the event of foreclosure and sale of an acquired asset?
What is the primary purpose of ensuring a satisfactory return to the bank in the event of foreclosure and sale of an acquired asset?
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What is the term used to describe the amount asked, offered, or paid for a good or service?
What is the term used to describe the amount asked, offered, or paid for a good or service?
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What is the total cost of a property inclusive of?
What is the total cost of a property inclusive of?
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What is value in the context of a property?
What is value in the context of a property?
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What are price and cost considered as in relation to value?
What are price and cost considered as in relation to value?
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What is fair market value?
What is fair market value?
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Under what circumstances are sellers pressured to sell?
Under what circumstances are sellers pressured to sell?
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What is one of the factors that create value in a property?
What is one of the factors that create value in a property?
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What is a key factor that must be present in an object for it to arouse desire in an individual?
What is a key factor that must be present in an object for it to arouse desire in an individual?
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Which of the following forces that create value is related to factors emerging from man's social instincts and yearning?
Which of the following forces that create value is related to factors emerging from man's social instincts and yearning?
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What is the formula used to calculate the present worth of future benefits or income in the principle of anticipation?
What is the formula used to calculate the present worth of future benefits or income in the principle of anticipation?
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According to the principle of change, what happens to the value of a property over time?
According to the principle of change, what happens to the value of a property over time?
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What is an example of a physical force that creates value?
What is an example of a physical force that creates value?
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What is the name of the principle that states that the value of a property is set by the present worth of future benefits or income?
What is the name of the principle that states that the value of a property is set by the present worth of future benefits or income?
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What is an example of an economic force that creates value?
What is an example of an economic force that creates value?
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What is the result of the rapid transition from residential to commercial land use in an area?
What is the result of the rapid transition from residential to commercial land use in an area?
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What is the primary driver of competition in real estate?
What is the primary driver of competition in real estate?
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What is the result of excessive competition in the real estate market?
What is the result of excessive competition in the real estate market?
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What is the primary goal of a real estate owner according to the Highest and Best Use principle?
What is the primary goal of a real estate owner according to the Highest and Best Use principle?
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What is the key to maximizing the value of a property according to the Conformity principle?
What is the key to maximizing the value of a property according to the Conformity principle?
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What is the primary consideration for justifying the expenditure of converting a basement into an apartment?
What is the primary consideration for justifying the expenditure of converting a basement into an apartment?
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What is the relationship between the land and the building according to the Contribution principle?
What is the relationship between the land and the building according to the Contribution principle?
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What is the result of improving a property with a modern elevator according to the Contribution principle?
What is the result of improving a property with a modern elevator according to the Contribution principle?
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What is the driving force behind the Highest and Best Use principle?
What is the driving force behind the Highest and Best Use principle?
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APPRAISAL or VALUATION – an estimate or opinion of value concerning real estate or other ______.
APPRAISAL or VALUATION – an estimate or opinion of value concerning real estate or other ______.
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The REAL ESTATE SERVICE ACT (RESA) of ______ defines the terms 'Appraiser' and 'Assessor'.
The REAL ESTATE SERVICE ACT (RESA) of ______ defines the terms 'Appraiser' and 'Assessor'.
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An ______ refers to a person who conducts valuation/ appraisal of real property.
An ______ refers to a person who conducts valuation/ appraisal of real property.
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Real estate development projects include, but are not limited to, ______ resorts.
Real estate development projects include, but are not limited to, ______ resorts.
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A real estate developer is a natural or juridical person engaged in the business of developing ______ development projects.
A real estate developer is a natural or juridical person engaged in the business of developing ______ development projects.
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Real property includes ______ interests and benefits related to the ownership of real estate.
Real property includes ______ interests and benefits related to the ownership of real estate.
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Appraisal is not a ______, but is determined through thorough observation, investigation, and analysis.
Appraisal is not a ______, but is determined through thorough observation, investigation, and analysis.
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The value of a property today may not be the same ______.
The value of a property today may not be the same ______.
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The primary purpose of ensuring a satisfactory return to the __________ in the event of foreclosure and sale of an acquired asset.
The primary purpose of ensuring a satisfactory return to the __________ in the event of foreclosure and sale of an acquired asset.
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The term used to describe the amount asked, offered, or paid for a good or service is __________.
The term used to describe the amount asked, offered, or paid for a good or service is __________.
