In the recent episode of Ikonsulta mo kay Doc EG, Appraiser Consultant Gus Agosto was interviewed on the state and importance of the appraisal profession. Appraiser Gus provided a deeper look on government expropriations due to build, build, build program, and the initiatives provided by the Supreme Court to hasten the resolution of expropriation cases. These includes the creation of special courts for public roads and the new ruling on the reconveyance of properties, which are not in its public use.
Dr. Eduardo G. Ong, was the first chairman of the Professional Board of Real Estate Service (PRBRES) which is under the supervision of the Professional Regulation Commission. He is currently the Dean of Real Estate Management in Lyceum University in Las Pinas City.
The interview highlighted on the different methodology in appraisal and its importance to the real estate professionals, buyers, sellers, banks, courts and other players of the industry.
Consultant Appraiser Gus Agosto is the President and Chief Executive Officer of AA+ Appraisal & Consultancy, Inc., which is primarily based in Cebu. Some of its notable clients are the Cebu Provincial Government, Ayala Property Management Corporation, Paramount Property Ventures, University of Southern Philippines, Southwestern University, Queensland Property Development, Vivant Corporation, GSE Law Firm, Atup Uy Ahong Law Offices, PTT Corporation and many more. He was also hired as consultant by the Asian Development Bank for an Inclusive Housing Financing Project.
The discussion ended with the insightful presentation shared on the need to propagate the value of the profession and the continuing education for the appraisers in order to get the trust of the public.
“Public should trust the appraisers on the value aspect of their properties. Appraisers are trained and knowledgeable in this craft, and they are continue honing their skills to serve better.” Consultant Gus Agosto ended.
Cebu, Philippines – AA+ Appraisal & Consulting, the predecessor of AA RealtyPro Solutions, a Cebu-based consulting firm, is pleased to announce that the firm completed serving its 300th client, which also marked the Php 25 Billion plus worth of properties appraised, in more than 70 cities and provinces. This accomplishment is indicative of continued growth in leadership among real estate consulting firm in the country market.
Gus Agosto, President and CEO of the firm, stated “I am so proud of our team and their hard work over the years to reach this tremendous level of success. Our primary goal is to serve our clients by helping them both in providing necessary information in decision making. It is an honor and privilege to work with entrepreneurs to help them reach their real estate and financial goals.”
AA+ Appraisal and Consulting was founded to help property owners, developers, government agencies, financial institutions and the like in providing solutions to their real estate needs. The Company are committed to helping clients in providing one-stop shop in real estate development consulting, property acquisition and project financial review.
Some notable clients of the firm are Vivant Energy Corporation, Ayala Property Management Corp., Intercontinental Broadcasting Corporation, General Milling Corporation, Queensland Development, Coldlink Asia, Contempo Development Corporation, Paramount Property Ventures, PTT Corporation, Travelbee Corporation, CFI Multipurpose Cooperatives, Cenapro Chemical Corp., Fairchild Multipurpose Cooperative, Enterprise Bank, University of the Philippines, University of Southern Philippine Foundation, UCCP, Provincial Government of Cebu and many more.
The Manila Board of Realtors (MBR) in its Annual Membership Meeting invited Appraiser Consultant Gus Agosto to discuss the highest and best use analysis. It was designed to provide members a brief view on the concept and purpose of highest and best use in the appraisal and development process. The meeting was held on October 7,2020 via zoom webinar.
Paying attention to the highest and best use will better the appraisal and consulting profession as a whole, and help practitioners in their transactions and for the appraisers to improve reports.
Appraiser Agosto, who is also a consultant of the Asian Development Bank, emphasizes the importance of the highest and best use analysis in providing different options and market value estimates for the same property. He provided an example from a listing of a real estate practitioner which marketed the property as a 4-storey apartment for Php 41 Million. However, the same property can be marketed as a potential 10-storey apartment and can be sold for Php 63.2 Million. Also, it can be marketed as a Serviced Apartment and can be sold to investors at Php 84 Million.
Highest and best use is extremely important in appraisal reporting because the market value estimate depends entirely on the nature of the present or anticipated use for it according to the concept of surplus productivity. It determine the selection of comparable sales and ultimately determine the market value estimate.
“Highest and best use is not only important but a must in the value consulting process”, the consultant concluded.
We should continue in knowing and understand the world, not only for our clients and country, but the most important for the next generation.
Prof. Gus Agosto, the Principal Property Valuer of AA+ Appraisal & Consultancy, conducted a webinar on the Philippine Real Estate Market and Trends. You can avail of FREE copy of the ppt and reports, just email at firstname.lastname@example.org.
Property inspections plays a major part in the appraisal process. Inspecting roofs, aerial and panoramic views of the property and neighborhood is always a must have. Drones can help appraiser in making job easier.
