In the course of my appraisal work, I visited places like Palo Church.
Palo Church is a historical landmark in Palo which was built in 1596 by Fr. Alonso de Humanes, a Jesuit who came to the place when the sitio had only two houses, who spread the gospel of Christ, baptized natives, taught the children to read and write, pray the rosary, sing church hymns or play the flute.
On December 12, Thursday, at 8:30 in the morning a simple oath taking of the Commission took place at the office of Judge Victor Teves, Lapulapu City Regional Trial Court Branch. The Commission was created to determine the fair market value of a property under litigation.
“It is an honor to be part of a body that commissioned by the court and will help in settling dispute”, Gus said after the oath taking.
Dr. Tom Academia , PARCS Executive Vice President said, “Appraiser as commissioned by the court must understand that his principal is the court, not in any of the parties involved and importantly, that position is always unbias in the performance of his appraisal duty. “
Gus is not new to appraisal involving legal proceedings.” I appraised properties already for litigation support”, he said. I helped clients and lawyers in strengthening their legal defense and arguments in court.
Gus was formerly the Managing Partner of Intech Property Appraisal,Inc., a Manila based appraisal company. He appraised different properties-residential, commercial and industrial, in Cebu and Iloilo. He also appraised properties of Cebu CFI Community Cooperative in the Visayas and Mindanao.
A licensed real estate appraiser and broker, he graduated Bachelor of Arts, Major in Economics. He also earned units in Bachelor of Law. Recently, he completed the Real Estate Consultants Review and Seminar given by the Philippine Association of Realty Consultants and Specialists (PARCS).
He is currently the President of Cebu South Real Estate Board, a local board under PAREB or Philippine Association of Real Estate Board.
What an appraiser does day to day ?
Real estate appraiser or valuer is someone who estimates the value of the land and the buildings. Most commonly, appraisers perform work for banks and companies, although many appraisers engage in a wide range of assignments, including for example, for sale, litigation, right of ways, divorce, valuation for financial reporting, estate planning and more. The appraisal work can vary greatly and can often be more complex than typical valuation assignments.
When carrying out appraisal work, appraisers’ main role is to provide an objective and unbiased opinion about the value of a property for their clients, who typically are owners, investors or lenders. Appraisers do this by gathering a series of facts,site inspections, interviews, statistics and other information, then analyzing the data to develop an opinion of value.
So what does an average day in the life of a typical appraiser normally look like?
Individuals who enjoy analytical thinking and problem solving generally have the makings of good appraisers, since each valuation assignment challenges the appraiser to put his/her analytical skills into practice, exercise good judgment and communicate effectively.
Although appraisers are typically based in an office, they spend a good deal of time at site visits. Most work full-time, during standard business hours, but appraisers often have the flexibility to customize their work schedules.
Depending on assignment, the appraisal site and specific tasks will vary. A licensed and certified appraiser is qualified to appraise all types of properties including lot, house and lot, condominiums, duplexes and apartments. An experienced appraiser is usually doing appraisal of all properties, but generally focuses on property used commercially, such as office buildings, stores and hotels.
Often times, an appraiser will conduct a fair amount of research up front before beginning work onsite, such as verifying legal descriptions of real estate properties in the assessors office or other public records.
Appraisal On-site
While onsite, an appraiser will inspect both new and existing properties, noting unique characteristics of the property or surrounding area, such as the property’s condition, structure, interior, amenities and upgrades. The appraiser also will photograph the interior and exterior of the property to use when preparing the appraisal report.
An appraiser usually uses the three approaches to value- sales approach, cost and income approach. Using the sales approach, the appraiser examines comparable sales after the site visit, to help determine value. The appraiser will also consider location and condition of the property, neighboring properties, documents, records, previous appraisals, the view from the property and income potential.
Depending on the assignment, an appraiser may also use the income approach or cost approach to develop an opinion of value. Cost approach seeks to determine how much a property would cost to replace (meaning, rebuild) after subtracting accrued depreciation. While income approach is a method of arriving at the appraisal value of a property on the basis of its opportunity cost.
Analyzing all of the data gathered, the appraiser prepares the written report showing the opinion of value.
Real estate appraisal is an interesting, rewarding, and challenging profession.
Philippine Association of Realty Consultants and Specialist (PARCS) successfully completed its 120 Hour Comprehensive Seminar and Review for Consultants. The seminar was conducted in preparation for the upcoming Philippine Regulation Commission Real Estate Consultant Board Examination scheduled on December 3 -4, 2014.
The seminar and review gives the participants an in-depth knowledge on consultancy, due diligence, land administration, risk and rate of return, capital budgeting, market analysis and the conduct of feasibility study.
“It gave me a profound and broader view of my real estate profession”, said Gus Agosto, one of the participant. Currently, he is a practicing real estate appraiser in Cebu and other provinces in Visayas and Mindanao. “Being an economic researcher for a quite of time, the seminar refreshes my craft and add lot of knowledge plus the practical experiences shared by the participants who are seasoned real estate practitioners themselves..”