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The total cost of a property includes all direct and indirect costs of its __________.
The total cost of a property includes all direct and indirect costs of its __________.
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Value is a relationship between a thing desired and a potential __________.
Value is a relationship between a thing desired and a potential __________.
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Fair market value is the highest price in terms of money which a property will bring if exposed for sale in the open market, allowing reasonable time to find a __________.
Fair market value is the highest price in terms of money which a property will bring if exposed for sale in the open market, allowing reasonable time to find a __________.
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Desirability to be effective must be supported by __________ power.
Desirability to be effective must be supported by __________ power.
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A thing must be __________ to have value.
A thing must be __________ to have value.
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Sellers are pressured to sell under circumstances such as __________.
Sellers are pressured to sell under circumstances such as __________.
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An object must have limited ______ in order to arouse desire in an individual.
An object must have limited ______ in order to arouse desire in an individual.
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The four forces that create value are social, economic, political, and ______.
The four forces that create value are social, economic, political, and ______.
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The value of a property is influenced by the constant ______ occurring in the environment.
The value of a property is influenced by the constant ______ occurring in the environment.
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Value tends to be set by the present worth of the future ______ or income that may be derived from the ownership of the property.
Value tends to be set by the present worth of the future ______ or income that may be derived from the ownership of the property.
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The formula used to calculate the present worth of future benefits or income is V = I/______.
The formula used to calculate the present worth of future benefits or income is V = I/______.
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The primary driver of the value of a property is the ______ of the future benefits or income that may be derived from the ownership of the property.
The primary driver of the value of a property is the ______ of the future benefits or income that may be derived from the ownership of the property.
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The value of a property is set by the present worth of the future ______ or income that may be derived from the ownership of the property according to the principle of ______.
The value of a property is set by the present worth of the future ______ or income that may be derived from the ownership of the property according to the principle of ______.
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The value of a property is influenced by the ______ changes occurring in the environment according to the principle of ______.
The value of a property is influenced by the ______ changes occurring in the environment according to the principle of ______.
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A ______ Consultant is a duly registered and licensed natural person who, for a professional fee, compensation or other valuable consideration, offers or renders professional advice and judgment on acquisition, enhancement, preservation, utilization, or disposition of lands or improvements.
A ______ Consultant is a duly registered and licensed natural person who, for a professional fee, compensation or other valuable consideration, offers or renders professional advice and judgment on acquisition, enhancement, preservation, utilization, or disposition of lands or improvements.
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A ______ Appraiser is 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.
A ______ Appraiser is 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.
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A ______ Assessor is a duly registered and licensed natural person who works in a local government unit, who performs appraisal and assessment of real properties, including plants, equipment, and machinery essentially for taxation purposes.
A ______ Assessor is a duly registered and licensed natural person who works in a local government unit, who performs appraisal and assessment of real properties, including plants, equipment, and machinery essentially for taxation purposes.
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The primary purpose of property appraisal for ______ is to establish a fair market value for the collateral offered in order to arrive at a sound credit decision.
The primary purpose of property appraisal for ______ is to establish a fair market value for the collateral offered in order to arrive at a sound credit decision.
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A ______ Broker is a duly registered and licensed natural person who, for a professional fee, commission or other valuable consideration, acts as an agent in a party in real estate transaction to offer, advertise, solicit, list, promote, mediate, negotiate or effect the meeting of the minds on the sale, purchase, exchange, mortgage.
A ______ Broker is a duly registered and licensed natural person who, for a professional fee, commission or other valuable consideration, acts as an agent in a party in real estate transaction to offer, advertise, solicit, list, promote, mediate, negotiate or effect the meeting of the minds on the sale, purchase, exchange, mortgage.
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A ______ Salesperson is a duly registered and licensed natural person who performs service for and in behalf of a duly licensed real estate broker for or expectation of a share in commission, professional fee, compensation or other valuable consideration.
A ______ Salesperson is a duly registered and licensed natural person who performs service for and in behalf of a duly licensed real estate broker for or expectation of a share in commission, professional fee, compensation or other valuable consideration.
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The primary objective of property appraisal is to establish a ______ MARKET VALUE for the collateral offered in order to arrive at a sound credit decision.
The primary objective of property appraisal is to establish a ______ MARKET VALUE for the collateral offered in order to arrive at a sound credit decision.
