Key points in the appraisal report

Appraisal reportIn every appraisal assignment, the appraiser should see to it that the client understand not only the final value, but the appraisal report in its entirety.

Appraisal report is the product of the whole appraisal process. It is an important document for decision maker in deciding whether or not to accept any real estate transaction.It outlines the strength and weaknesses of a property. Thus, the conclusion in the report can make or break any real estate negotiations.

Beside market value, what are the other factors that a property owner, real estate practitioner or investor should look to in an appraisal report?

Here are some of the major factors to consider as you read over the appraisal report.

Proper identification of the property.The most important in appraisal is the proper identification of the property. Definitely, wrong property is wrong appraisal. The appraiser should indicate the correct characteristics of the property like shape, size, depth, age, topography and boundaries. Documents such as the property title and tax declaration should match with the public records in the city assessor, engineering, city planning and Bureau of Lands.

Market trends. If the market has been going up, but the report says the market is going down, that could not support the final value. The report should show if what is unfolding in the market, otherwise that could lead to erroneous adjustments in the report.

Neighborhood Boundaries. The neighborhood boundaries listed in the appraisal report should show the correct similar neighborhood on which the subject property and the comparable (comps) sales are located. It can make a big difference if the wrong comps are used from inferior or superior neighborhoods.

Selection of comparables. The comparable used are the good substitution of properties a buyer might consider purchasing instead of the subject property. It should almost identical with the property appraised. Otherwise, it is a wrong comps and questionable.

Adjustments.Some reports make an adjustment by just getting the  average of the total price of comps in the market. It does not reflect the real estate market and are not reasonable.

Measurements. In measuring the improvements, appraisal report should present  a relatively similar to official records or to what a buyer know of the property. It is important to double-check, in case of error.

Improvements. The report won’t show an adjustment for every single update, but the final value should consider improvements. Keep in mind of course that not all improvements contribute to value. For example, a swimming pool in the backyard probably won’t be a huge plus in a beach area.

Qualification of the appraiser. Appraisal report mirrors the experience and qualification of the appraiser. Property owner, investors and real estate practitioners should look for appraisers that are not only licensed but possess a certain level of experience. The report should indicate the client list and types of property appraised by the appraiser. This will show if the appraiser is qualified to do the assignment.

Now that you know the important elements of an appraisal report, its time to obtain a copy from your appraiser or bank loan officer.

Remember that your property is one of your most important lifetime investments. The money spent on a quality appraisal is well spent.

Subdivision Development Method

12Land valuation is the most common appraisal assignment. An appraiser uses different method of valuation taking in consideration the purpose of the appraisal. But land differs in sizes, shapes and probable uses that an appraiser should look up to. Land which is large enough has different characteristics that warrants equal if not special attention. Besides, large tract of land requires more data and sets of comparable in using sales comparison method to arrive in a reliable and defensible market value.

An appraisal technique seldom used by appraisers in determining value of large tracts of land is the subdivision or development approach. This technique determines market value by subtracting the costs of developing a potential subdivision from its anticipated proceeds, and discounts the remainder to arrive at present value as of the date of the appraisal.

In using this technique, an appraiser should prepare a subdivision lay-out to determine the number, size and shape of lots. Through research estimate prices of lot; rental rate per square meters if improved with buildings; the development cost and developers profit and the income stream discounted to the present and arrive in its market value.

Often, land value estimates emanating from the subdivision or development approach are significantly lower than those correspondingly derived from the sales comparison approach with a lower lot sizes and different uses. In theory, if both the development method and sales comparison approach were applied correctly, the value estimates should be similar. Nonetheless, the process of reconciliation of different approaches, the appraiser should give weight to the method which is more reliable and justifiable than the other.

In the whole process of the development method of appraisal, the experience, skill and judgment of the appraiser will play with paramount of importance. There are number of methods and techniques available for the appraisers to explore and gain expertise in the practice of profession. Through our innovative effort as an appraiser, we can make an important contribution in popularizing and practicing the subdivision or development approach, in the service of our clientele and to the society.

Cavite Appraisal

 

I appraised properties in Cavite recently. My client, which is an expat living in the US, instructed me to deliver the report within three (3) days for court submission. He gave me only the exact address of the property, the rest will be produced through research.

Early in the morning I travel to Noveleta, Cavite for my first assignment, through the Manila-Cavite Expressway or Cavitex. I arrived in the municipal hall and paid a courtesy call with the Municipal Assessor, then proceed to the site for actual site inspection and research.

Then I went to Trece Martirez City to conduct due diligence for a property under dispute. I visited the site and afterwards went to the City Hall to conduct research and investigation.

I finished the assignment in three days and submitted it. My clients were happy after reading the appraisal report I sent to them.”Thank you for excellent job.”

A commendation that makes an appraiser happy.

Let us now tour Cavite.

Cavite is a province in the Philippines located on the southern shores of Manila Bay in the Calabarzon region on Luzon island. It is bounded on the north by Manila Bay and Metro Manila, on the east by Laguna, on the west by the South China Sea, and on the south by Batangas. It is composed of 7 Cities and 26 Municipalities. With a population of 3,090,691 in 2010, it is the most populated province in the country.

You can reach Cavite from Metro Manila through Aguinaldo Highway and Manila-Cavite Expressway or Cavitex .Situated just 21 kilometers south of the capital, it is one of the most industrialized and fastest growing province because of its close proximity to Metro Manila. Many companies, such as Intel, have established manufacturing plants in numerous industrial parks in the province. As of 2012, there are 382 actively operating companies in Cavite Export Processing Zone.

Major historic events happened in Cavite that shaped Philippines today, if you want to know more about Philippine History, you can visit Cavite and it will be like seeing the history itself not just reading them from Philippine History books.