Drones can provide a video and high resolution photographs which is one of the many benefits of using drones in appraisal. It can take pictures in various angle and up close which make the inspection and visibility of the properties very helpful in inspections.
In using aerial photographs, expenses are a major factor. Using aircrafts and helicopters are more costly than utilizing drone. By using drone you can save on aircraft rental cost, paying a pilot and fuel costs. All what you need in drone is a rechargeable lithium-ion batteries.
Drones is better than satellite photography such as google maps and wikimapia. Since there is no height limitations an appraiser can get the specific details of the properties, in real time.
Drones are the future of aerial property photography. By using this technology in your appraisal practice, you can gain a competitive advantage. #
AA Appraisal & Consultancy successfully valued three island properties in Northern Samar. The appraisal inspection was done using drone technology and able to get different views of the islands and its beautiful beaches.
The 3 island properties which have a total area of 400 hectares, are ideal for high-end and tourism related development . The beaches and its location are accessible from different point of origin such as Manila and Cebu.
An appraisal is important in developing an opinion of value on how much a property is worth and plays a crucial part in setting the sales price of the property. Property owners and buyers rely on the third party appraisal to help them in the transaction.
While the appraisal of a regular properties in urban can be easily established by sales comparison, valuing private island is more complex and trickier. AA Appraisal did researches and considers different islands in the country and in international. “Experience in using different methodology such as income approach and development method plays a big part in appraisal”, Appraiser Gus explained.
“Establishing a realistic and reliable value of a property based on market data, previous appraisal reports and investment value of the property is crucial,” he continues.
He also emphasizes the importance of drone technology in appraising large properties like islands. “Drones will help appraisers in making inspections and documentation much easier”
Gus Agosto served as the Principal Appraiser of AA+ Appraisal & Consulting. He has been commissioned already to value beach properties, islands and other tourism related properties. He has served as consultant for Asian Development Bank, Cebu Provincial Government and big corporations such as Vivant Energy, Avida Condominium, Ayala FGU, Punta Engano Development Corporation, and others.
The impact of the COVID-19 can be measured of its severity with number of affected person in the country. As of March 29,2020, there is a total of 1,418 confirmed cases, with 418 recovered and 71 deaths. Majority of confirmed cases are in Metro Manila and nearby provinces. COVID-19 is not as deadly as Ebola, which had a mortality rate of 60%, or SARS and MERS at 30%. But if the risk of death is lower, transmission is much higher.
Staying in business is the biggest challenge brought by the coronavirus. However, as Albert Einstein said, “In the midst of every crisis, lies great opportunity”.
There is a need to explore the economy, business, real estate sector and draw-up a plan to confront the crisis and explore opportunities not only to withstand but to emerge stronger. Businesses that are well-prepared will always recover more quickly.
Pandemic in History
Pandemic is not new in the country. Looking back in history, our country survived several pandemic already. The nearest comparable pandemic to coronavirus that impacted the country occurred in 1918-1919, with the Spanish Influenza or locally known as trancazo. It was also the pandemic that infected more than 500,000 of the global population. In the Philippines, the total number of deaths was estimated at 70,513, with the group suffered most were those between 10-29 years in age. This epidemic occurred in waves, beginning in June and the second, which is more severe one begun in October 1918.
Another outbreak , SARS, which has a worldwide impact last for five months, from March to July 2003. The country recorded 14 cases and 2 deaths, the lowest count in 30 countries affected by the disease. This can be attributed to the established guidelines or infrastructure system of the government, and also the characteristics of the virus itself.
On coronavirus, lockdown were implemented in Wuhan, China to contain the spread of the virus. However, it enables the businesses to be innovative and cope up with the situation, in its two-month lockdown. Businesses engage in providing basic essentials were allowed to continue. Digital ordering of food supplies to estate arrangements were encouraged. The implementation of QR Code system in detecting person with infection, provision of supplies and others.
The experiences we can learn from Wuhan and from our own gives us a light of hope on our quest to survive and end coronavirus.
The economic impact is inevitable. Luzon accounts for the 73% of the country’s gross domestic product (GDP), while Visayas and Mindanao have 13% and 15% respectively. The National Economic Development Authority projected already at 0.3 reduction of the GDP if the virus lingers until June, and will further increase to 0.7& if it will last until December.
Among the sectors in the economy that were hit the hardest were services, tourism, trade, and remittances. Real estate being in the service sector is among them.
Based on the estimate, tourism industry alone could lose P22.7 billion in revenues per month due to the corona virus outbreak. The industries such as the export processing zones will be vulnerable to the disruptions in global supply chains after the closure of airports, ports, and factories within the country and abroad. Real estate, which has a gross value added of 2.3 Billion, as of January 2020, has greatly impacted.