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Real Estate Service Practitioners such as Estate Consultants, Estate Appraisers, Real Estate Assessors, Estate Brokers, and Real Estate Salespersons are all duly registered and ______.
Real Estate Service Practitioners such as Estate Consultants, Estate Appraisers, Real Estate Assessors, Estate Brokers, and Real Estate Salespersons are all duly registered and ______.
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The principle states that no prudent buyer will pay more than what it will cost him to buy or build an equally desirable ______ property.
The principle states that no prudent buyer will pay more than what it will cost him to buy or build an equally desirable ______ property.
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Mr.Roxas decided to put up a boutique selling local and imported clothes; shoes and other accessories along the ______ side of Nicanor Reyes St.
Mr.Roxas decided to put up a boutique selling local and imported clothes; shoes and other accessories along the ______ side of Nicanor Reyes St.
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There is an oversupply of office buildings in Makati, like in ______ and Legaspi Villages.
There is an oversupply of office buildings in Makati, like in ______ and Legaspi Villages.
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Changes in the proportionate relationship between ______ and demand tend to affect the price obtainable in the market.
Changes in the proportionate relationship between ______ and demand tend to affect the price obtainable in the market.
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Demand of for a commodity is created by its ______ ad the scarcity of supply.
Demand of for a commodity is created by its ______ ad the scarcity of supply.
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To compete in the market, owners have no option but to offer their buildings/condominiums for rent or for sale at the lower side of the ______ prevailing in the area.
To compete in the market, owners have no option but to offer their buildings/condominiums for rent or for sale at the lower side of the ______ prevailing in the area.
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Velez St. in Cagayan de Oro City is a commercial strip forming part of the city's ______ district.
Velez St. in Cagayan de Oro City is a commercial strip forming part of the city's ______ district.
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The principle involves the interplay of economic forces affecting ______ value.
The principle involves the interplay of economic forces affecting ______ value.
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An appraiser is an official in the local government unit who performs appraisal and assessment of real properties.
An appraiser is an official in the local government unit who performs appraisal and assessment of real properties.
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Real estate includes only the land and not the items attached to it.
Real estate includes only the land and not the items attached to it.
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A real estate developer is a person who buys and sells real estate properties.
A real estate developer is a person who buys and sells real estate properties.
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Real property includes only the physical land and not the rights and interests related to it.
Real property includes only the physical land and not the rights and interests related to it.
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A Real Estate Service Practitioner can be a duly registered and licensed natural person who works in a local government unit.
A Real Estate Service Practitioner can be a duly registered and licensed natural person who works in a local government unit.
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Appraisal is a guess or an estimate of value without thorough observation and investigation.
Appraisal is a guess or an estimate of value without thorough observation and investigation.
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Estate Consultants are responsible for estimating and arriving at an opinion of real estate values.
Estate Consultants are responsible for estimating and arriving at an opinion of real estate values.
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The value of a property remains the same over time.
The value of a property remains the same over time.
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A Real Estate Broker is responsible for performing appraisal and assessment of real properties.
A Real Estate Broker is responsible for performing appraisal and assessment of real properties.
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A real estate development project includes only residential projects.
A real estate development project includes only residential projects.
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The primary purpose of property appraisal for banks/financial institutions is to establish a fair market value for the collateral offered.
The primary purpose of property appraisal for banks/financial institutions is to establish a fair market value for the collateral offered.
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The primary purpose of appraisal is to determine the price of a property.
The primary purpose of appraisal is to determine the price of a property.
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A Real Estate Salesperson is responsible for performing services for and in behalf of a duly licensed real estate broker.
A Real Estate Salesperson is responsible for performing services for and in behalf of a duly licensed real estate broker.
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Real Estate Service Practitioners are not required to be registered and licensed.
Real Estate Service Practitioners are not required to be registered and licensed.
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Estate Appraisers are the same as Real Estate Assessors.
Estate Appraisers are the same as Real Estate Assessors.
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The primary purpose of property appraisal is to establish a fair market value for the collateral offered.
The primary purpose of property appraisal is to establish a fair market value for the collateral offered.
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The scarcity principle states that an object must have an unlimited supply to arouse desire in an individual.
The scarcity principle states that an object must have an unlimited supply to arouse desire in an individual.