The seminar and review participants were determined to pass the board exam. The lecturer of the review include real estate icon Tom Academia, seasoned appraiser and consultant Oscar Labrador and Alexander Lumarda.
Real Estate Appraisers are often requested to provide an expert opinion as to the value of a property (an appraisal), for the purposes of determining just compensation. In an expropriation proceeding commissioners should at least be appointed to determine just compensation in accordance with the procedure in Section 5 of Rule 67 (Rules of Court). xxx the court shall appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the court the just compensation for the property sought to be taken.xxx
Additionally, appraisers are often requested to conduct an appraisal where the purpose is not explicitly described as being for litigation, but where litigation may result. Examples would be an appraisal completed for eviction cases, divorce proceedings, foreclosure or power of sale, or for civil forfeiture. Although appraiser’s reports are often entered into evidence for court, the appraiser is not necessarily called upon to provide expert witness testimony or to defend the report. However, it is prudent for the client ordering an appraisal to be sure the appraiser is aware of the duty of the expert witness and the court rules for report requirements, prior to engagement for an appraisal assignment.
“It is another area in our profession where we can lend services and specialize in” said Gus Agosto. Gus has been appointed by a lower court in Lapulapu City as a commissioner that will help the court in determining just compensation in expropriation case on trial. He also provided support to lawyers for litigation and court cases like eviction, judicial settlement and divorce.
The appraiser as experts may also provide retrospective appraisals, independent-appraisal analysis, appraisal review , expert witness testimony and litigation-support services in all real property valuation.
When selecting a real estate appraiser for litigation support, knowledge and experience matter. An appraiser should strive to be more knowledgeable and experienced property appraiser in providing litigation support and expert witness services.
It Is important for a real estate practitioner to know not only the current market value of the land they are marketing or dealing with. It is also equally important to determine its highest and best use. The highest and best use of a specific parcel of land is not determined through subjective analysis by a property owner, developer, real estate agent, or appraiser; but rather, it is a use shaped by the competitive forces within the market where the property is located.
In a real sense, the definition of highest and best use encompasses four tests. It is …
• the most probable use of land or improved property that is legally possible, physically possible, financially feasible (and appropriately supportable) from the market, and which results in maximum profitability.
An attempted analysis of highest and best use involves two considerations: [1] the most likely and profitable use of the site “as if vacant” under the requirements set forth above and, [2] if a property is “already improved”, it is the use that should be made of the property to maximize value for non-income producing properties or, maximize net operating income on a long range basis for investment properties. In cases where capital expenditure is necessary to renovate or improve an income producing property, these costs must provide a sufficient rate of return (to the owner) for the total amount invested in the site and building improvements.
Basic highest and best use assumptions include:
• If the property is located in an area “zoned” for commercial use, the maximum productivity of the land as though vacant will likely be based on commercial use. If, however, the competitive level of demand is greater for say, residential or multi-family use, then the highest and best use of the property as improved would be for residential use. If market preference conflicts with zoning (and consequently violates the legal permissibility test), a developer will consider if there is sufficient profit incentive to justify the added legal costs, extended time frame, and potential neighborhood opposition before obtaining a zoning change and developing the site.
• As long as the value of the property “as improved” is greater than the value of the site as “if vacant”, the highest and best use is usually the “improved” property. Once the value of the vacant land exceeds the value of the improved property (including demolition costs), highest and best use will usually dictate that improvements be demolished.
The following are examples of narratives from appraisal reports outlining the primary criteria in estimating highest and best use…
LEGALLY PERMISSIBLE USE
• The present zoning classification of Highway Business encourages the use of the subject property for retail —clearly a definition consonant with the present use of the subject property and surrounding properties. Environmental conditions and urban infrastructure are adequate to support the present use and it’s current use appears to legally conform with the current zoning ordinance.
• The present lack of zoning would allow for a wide variety of residential and/or commercial/industrial uses. As vacant, the proposed improvements would be legally permissible subject to the same land use regulations that apply to all property types such as erosion control measures, environmental safety, watershed implementation, and government agencies compliance. There were no apparent adverse easements or encroachments which would adversely impact subject and there are no known private deed restrictions which would prohibit full utilization of the site.
• Lack of zoning in the county and no known restrictions concerning the property would permit virtually any use. Even though new zoning regulations may be imminent in the near future, it is probable that current use patterns (retail and offices – a supermarket, insurance office, restaurant, bank branch, convenience store, and so forth) would entail similar zoning.
PHYSICALLY POSSIBLE USE
• The vacant site is near level, highly visible from the highway, and is considered suitable for “low rise” improvements. Although no soil report has been reviewed, it is the appraiser’s opinion that the soil has sufficient load bearing capacity to support construction. All public utilities are available at the street and capacity for utilities does not appear to be a limitation.
• If vacant, the site appears to be of sufficient size to accommodate many types of commercial buildings and parking requirements for those buildings. Likely uses would include office or retail. As improved, the existing retail building adapts well, still has significant remaining economic life, and therefore should not be demolished. On the other hand, the roof should be replaced and exterior painted to sustain the condition of the building.