Agriculture sector stand-out in this time of crisis. The role it plays in food sufficiency and provision of employment to the people cannot be denied. In 2018, it employs 10 Million people in the countryside.
The declaration of “Enhanced Community Quarantine” from Luzon and other provinces signals a new situation in real estate. It will pave way to a new redistribution of real estate development and type of properties that will be offered in the future.
Opportunities in time of crisis
Under the guidelines on the enhanced community quarantine, only those providing basic necessities and activities will be allowed to operate.
Basic necessities include food and medicine production:
- Public markets
- Convenience stores
- Medical clinics
- Pharmacies and drug stores
- Food preparation
- Delivery services
- Water-refilling stations
- Manufacturing and processing plants of basic food products and medicines
- Money transfer services
- Telecommunications supplies and facilities.
Business procession outsourcing and export-oriented will continue to operate provided that they will employ social distancing. Other businesses are allowed to operate provided their employees are working at home.
These businesses are opportunities that need to be explored. This crisis require people to think out of the box and be innovative to remain in business. Analyze current business strength and weaknesses, to enable to capture opportunities in the market. Adaptability and collaboration is the key.
Key driver to resilience
In coping with the social and commercial disruption, a key driver is turning out, the digital technology and agriculture. Groceries and food supplies can be purchased online and delivered to the home. In Wuhan, local residents organize themselves for home delivery of essential supplies while in self-quarantine. The combination of consumer digital maturity and digitally supported supply chains has enabled local residents to organize home delivery of essential supplies to people in quarantine.
There are companies that provide virtual trainings and online seminars to its people and learnings about real estate salesmanship skills, market analysis, business matching, and other useful skills to personal development such as leadership and speaker’s training.
Agriculture plays a great role in the sustenance of food supplies and stable prices in the market. Farming and fishing activities were permitted during the period of quarantine. The government also ensure the continues movement and unhampered flow of farm products to the cities.
Uncertainty still dominates the situation. Nobody knows what next week or months could bring. Preparation and planning is the key to overcome. Businesses should conduct scenario planning, the best and worst case scenarios, and the capability of the business to cope. There should be short and long term plan on the financial, organisational and operational capability. Access to financial assistance and relief should be demanded from different government agencies.
Filipino people had been proven to be resilient amid calamities and crisis. Covid-19 is a wakeup call for us which both need to accelerate the digital transformation of our economy — ahead of the next pandemic.
Cost approach is one of the valuation approach that is commonly used in valuing man-made improvements and machinery. In the Philippine context, cost approach is being used to value improvements separate from the valuation of land. This method can be trace back to our long history of housing assessment in the Philippines. It is revered yet poorly understood.
In a nutshell, cost approach is a breakdown of what it would cost to reconstruct the property, as if it were destroyed less depreciation. Cost approach is highly reliable if the property subject for appraisal is new, and might have little or no depreciation at all.
But it’s not a walk in the park approach. There are a lot of misconception and need to polish. In cost approach method, an appraiser should master the building construction estimation, the difference between the reproduction and replacement method, types of depreciation, its application and whether it is curable and incurable, and the supply and demand that shape the economic situation.
Economic obsolescence is seldom used by practitioners. Analyzing the location of the property and its role in the supply and demand is at the core of this type. Example, an older warehouse that is not suited to containerized freight and as such not as valuable as the other one. Another example is a building designed for processing of local agricultural products which through the period of time, the community no longer produces these products. These buildings substantially depreciated due to economic obsolescence.
The crucial portion in the cost approach is the determination of the cost new and depreciation of the property subject for appraisal and breaking down the building cost into direct and indirect cost. It’s not just a list of materials and labor needed to construct a building, but should also include the developer’s and entrepreneurs’ profit. This is a reward for the role they played in ensuring the completion of the project and bring it to the consumers.
Defining the different part of depreciation is also an important one. The economic life of the improvement has bearing on its contribution to the market value of the property. However, there are confusion on the interrelation of remaining economic life, effective age and actual age. The economic life of a building can be as short as thirty five years, or its effective age is longer than the actual life. Thus the maintenance, renovation and repair plays an important role in prolonging the remaining economic life of the property.
Here is an example of how to solve the problem on actual age versus effective age:
|Portion of the House with 10 years old||20||70%||20 x 70%||14|
|Portion of the House with 5 years old||5||30 %||5 x 30%||1.5|
|Effective Age of Building||15.5 years|
The house appraised which has a portion undergone renovation (30%) while others remain in its normal course of wear and tear and utility. The result will show that the effective age of the building is 15.5 years even if the actual life of the building is 20 years.
Simplistic analysis of cost approach will open the appraisal process and value conclusion to scrutiny and questions. At the end of the day, the appraiser’s experience and knowledge will play crucial in making sound judgment.#