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The social force that creates value is related to factors emerging from man's economic instincts.
The social force that creates value is related to factors emerging from man's economic instincts.
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The principle of anticipation states that the value of a property is set by the present worth of past benefits or income.
The principle of anticipation states that the value of a property is set by the present worth of past benefits or income.
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The purpose of appraisal is to ensure a satisfactory return to the bank in the event of foreclosure and sale of an acquired asset.
The purpose of appraisal is to ensure a satisfactory return to the bank in the event of foreclosure and sale of an acquired asset.
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The principle of change states that the value of a property remains constant over time.
The principle of change states that the value of a property remains constant over time.
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Climate and topography are examples of economic forces that create value.
Climate and topography are examples of economic forces that create value.
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Value is the actual amount spent to build or put a property into being.
Value is the actual amount spent to build or put a property into being.
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Fair market value is the highest price that a seller would sell and a buyer would buy under abnormal pressure.
Fair market value is the highest price that a seller would sell and a buyer would buy under abnormal pressure.
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The formula used to calculate the present worth of future benefits or income in the principle of anticipation is V = I/R.
The formula used to calculate the present worth of future benefits or income in the principle of anticipation is V = I/R.
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The rapid transition from residential to commercial land use in an area results in a decrease in property value.
The rapid transition from residential to commercial land use in an area results in a decrease in property value.
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Desirability is a physical force that creates value in a property.
Desirability is a physical force that creates value in a property.
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The appraisal or valuation of a property is not an estimate or opinion of value concerning real estate or other properties.
The appraisal or valuation of a property is not an estimate or opinion of value concerning real estate or other properties.
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The total cost of a property includes all direct and indirect costs of its production.
The total cost of a property includes all direct and indirect costs of its production.
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Price is a hypothetical figure and is not an indicator of value.
Price is a hypothetical figure and is not an indicator of value.
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Cost is an economic concept referring to the price most likely to be concluded by buyers and sellers.
Cost is an economic concept referring to the price most likely to be concluded by buyers and sellers.
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Utility is a factor that creates value in a property by making it useless.
Utility is a factor that creates value in a property by making it useless.
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Excessive competition can lead to higher profits in the real estate market.
Excessive competition can lead to higher profits in the real estate market.
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Conformity is achieved when a property stands out from its surroundings.
Conformity is achieved when a property stands out from its surroundings.
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The value of land is dependent on the amount of net returns on investment on the building.
The value of land is dependent on the amount of net returns on investment on the building.
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The highest and best use of a property is always its current use.
The highest and best use of a property is always its current use.
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Improving a property with a modern elevator will always increase its value.
Improving a property with a modern elevator will always increase its value.
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The principle of competition is driven by the desire to maximize profits.
The principle of competition is driven by the desire to maximize profits.
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Conformity is not a key factor in determining the value of a property.
Conformity is not a key factor in determining the value of a property.
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The highest and best use of a property is determined by the owner's personal preferences.
The highest and best use of a property is determined by the owner's personal preferences.
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Match the following appraisal principles with their definitions:
Match the following appraisal principles with their definitions:
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Match the following appraisal principles with their examples:
Match the following appraisal principles with their examples:
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Match the following terms with their definitions:
Match the following terms with their definitions:
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Match the following appraisal principles with their factors:
Match the following appraisal principles with their factors:
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Match the following appraisal principles with their effects:
Match the following appraisal principles with their effects:
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Match the following appraisal principles with their goals:
Match the following appraisal principles with their goals:
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Match the following appraisal principles with their characteristics:
Match the following appraisal principles with their characteristics:
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Match the following appraisal principles with their applications:
Match the following appraisal principles with their applications:
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Match the following appraisal principles with their relationships:
Match the following appraisal principles with their relationships:
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Match the following appraisal principles with their implications:
Match the following appraisal principles with their implications:
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Study Notes
Introduction to Property Appraisal
- Appraisal or valuation is an estimate or opinion of value concerning real estate or other property.
- It is an estimate of the monetary value of a property or an estimate of the value of an adequately identified and described property as of a specified date, supported by a logical presentation of relevant data.
Important Notes on Appraisal
- Appraisal is not a guess; value is determined only after thorough observation, investigation, and analysis.
- The appraisal is usually presented in written form with a complete description to avoid confusion with other assets.
