Site Valuation

appraisallargeOne day, I was asked to observe in a meeting of real estate practitioners. They were finalizing the asking price of a property that has just listed. One of them opined that they can base it to the Bureau of Internal Revenue (BIR) Zonal Value, while the other one, succumbed to the pricing that is based on the prevailing prices of properties in the area. I almost bolted from my seat to immediately correct the practitioners.

I have appraised hundreds of properties already, and comparing prices of properties in the area is erroneous. It won’t give justice to the property of the client. Site valuation is not just as simple as comparing with other sold or offered for sale properties in the area.  For one, no two vacant lots are the same typically; no two houses are the same. Every property is unique.  There are differences in size, location, width and depth of lot, and leveling or topography of the land.  The most important to consider is the lot size. Smaller lots tend to sell for a higher price per square meter than larger lots.  However, if the end use is commercial, bigger lots command a much higher price. Once the sales price per square meter is determined for each comparable or “comps”, the reconciliation process begins. Then there are other factors that should be consider such as easement, road right of way,  encroachment, presence of informal settlers or other occupants, the neighborhood, and also, the facilities and amenities in the vicinity.

In the larger scale, one has to consider also the real estate market, from the city or municipality up to the provincial level.  All of these should be taken into account.

Meanwhile, the method of obtaining a market value from the Assessor’s Office is not reliable. We all knew that a lot owner usually declared their property at low level to minimize taxation. The zonal value also cannot be use nor relied on.  Zonal values were based on streets or zones and not on individual property. Just remember that these two were all for taxation purpose only.

In conclusion, real estate practitioners should not shillyshally in topping the services of an appraiser. An experienced appraiser can guide practitioners in arriving at a reliable price of their listings. They have the knowledge and skills in discerning the value of a property. Your client deserve the best service from you.

Mixed use development appraisal

11221862_1062426540442254_1175843060924474763_oReal estate valuation is the process of developing an opinion of value. It can be used in determining the value of property whether single use or mixed use development.

So far we have discussed more on the single use appraisal, now let me share and discuss the appraisal of mixed use development.

In valuing property, the first and foremost we should have to know is the intended use or the purpose of the appraisal. It will serve as a guide in appraising the mixed use property.

Mixed-use development is—in a broad sense—any single building, that blends a combination of residential, commercial, institutional, or industrial uses, where those functions are physically and functionally integrated. It may also a site or a building, complex of buildings, or district of a town or city that is developed for mixed-use by a private developer, government agency, or a combination.

In a nutshell, there are benefits in mixed use developments. For example, it reduces distances between housing and workplace, retail business and other. It is now common to have developments which align to the concept of live, work and play.

It is a great challenge to an appraiser in coming out of an opinion of value that reflects the actual use and the highest and best use of the mixed use property. An appraiser can use the different approaches in valuation such as sales comparison, cost and income approach. And since it is a mixed use, you have to use different comparable, and methods. An appraiser has to dig more data and information from the knowledgeable persons in the neighborhood, government officials and industry leaders where the property is located.

In analyzing data, we have to consider the zoning, allowable use, predominant use, conforming use, legal and illegal non-conforming use, the highest and best use, neighborhood analysis, market trends not only of the city but the region as well.

Nothing beats the importance of conducting actual inspection of the property and the neighborhood. It will give concrete data and visualization of the property. The trend of development in the locality and region, will broaden your perspective and analysis.

Valuing mixed use properties will force the appraiser to be more analytical and creative in solving problem –to determine the market value that is reliable and defensible.

SME and the Valuation Standard

zzq9wVj4_400x400On Tuesday, Nov. 17, the Asia Pacific Economic Cooperation (APEC) kicked-off the Small and Medium Enterprise (SME) Summit 2015, with the theme, “Innovation and Big Ideas: Pushing Boundaries” that aims to challenge the traditional framework and mindset of micro and SMEs to further innovate their businesses.

SME is the engine of growth and innovation in APEC. It comprises over 97 percent of enterprises in the region; over half of the total workforce in APEC member economies; 20 to 50 percent share to GDP; and contributes up to 35 percent of direct exports.

