PROFCOR7&10.MIDTERM.LECTURE1.pptx

APPRAISAL PROCESS VALUATION PROCESS 1. Study Pertinent Documents a) Copy of title b) Geodetic Engineer’s Plan c) Floor Plan of the building d) Tax Declaration of land & building e) Tax Receipts 2. Pinpoint Location a) Appraiser’s Plotting b) Cadastral Refe...

APPRAISAL PROCESS VALUATION PROCESS 1. Study Pertinent Documents a) Copy of title b) Geodetic Engineer’s Plan c) Floor Plan of the building d) Tax Declaration of land & building e) Tax Receipts 2. Pinpoint Location a) Appraiser’s Plotting b) Cadastral Reference Maps c) Geodetic Engineer’s Plan d) Base Topographical Map (Bureau of Technical Maps) VALUATION PROCESS 3. Check/Verify Title/s - Check for liens, encumbrances, authenticity and continuity. 4. Inspect properties a) Site Analysis (frontage, depth, elevation, condition of street) b) Improvement (building features, age, condition) c) Neighborhood (HABU Analysis) 5. Apply Approaches to Value d) Market Data Approach e) Cost Approach f) Income Approach 6. Correlate Values and Make Final Estimate APPROACHES TO VALUE 1. MARKET DATA APPROACH - Principle Underlying the Approach is the Principle of Substitution - Consist of gathering information concerning sales of properties that are comparable to the property appraised. a. Direct Comparison Method (Actual Sales) i) Describe and classify subject property ii) Establish time period iii) Determine Market area iv) Gather Sales data v) Analyze & modify sales data gathered vi) Compare and adjust for differences b. Inferential/Rectification Method (Opinion Survey) - Gather opinion of values from reliable sources such as Real Estate Appraisers, Brokers, etc. - Each source is given a corresponding weight depending on the knowledge and familiarity of the area being surveyed. - Least reliable under market data approach c. Development Approach - Valuation of rawland properties For a property to be a rawland, it should have the ffg. characteristics: - Suitable for development (flat, economical to develop) - 2. COST APPROACH - Principle Underlying the Approach is the Principle of Substitution - Value of Improvement is estimated as follows:  Estimate Replacement cost New (RCN)  Arrive at the depreciated value of improvement using straight-line method of depreciation and cost- to-cure technique. Different Methods in estimating Cost: a. Quantity Survey Method – includes a detailed inventory of all materials, labor including indirect costs. Used by Engineers & Architects. b. Unit-Cost-in-Place – It is the mathematical compression of Quantity Survey Technique. Use of installed prices of various building materials. c. Cost per Sq. Meter – is a product of Quantity Survey & Unit Cost in Place 3. INCOME CAPITALIZATION APPROACH - Principle Underlying the Approach is the Principle of Anticipation - Value is arrived by capitalizing Income. - Used in the valuation of income generating properties, such as: Retail store properties, apartments, shopping centers, office buildings, hotels, leased commercial & industrial buildings. a) DIRECT CAPITALIZATION b) YIELD CAPITALIZATION (DISCOUNTED CASH-FLOW) INCOME CAPITALIZATION APPROACH A.DIRECT CAPITALIZATION It applies an overall rate, or all risks yield, which when divided into a single year’s or stabilized net operating income, produces a value indication. Used in particularly, well-evidenced markets. Basic Formula: Income/ Capitalization Rate Example 1: Income per year is P INCOME CAPITALIZATION APPROACH B. YIELD CAPITALIZATION It considers the time value of money, and is applied to a series of net operating incomes for a period of years. A method called discounted cash flow analysis (DCF) is an example of yield capitalization. Income, produces a value indication.