- The value of a property today may not be the same tomorrow.
Definitions of Terms
Real Estate Service Act (RESA) of 2009 - RA 9646
- An "Appraiser" or "Valuer" is a person who conducts valuation/appraisal, possessing the necessary qualifications, license, ability, and experience to execute or direct valuation of real property.
- An "Assessor" is an official in the local government unit who performs appraisal and assessment of real properties.
Real Estate
- Refers to land and all items attached to the land, including physical, tangible entities, with all additions or improvements on, above, or below the ground.
- Includes rights, interests, and benefits related to the ownership of real estate.
Real Estate Development Project
- Means development of land for residential, commercial, industrial, agricultural, institutional, or recreational purposes or any combination of these, including tourist resorts, reclamation projects, building or housing projects.
Real Estate Developer
- Refers to any natural or juridical person engaged in the business of developing real estate development projects for their own account and offering them for sale or lease.
Real Estate Service Practitioners
- Includes:
- Estate Consultant: a duly registered and licensed natural person who offers professional advice and judgment on the acquisition, enhancement, preservation, utilization, or disposition of lands or improvements thereon.
- Estate Appraiser: a duly registered and licensed natural person who performs or renders services in estimating and arriving at an opinion of or acts as an expert on real estate values.
- Real Estate Assessor: a duly registered and licensed natural person who works in a local government unit, performing appraisal and assessment of real properties, including plants, equipment, and machinery, primarily for taxation purposes.
- Estate Broker: a duly registered and licensed natural person who acts as an agent in a real estate transaction to offer, advertise, solicit, list, promote, mediate, negotiate, or effect the meeting of minds on the sale, purchase, exchange, mortgage, or lease of real estate.
- Real Estate Salesperson: a duly registered and licensed natural person who performs services for and in behalf of a duly licensed real estate broker for or in expectation of a share in the commission, professional fee, compensation, or other valuable consideration.
Objectives of Appraisal
- Primary purpose for banks/financial institutions:
- To establish a fair market value for the collateral offered to arrive at a sound credit decision.
- To ensure a satisfactory return to the bank in the event of foreclosure and sale of acquired assets.
- Other purposes:
- Sale and disposition
- Taxation
- Condemnation proceedings
- Basis for insurance
- Accounting and property records
Price, Cost, and Value
- Price: the actual amount paid in a particular transaction or the term used for the amount asked, offered, or paid for a good or service.
- Cost: the actual amount spent to build or put a property into being, including all direct and indirect costs of its production.
- Value: a relationship between a thing desired and a potential purchaser, referring to the price most likely to be concluded by buyers and sellers.
Fair Market Value
- The highest price in terms of money that a property will bring if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted or capable of being used.
- A price that a willing seller would sell and a willing buyer would buy, neither being under abnormal pressure.
Factors That Create Value (DUST)
- Desirability: a property must arouse the desire of potential buyers, supported by purchasing power.
- Utility: a thing must be useful to have value.
- Scarcity: an object must have a limited supply to arouse desire in an individual.
- Transferability: the ability to transfer ownership easily and quickly.
Forces That Affect Value (SEEP)
- Social: factors emerging from man's social instincts and yearning, such as population growth and decline, changes in family size, and social trends.
- Economic: factors that have a direct or indirect effect on purchasing power, such as availability of money and credit, price level, interest rates, and tax burdens.
- Political: government regulations, rent controls, building codes, police and fire regulations.
- Physical: forces created by man or nature, such as climate and topography, mineral resources, flood control, and community factors like transportation, schools, parks, and amenities.
Valuation Principles
- Anticipation: value tends to be set by the present worth of the future benefits or income that may be derived from the ownership of the property.
- Change: value of property is influenced by constant changes occurring in the environment; value today may not be the same tomorrow.
- Competition: profit creates competition, and excessive competition dissipates profit.
- Conformity: maximum value of a property is realized when it conforms to the standards governing the area where it is located.
- Contribution: the principle states that the land and building is a single economic enterprise; therefore, the value of land is dependent on the amount of net returns on investment on the building.
- Highest and Best Use (HABU): the principle states that the most profitable use of the property will yield the highest land value.
Introduction to Property Appraisal
- Appraisal or valuation is an estimate or opinion of value concerning real estate or other property.
- It is an estimate of the monetary value of a property.
