Overcoming the learning gap

mentoringThere is a learning gap for new appraisers. Recent statistics from the Philippine Regulatory Board of Real Estate Service shows that the total number of licensed appraisers is now at 9,932 (PRBRES). But most of the newly passed appraisers need coaching and mentorship from the experienced and competent appraisers. “How do I get started?”, the common question asked by a newly passed appraiser.

The appraisal coaching that PAREB shared to its members is worthy to mention, spearheaded by Appraiser Gus Agosto, the Director-in-charge, held recently a coaching session in Cebu.” The appraisal coaching is not only a set of theories and coursework”, he said.  Appraisal is more than a body of knowledge, it comes with many requirements,  a definite set of skills that has many facets and variations. Appraisers have to know how to do many things, from measuring properties accurately, analyzing the economic condition and comps to manage schedules, billing and plan inspection trips.

But equally important to the set of skills and practical knowledge, is the observance of high ethical standards and adherence to moral standards with an emphasis on objectivity and honest exchange. A competent appraiser does not only possess a number of years in practical knowledge and experience, but also imbued with ethical standards.

In answering the question of what is our profession, the resounding answer always has to be that appraising is a profession built on the foundation of public trust. This trust can be viewed in the burgeoning demand for the service of appraisers in real estate transactions,  government agencies, court litigation and insurance.

Appraisers, in their objective opinions and judgments, are keepers and protectors of this trust. The reality is, in overcoming the learning gap, more and more appraisers should be trained and be elevated to a new and higher level of professional practice.

“In so doing, the public trust in the profession will also be elevated to a new and higher level.” Director Gus ended.

 

How private appraisals differ from bank appraisal?

IBPS-Participating-BanksA lot of people are asking us if we can undertake valuations that may then be used to banks for mortgage purposes. Some also uses the bank appraisal fee as an argument to demand for a much lower appraisal fee from the private appraisers.

On the first question, our response is that some lenders do not accept a valuation from a third party appraiser, they have their own in-house appraisers. But getting the services of a private appraiser is beneficial for the landowner; it can be use in negotiation with the bank for a higher loanable amount.

Why bank appraisal has lower fee than the private? It is pretty simple, the banks will profit not in the appraisal but rather in the home loan transaction.

How then private appraisals differ from those provided by banks? Banks are interested in quick turnaround, thus the valuer assigned has to conduct valuation based on bank standards. Bank also has policies that served as guidelines to their in-house appraisers that concur to the company policies on home loans.

There are few appraisal companies that are successful in getting appraisal jobs from banks. They are mostly accredited by the Central Bank. Fees are low and turnaround time from receiving instructions to having to send the appraisal report is short. Situation that newly passed appraisers cannot cope up.

However, if a client gets the services of a private appraiser, they can instruct the valuer directly for their own purposes.  Not to side with the client, but in providing unbiased report. The most important client can expect as a minimum is a quality and independent report.

On build, build, build  progam and its impact in  real estate values

The announcement of Pres. Duterte on his infrastructure program is a well received  development. Described as the “golden age of infrastructures”, the Duterte   administration has rolled out its infrastructure projects – from new roads, airports and railways.

Based on studies, the value of properties tend to increase in the adjoining areas with   the infrastructure projects. There have been instances that the price increases go as   high as 50-70%, from the announcement of the infrastructure until the  operational   phase.

Infrastructures changes within the vicinity of the property add an established livability quotient for the public. Factors like new roads, highways, malls, schools and hospitals, all  contribute in the appreciation. Infrastructure that links localities to the neighboring are as also influence the value of the property.

There are other factors that may have a negative bearing for the property owners affected by the infrastructures. Government usually  pricing the land using BIR Zonal  Value or worse the Assessment Value that is shown in the tax declarations. Proper  authorities should look into it for proper compensation to the landowners.

Investors should take a good look at the property appreciation involved before   putting  an investment along the major infrastructure projects. Proper  evaluation is needed  in   establishing the potential of the vicinity.

Some factors to consider before investing in properties around an infrastructure are  the following:

  • The time frame and the phasing of the implementation
  • value drivers in terms of employment generation, increase in trade and business   and others
  • The larger development plan and the position of the property on its land use plan
  • In general, the investor should develop an study focusing on the projections of  supply and demand in the area and financial feasibility in order to evaluate        if it is feasible and justified.

Feasibility study is the primary activity a prudent investor should do before           infusing investment in properties along the infrastructure’s area.

US court appointed expert witness

courtAppraiser Gus appointed and subpoenaed as an expert witness in  San Joaquin Superior County Court, Stockton, California. The court is  determining the value of  properties located in the Philippines which is under dispute and for disposition.