The process of innovation of business requires new mindset and building of credibility of their businesses. The International Valuation Standards Council (IVSC) has recognized this demand and considers it critically important to build valuation expertise and capacity through the application of consistent standards and to continue to develop a globally respected valuation profession to apply these standards with the required vigor and coherence. Having uniform valuation standards in place ensures that the environment in which SMEs operate is fair and encourages healthy competition within and across borders.

The global application of clear valuation standards can benefit SMEs and companies of all sizes in a number of ways. Practitioners, alongside their clients, liaise with a variety of third-party organizations, such as banks, grant funders, and other external parties involved in various transactions. In order to meet their expectations and develop meaningful relationships based on mutual trust, the companies need to demonstrate a high level of credibility. The consistent application of fair value measurement implemented by well-qualified valuation practitioners is an important means for achieving this goal.

All parties involved in the business process should be involve in the education on the importance of valuations standards, which, once applied, help companies to operate in a more accountable and transparent way. As such, valuation standards ultimately can improve companies’ reputation and positioning in the marketplace.

Appraiser on the Environment: The Case of Inner Niger Delta

Real estate practitioner should also be concern with the environment. As my contribution to the campaign in preserving the Inner Niger Delta River in Mali. I am sharing the summary of my paper submitted to the United Nation Environment Programme (UNEP) on how to augment the present effort on Ecosystem-based Adaptation (EbA) in Inner Niger Delta River.

Ecosystem Based Adaptation

The Inner Niger Delta in Mali is a 3,000,000 hectare wetland consisting of flood plains, lakes, river branches and small pockets of flood forest. It is part of the 4.200 kilometres Niger river catchment, which flows through 10 countries before discharging in the Atlantic Ocean. It is also classified as a Ramsar site in 2004, for its extraordinary importance having a large range of water dependent plant and animal species.

The Inner Niger Delta is vulnerable to climate change, deforestation, flooding and loss of livelihood of fishermen, farmers and cattlers.

The integration of Ecosystem-based Adaptation and Ecosystem-based Disaster and Risk Reduction integration in Inner Niger Delta will bring more benefits to the people and the environment. Integrated approach of structural and non-structural projects will help restore the forest and prevent flooding and brings livelihood of the people. Furthermore, ecosystem based adaptation is more beneficial being a cost-effective measure and more effective.

There are activities currently done in the river but other measures should also be adopted like reforestation programs, construction of natural channels and water reservoir, experimentation of other suitable farming methods and more.

Reforestation will raise the water level and will help maintain the river flow. Regeneration of the tree cover will not only raise the water level of the water but this will also another source of livelihood for the people and will greatly help in preserving different flora and fauna habitat.

To prevent flooding and control rivers during heavy rains there should be natural channels and water reservoirs to be constructed.These structures could re-channel the waters to the reservoir and be absorb by the soil naturally.

Non-structural measures includes reforestation of riparian areas and strengthening of organization framework for disaster management. These projects and land restoration initiatives increases soil structure and thereby improved the watersheds ability to hold and store water.

In the agricultural village, the effect of climate change are the drying up of the soil vegetation and irrigation system . There should be innovation and experimentation with traditional farming methods and agroforestry techniques. Depending on the soil characteristics, with the above measures, people can have a better crop yields, regeneration of tree cover, as well as other additional economic and environmental benefits.

Coordination among the stakeholders and users of the river should be implemented.There should be coordination among the population in upstream and downstream part of the river with regards to the use of the river. Creation of water governance bodies in downstream and upstream and a bigger bodies that coordinates all the stakeholders. This body will conduct mapping of the entire area and pinpointing the possible or potential area that are prone to disaster and hazards.At the same time, conduct training on preparedness on different hazard events.

These measures needs people support and to achieve it, there should be a massive information and educational campaigns and conduct of trainings among the populace.

Maintenance of water flows in Inner Niger Delta is a major campaign to help preserve our wetlands. We should throw our support and give our next generation a chance to benefit the beauty of nature and the ecosystem.

I hope this was interesting to you. Thanks for being here.

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