- The process involves developing an estimate of value of an adequately identified and described property as of a specified date, supported by a logical presentation of data.
Important Notes on Appraisal
- Appraisal is not a guess; value is determined only after thorough observation, investigation, and analysis.
- Appraisal is usually presented in written form with a complete description to avoid confusion with other assets.
- The value of property today may not be the same tomorrow.
Definition of Terms
- Appraiser (also known as Valuer) refers to a person who conducts valuation/appraisal, possessing the necessary qualifications, license, ability, and experience to execute or direct valuation of real property.
- Assessor refers to an official in the local government unit, who performs appraisal and assessment of real properties, including plants, equipment, and machinery.
- Real Estate refers to land and all those items attached to the land, including physical, tangible entities, and improvements on, above, or below the ground.
- Real Estate Development Project refers to the development of land for residential, commercial, industrial, agricultural, institutional, or recreational purposes, including tourist resorts, reclamation projects, building or housing projects.
- Real Estate Developer refers to any natural or juridical person engaged in the business of developing real estate development projects for their own account and offering them for sale or lease.
- Real Property includes rights, interests, and benefits related to the ownership of real estate.
- Real Estate Service Practitioners include:
- Estate Consultant: a duly registered and licensed natural person who offers professional advice and judgment on the acquisition, enhancement, preservation, utilization, or disposition of lands or improvements.
- Estate Appraiser: a duly registered and licensed natural person who performs or renders services in estimating and arriving at an opinion of real estate values.
- Real Estate Assessor: a duly registered and licensed natural person who works in a local government unit, performing appraisal and assessment of real properties, including plants, equipment, and machinery, essentially for taxation purposes.
- Estate Broker: a duly registered and licensed natural person who acts as an agent in a real estate transaction, offering, advertising, soliciting, listing, promoting, mediating, or negotiating the sale, purchase, exchange, mortgage, or lease of real estate.
- Real Estate Salesperson: a duly registered and licensed natural person who performs services for and in behalf of a duly licensed real estate broker, for or in expectation of a share in commission, professional fee, compensation, or other valuable consideration.
Objectives of Appraisal
- Primary purpose for banks/financial institutions:
- Establish a fair market value for the collateral offered in order to arrive at a sound credit decision.
- Ensure a satisfactory return to the bank in the event of foreclosure and sale of acquired assets.
- Other purposes:
- Sale and disposition
- Taxation
- Condemnation proceedings
- Basis for insurance
- Accounting and property records
Price, Cost, and Value
- Price: the actual amount paid in a particular transaction; the amount asked, offered, or paid for a good or service.
- Cost: the actual amount spent to build or put a property into being; the total cost of the property includes all direct and indirect costs of its production.
- Value: a relationship between a thing desired and a potential purchaser; an economic concept referring to the price most likely to be concluded by buyers and sellers; a hypothetical price and the hypothesis on which the value is estimated, determined by the valuation basis adopted.
Fair Market Value
- The highest price in terms of money that a property will bring if exposed for sale in the open market, allowing reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted or capable of being used.
- A price that a willing seller would sell and a willing buyer would buy, neither being under abnormal pressure.
Factors that Create Value (DUST)
- Desirability: a property must arouse the desire of a potential buyer; desirability must be supported by purchasing power.
- Utility: a thing must be useful to have value.
- Scarcity: an object must have limited supply in order to arouse desire in an individual.
- Transferability: the ability to transfer ownership or possession of a property.
Forces that Affect Value (SEEP)
- Social: factors emerging from man's social instincts and yearning, such as population growth and decline, changes in family size, and community factors.
- Economic: factors which have direct or indirect effects on power, such as availability of money and credit, price level, interest rates, and tax burdens.
- Political: government regulations, such as rent controls, building codes, police and fire regulations.
- Physical: forces created by man or nature, such as climate and topography, mineral resources, flood control, and community factors.
Valuation Principles
- Anticipation: value tends to be set by the present worth of the future benefits or income that may be derived from the ownership of the property.
- Change: value of property is influenced by the constant changes occurring in the environment; value of today may not be the same tomorrow.
- Substitution: the principle states that no prudent buyer will pay more than what it will cost him to buy or build an equally desirable substitute property.
- Supply and Demand: the principle involves the interplay of economic forces affecting market value; changes in the proportionate relationship between supply and demand tend to affect the price obtainable in the market.