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ASEAN IS ONE TONIGHT

We welcome 2016, not just a new year, but a new era for our country and other members of ASEAN. ASEAN is one community tonight.

The ASEAN Economic Community endeavors to become a single market and production base. It will unify the 625 Million people of 10 countries under ASEAN as a single community. ASEAN will be connected thru effective air, sea and land links. Further development of regional connectivity will help people, goods and services flow across the region more quickly and cheaply.

ASEAN identifies professions that are allowed to practice in other ASEAN countries. Small-Medium Enterprises (SME) will become more competitive. Those who are open to ASEAN market can expand operations and acquire office space and industrial properties outside the Philippines.

ASEAN community gives us more opportunities. The free movement of goods, services, skilled labor and capital would require more commercial and residential buildings and other infrastructures.

At the same time, it brings challenges to connect. Bigger, skilled and more advanced real estate practitioners from other ASEAN countries can enter the local market. They need local partners and counterparts.

New era requires new mindset and system. It means old habits and comfort zones should be archived. It is an era where connectivity and excellence is a must.

Happy New Year!   Welcome to ASEAN Community.

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PAREB-CESOREB held its first CPD Seminar

PAREB-Cebu South Real Estate Board (PAREB-CESOREB ) successfully held its first Comprehensive Development Program last October 17-18 at Elegant Circle Inn, Cebu City. More than 60 real estate brokers and salespersons participated in the seminar.

Gus Agosto, the President of PAREB-CESOREB, in his speech welcoming the participants highlighted the objective of PAREB-Cesoreb in conducting cpd seminars, “ Pareb- Cesoreb aims to help in raising the bar of real estate professional practice in Cebu.” “Thru seminars, we can produce more and more real estate practitioners who are capable in providing professionalized services to their clients and to the public in general.”

“We learned a lot in the seminar”, one of the participant said. “We are looking for the next set of seminars “, another participant shared.

The two-day seminar were the first set in the series of seminars they will be conducting. The topic of seminars included basic property management, leasing, BIR transactions, business planning, real estate service law and professional ethics.

PAREB-Cesoreb CPD

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Took oath anew as Court Commissioner

11150573_1061342033884038_5252473516736476044_nAppraiser Gus took his oath last Friday, September 11, 2015 as one of the Commissioners of a Regional Trial Court in Cebu City. As one of the Commissioner, his duty is to aid the court in determining the exact property affected area and the amount of just compensation to be paid.

“Congratulations to all of you”, the lady judge happily greeted them after the oathtaking ceremony in her office. The other oath-takers were the City Assessor of Carcar, Cebu City and the Clerk of Court.

“I thank the lady-judge and the lawyers who trusted my capacity and chooses me as one of the Commissioner.” Appraiser Gus exclaimed. “With the present composition of Commissioners, the court could render wiser judgment aided by the report of each and everyone of us as Commissioners.”

Appraiser Gus was also chosen as Commissioner by the regional trial court of Lapulapu to determine the fair market value of a property in a dispute. Previously, he also served as an Associate Appraiser in Zonal Revaluation of the BIR Technical Committee in Cebu City.

Metro Manila Appraisal

It was an honor and privilege to be invited by a prestigious and one of the top appraisers company in the land to join their team in appraising property in Metro Manila.

Truly it adds value to my appraisal skills and in running an appraisal company.

Great experience.

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No two properties are alike

marketvaI have a client who asked me if I am using the same appraisal report format in my practice.  I quickly replied no. Why? Real estate properties have different appraised values depending on how you intend to use the appraisal. For instance, valuation for insurance may be very different than the value in the market, estate tax, property resale, or insurance. Other assigned uses include investment, liquidation, price confirmation, equitable distribution, loan collateral, retrospective value and many more.

Qualified and educated appraisers understand the many different types of values, assigned uses, and market condition in an specific area. He or she works with client to choose the proper type of value so that they can use the appraisal correctly and effectively.

Whenever there’s a question about the value of your property, there’s also a risk involved. It may be the risk of selling too low, or of paying too much: the risk of being under or over insured; the risk of not getting your fair share in a division of property; the risk of incurring tax penalties or being audited when calculating estate taxes.

A professional appraiser helps you manage these and other such risks by providing a written opinion of value upon which you can base your financial decisions. Rather than being just an “educated guess”, the professional appraiser’s value conclusions are based upon prescribed methods of valuation, research and report writing.

Bankers, investors, insurers, brokers, trustees, lawyers, judges, government agencies – ALL are dependent upon the knowledge and expertise of the appraisers, and so are you. Too often and too late, people find out that the appraisals they have are inaccurate or misleading, resulting not only in greater risk to themselves, but also a waste of millions out of their pocket.

No two properties are alike, no two appraisals are alike.

Appraisal services with a government institution

Appraiser Gus Agosto has just rendered appraisal services to the University of the Philippines, Cebu Campus. “It is an honor to be awarded a contract and appraised properties of a prestigious institution like U.P.”, Appraiser Gus Agosto shared.

“Government institutions and agencies are good market for real estate appraisers. Appraisers can explore and participate in government bidding and contracts.” he further said.  Last year, he was also part of an appraisal team that provided appraisal services to the Cebu Appraisal Technical Committee on Zonal Valuation of the Bureau of Internal Revenue (BIR).

To succeed, Appraisers should have working knowledge of the Republic Act 9184 or the Government Procurement Act. Every branch or agency of the government through the head of a procurement entity forms a bids and awards committee (BAC) to conduct competitive and transparent purchases by means of public bidding. There are also alternative ways government can make purchases like limited source bidding, direct contracting, negotiated procurement and shopping,

“In winning a government contract, offering the lowest price is not the key. It is knowledge, appraisal experience and excellence in appraisal that matters,” Appraiser Gus ended.

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