“I am humbled for the appointment and the opportunity to appear in a US Court as an appraiser witness.” Appraiser Gus replied upon knowing the order.

In its order, the court emphasized his role in the court proceeding citing the following:  “The appraiser provided an estimate of value for real estate properties in the Philippines. He has the the first hand knowledge of the properties, title information and estimated values which are crucial in resolving the property division aspect of the case.”

Prior to his appointment, Appraiser Agosto has served different trial courts in the cities of Lapulapu, Cebu, Mandaue and Talisay as court commissioner.  Beside working in the court, he has served clientele both in private and public. Some of them includes Miraizo Group of Hongkong, General Milling Corporation, SMC Lighterage Corporation, Southwestern University, Pilipinas Water Resources, Inc. and University of the Philippines. He was the former Managing Partner of Intech Property Appraisal, Inc. and Magaca Appraisal Konsult.

“It’s an opportunity to showcase our professional expertise in the USA, which is known as the hallmark of real estate industry.” Appraiser Gus told Appraiser News Online. “My job is to help the court in determining the value of the property under litigation.”

Appraiser Agosto is a National Director of the Philippine Association of Real Estate Board, Inc. He is also a faculty of real estate management and finance in the University of San Carlos, Cebu City.

 

Subpoena

 screen shot caption of the subpoena

Importance of macroeconomic analysis  in real estate practice

Having a view on the macroeconomic trends is critical when analyzing the real estate market. Real estate does not operate in a vacuum. Thus, it is essential for a real estate practitioner to grasp the role of the industry and knows the current events and how macroeconomic affect the real estate market, both in the aggregate supply and demand and the expectation of the buying public.

Real estate plays an important role in the economy. Residential real estate provides housing for families. It is the greatest source of wealth and savings for many families. Commercial real estate, which includes apartment buildings, create jobs and spaces for retail, offices and manufacturing. Real estate business and investment provide a source of revenue for millions.

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Real estate, renting, business and construction are both measured by, and contributes to Gross Domestic Product (GDP). As shown in the graph, its growth continues. In 2016, it contributed P1.8 trillion,  13 percent of the country’s gross domestic product. It exceeded its 2000 record of P3.5 trillion. At that time, real estate, renting and business was a hefty 9 percent component of GDP.

Private construction, which is mostly done by property developers and individuals, contributed P1.2 trillion in the gross domestic product. It is one of the contributor in  providing employment and help in lowering  unemployment rate.

Beside GDP, real estate market in the country is fueled by increasing foreign direct investment. Since 2007, the accumulated foreign direct investment totalled to P 2.1 Trillion. Meanwhile, the overseas Filipino workers remittances increases by 17% . From 22 Million in 2013 to $ 26.8 Million in 2016.

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Understanding key real estate relationships has a strategic implication on real estate decision making and portfolio management. The changing real estate environment can be linked to the macro-economy. Knowing the relationship between macroeconomic variables and real estate performance , and knowing whether these links are consistent or changing overtime ca provide a useful tool in leveling up our service to our clients and to our daily real estate practice.

The importance of taking pictures during site inspections

picsIn every site inspection, an appraiser will surely draw cameras to take pictures of the property. As the saying goes, a picture is worth of a thousand words. This holds true in appraisal. Pictures play an important role in the whole process.

Some clients like banks require photos of the properties; but others will ask why there is a need in taking pictures. They are thinking of their privacy. Let’s discuss the importance of taking pictures in the appraisal.

First, it forms part of the appraisal process. In every appraisal report, you can notice pictures of the property in the annexes or addendum of the report. This helps the appraiser in telling the story of the house and will support the valuation and assumptions provided in the report. Photos can highlight condition, layout, and quality of a house, building or a tract of land. Since no one except the lender or the property owner will read the report, you are assured of the confidentiality and privacy of your properties.

Second, it serves as back-up to the appraisers’ memory. When an appraiser takes photos, the appraiser can remember what the house was like. For instance, there have been times when I labeled the floor as vinyl during my inspection, but the photos clearly showed the floor was ceramic tile. Or maybe in the sketch showed only four bedrooms, but there were actually five based on my photos. Everyone makes mistakes, and that includes appraisers.

Third, it’s documentation. The pictures will greatly help the appraiser if he will be called to testify in the court or any government proceedings.  Since most litigation requires an appraisal of value at the time of taking, photos can be a tremendous tool to assist the appraiser’s description of the property. Few weeks ago, a client asked me to value a property for litigation purposes, I took pictures of the property. Come court hearing, the judge asked the condition of the property, thus I shared in court the pictures I took during the site inspection.

Now you know why an appraiser takes pictures of the properties. Instead of worrying, help the appraiser take good shots by turning on lights and keeping away dogs.