Introduction to Property Appraisal
- Appraisal or valuation is an estimate or opinion of value concerning real estate or other property.
- It is an estimate of the monetary value of a property or an estimate of the value of an adequately identified and described property as of a specified date, supported by a logical presentation of relevant data.
Important Notes on Appraisal
- Appraisal is not a guess; value is determined only after thorough observation, investigation, and analysis.
- The appraisal is usually presented in written form with a complete description to avoid confusion with other assets.
- The value of a property today may not be the same tomorrow.
Definitions of Terms
Real Estate Service Act (RESA) of 2009 - RA 9646
- An "Appraiser" or "Valuer" is a person who conducts valuation/appraisal, possessing the necessary qualifications, license, ability, and experience to execute or direct valuation of real property.
- An "Assessor" is an official in the local government unit who performs appraisal and assessment of real properties.
Real Estate
- Refers to land and all items attached to the land, including physical, tangible entities, with all additions or improvements on, above, or below the ground.
- Includes rights, interests, and benefits related to the ownership of real estate.
Real Estate Development Project
- Means development of land for residential, commercial, industrial, agricultural, institutional, or recreational purposes or any combination of these, including tourist resorts, reclamation projects, building or housing projects.
Real Estate Developer
- Refers to any natural or juridical person engaged in the business of developing real estate development projects for their own account and offering them for sale or lease.
Real Estate Service Practitioners
- Includes:
- Estate Consultant: a duly registered and licensed natural person who offers professional advice and judgment on the acquisition, enhancement, preservation, utilization, or disposition of lands or improvements thereon.
- Estate Appraiser: a duly registered and licensed natural person who performs or renders services in estimating and arriving at an opinion of or acts as an expert on real estate values.
- Real Estate Assessor: a duly registered and licensed natural person who works in a local government unit, performing appraisal and assessment of real properties, including plants, equipment, and machinery, primarily for taxation purposes.
- Estate Broker: a duly registered and licensed natural person who acts as an agent in a real estate transaction to offer, advertise, solicit, list, promote, mediate, negotiate, or effect the meeting of minds on the sale, purchase, exchange, mortgage, or lease of real estate.
- Real Estate Salesperson: a duly registered and licensed natural person who performs services for and in behalf of a duly licensed real estate broker for or in expectation of a share in the commission, professional fee, compensation, or other valuable consideration.
Objectives of Appraisal
- Primary purpose for banks/financial institutions:
- To establish a fair market value for the collateral offered to arrive at a sound credit decision.
- To ensure a satisfactory return to the bank in the event of foreclosure and sale of acquired assets.
- Other purposes:
- Sale and disposition
- Taxation
- Condemnation proceedings
- Basis for insurance
- Accounting and property records
Price, Cost, and Value
- Price: the actual amount paid in a particular transaction or the term used for the amount asked, offered, or paid for a good or service.
- Cost: the actual amount spent to build or put a property into being, including all direct and indirect costs of its production.
- Value: a relationship between a thing desired and a potential purchaser, referring to the price most likely to be concluded by buyers and sellers.
Fair Market Value
- The highest price in terms of money that a property will bring if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted or capable of being used.
- A price that a willing seller would sell and a willing buyer would buy, neither being under abnormal pressure.
Factors That Create Value (DUST)
- Desirability: a property must arouse the desire of potential buyers, supported by purchasing power.
- Utility: a thing must be useful to have value.
- Scarcity: an object must have a limited supply to arouse desire in an individual.
- Transferability: the ability to transfer ownership easily and quickly.
Forces That Affect Value (SEEP)
- Social: factors emerging from man's social instincts and yearning, such as population growth and decline, changes in family size, and social trends.
- Economic: factors that have a direct or indirect effect on purchasing power, such as availability of money and credit, price level, interest rates, and tax burdens.
- Political: government regulations, rent controls, building codes, police and fire regulations.
- Physical: forces created by man or nature, such as climate and topography, mineral resources, flood control, and community factors like transportation, schools, parks, and amenities.
Valuation Principles
- Anticipation: value tends to be set by the present worth of the future benefits or income that may be derived from the ownership of the property.
- Change: value of property is influenced by constant changes occurring in the environment; value today may not be the same tomorrow.
- Competition: profit creates competition, and excessive competition dissipates profit.
- Conformity: maximum value of a property is realized when it conforms to the standards governing the area where it is located.
- Contribution: the principle states that the land and building is a single economic enterprise; therefore, the value of land is dependent on the amount of net returns on investment on the building.
- Highest and Best Use (HABU): the principle states that the most profitable use of the property will yield the highest land value.
Introduction to Property Appraisal
- Appraisal or valuation: an estimate or opinion of value concerning real estate or other property, which involves developing an estimate of value of an adequately identified and described property as of a specified date, supported by logical presentation of relevant data.
- Important notes on appraisal: it is not a guess, value is determined only after thorough observation, investigation, and analysis; usually presented in written form; and value of property today may not be the same tomorrow.
Definition of Terms
- Appraiser/Valuer: a person who conducts valuation/appraisal; specifically one who possesses the necessary qualifications, license, ability, and experience to execute or direct valuation of real property.
- Assessor: an official in the local government unit who performs appraisal and assessment of real properties, including plants, equipment, and machinery.
- Real Estate: land and all those items which are attached to the land; physical, tangible entity, together with all the additions or improvements on, above or below the ground.
- Real Estate Development Project: development of land for residential, commercial, industrial, agricultural, institutional, or recreational purposes or any combination of such, including but not limited to tourist resorts, reclamation projects, building or housing projects.
- Real Estate Developer: any natural or juridical person engaged in the business of developing real estate development projects for their own account and offering them for sale or lease.
- Real Property: includes rights, interests, and benefits related to the ownership of real estate.
- Real Estate Service Practitioners:
- Estate Consultant: a duly registered and licensed natural person who, for a professional fee, compensation, or other valuable consideration, offers or renders professional advice and judgment on acquisition, enhancement, preservation, utilization, or disposition of lands or improvements thereon.
- Estate Appraiser: a duly registered and licensed natural person who, for a professional fee, compensation, or other valuable consideration, performs or renders services in estimating and arriving at an opinion of or acts as an expert on real estate values.
- Real Estate Assessor: a duly registered and licensed natural person who works in a local government unit, who performs appraisal and assessment of real properties, including plants, equipment, and machinery, essentially for taxation purposes.
- Estate Broker: a duly registered and licensed natural person who, for a professional fee, commission, or other valuable consideration, acts as an agent in a party in real estate transaction to offer, advertise, solicit, list, promote, mediate, negotiate, or effect the meeting of the minds on the sale, purchase, exchange, mortgage, or lease of real estate.
- Real Estate Salesperson: a duly registered and licensed natural person who performs services for and in behalf of a duly licensed real estate broker for or expectation of a share in commission, professional fee, compensation, or other valuable consideration.
Objectives of Appraisal
- Primary purpose of property appraisal for banks/financial institutions: to establish a fair market value for the collateral offered in order to arrive at a sound credit decision.
Forces that Affect Value
- Social: factors emerging from man’s social instincts and yearning, such as population growth and decline, changes in family size.
- Economic: factors which have a direct or indirect effect on power, such as availability of money and credit, price level, interest rates, and tax burdens.
- Political: government regulations, rent controls, building codes, and police and fire regulations.
- Physical: forces created by man or nature, such as climate and topography, natural resources, flood control, and community factors like transportation, schools, and parks.
Valuation Principles
- Anticipation: value tends to be set by the present worth of the future benefits or income that may be derived from the ownership of the property.
- Change: value of property is influenced by the constant changes occurring in the environment; value of today may not be the same tomorrow.
- Competition: profit creates competition; excessive competition dissipates profit.
- Conformity: maximum value of a property is realized when a reasonable degree of sociological, architectural, and economic homogeneity is present.
- Contribution: the land and building is a single economic enterprise; therefore, the value of land is dependent on the amount of net returns on investment on the building.
- Highest and Best Use (HABU): the most profitable use of the property will yield the highest land value.
- Substitution: no prudent buyer will pay more than what it will cost him to buy or build an equally desirable substitute property.
- Supply and Demand: the principle involves the interplay of economic forces affecting market value; changes in the proportionate relationship between supply and demand tend to affect the price obtainable in the market.
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Description
Learn the fundamentals of property appraisal, including the definition of appraisal and the process of determining a property's value. Explore the importance of thorough analysis and logical presentation in real estate appraisal.