• The subject site is mildly sloping at its most visible/usable portion. Improvements are possible but construction would be limited by the size, shape, and topography of the site as well as the ability of the vacant site to accommodate on-site well and septic placements. In January, 2002 hopes for a new sewer line to the area were diminished after local officials decided against building a sewer line through the valley. Instead, they elected to spend Php 1,500,000 for a small treatment sewage plant. Further, the recent construction of a nearby Food Lion Center in this rural location required construction of an on-site waste treatment facility that cost in excess of Php 500,000 and required the acquisition of four additional acres. These examples, and the prices paid for raw land, are reflective of the difficulty, additional development risk, and increased costs necessary to develop marginal sites for commercial use.
FEASIBLE AND MARKETABLE USES
• The current market value of the subject is driven by its current use. A general shortage of developable sites in this mountainous region has sustained land prices, encouraged development of marginal sites, and demolition of those buildings that no longer produce economic return. Case in point, rapid development along the Highway corridor. The advent of growth along the corridor has driven prices out of reach for most uses except those catering to brand name retailers, fast food/restaurant chains, and/or strip centers. Outdated buildings are being acquired and demolished to make way for more modern structures that can produce greater economic return.
• For the subject, it is fairly new and the cost to demolish would appear to make this property too costly as raw land. The location has high traffic volume – a requirement for retail use, but it has only marginal visibility (due to it’s elevation above the highway) and limited access – also requirements for retail. It’s present use as retail is constrained by the following: a lack of road frontage, excessive above-the-road elevation, small site size, and poor access – factors that would likely discourage brand retailers from acquiring the site if vacant. Although access may be cured at some cost, the elevation of the site, limited visibility, and blocked signage cannot be financially overcome. Market data suggests office and “secondary” retail pricing are competitive. Given these limitations, probable uses would include: [1] the continued retail use or, conversion to office use if conversion costs can be sufficiently amortized.
• The property is presently improved with a one-story 2000 sq. m. branch bank facility. The structure is reasonably well designed and in good condition however, it does not have the modern appearance of more recently constructed facilities. On the other hand, there are no other branch bank facilities in this section of the City and the present use as a branch bank is felt to command a competitive advantage due to the lack of competition of other banks in the market. Further, it is the appraiser’s opinion that use of this location for this purpose may command a premium in the market.
Pricing a listing is one of the hardest— and perhaps most important — tasks in real estate. Sellers can get it wrong in either direction: If the asking price is too low, the sellers might end up leaving money on the table; if it’s too high, they won’t tap into the right target group, will lose a lot of time and may then end up selling for even less.
Can you rely on a “mata-mata” or guessing? The answer is “NO”. You cannot. Relying on a guess or the word of a non-certified person is inaccurate and will not estimate the true market value of a property. However, with the educated and experienced real estate appraiser, who apply the methodology of appraisal and employ the ethical guidelines for determining values, can be relied on as unbiased and independent. Appraisal will add credibility to your pricing.
In addition, appraisal analysis the market to determine the highest and best use of the property, thereby come up with a value that is credible and reliable.
Buyers, particularly foreign investor and businessmen, tend to buy property with confidence if it was appraised by a third party.
In our real estate profession where trust is the most important aspect, a real estate professional-broker and agents, should encourage in acquiring the services of a licensed appraiser. It is more beneficial to the clients having it appraised and help in fostering our relationship with them. In the long run, the confidence of the public on real estate practitioners.
Add credibility to your listing price, get the services of a real estate appraiser.
Vacation-home sales accounted for 13 percent of all transactions in 2013 — their highest market share since 2006 — according to the National Association of Realtors’ 2014 Investment and Vacation Home Buyers Survey. As growth in the equity market continues to benefit households, consumers are gaining the confidence to invest in second homes for recreational use.
When considering the purchase of a vacation home, buyers should enlist the help of a qualified residential real estate appraiser to help them evaluate the property’s investment potential.
What is the location of the property worth?
Buyers can do their due diligence by familiarizing themselves with the location of the recreational property to help them determine if they want to make the investment. Does the neighborhood feel safe? Is it currently well-kept and in close proximity to entertainment or attractions that are important to the buyers?
However, buyers need the expertise of a real estate appraiser to help them understand how location and the future prospects of land values influence property returns in addition to the physical structure of the home itself.
According an Appraisal Institute brochure, “Understanding the Appraisal,” it’s the appraiser’s job to investigate the nature of the market for that property, competitive properties and the buyers and sellers who constitute the market for that property type. The principles of supply and demand, substitution, balance and externalities help the appraiser develop a credible opinion of value.
What is the property’s rental potential?
Because this is a second home intended for recreational use, buyers will likely spend only a portion of each year using the vacation property and might be interested in the rental potential of the home in order to recoup some of the money they invested.
To develop an opinion of the property’s rental potential, the Appraisal Institute says a real estate appraiser will investigate specific data, including the comparable rentals in the area, how much income the property can generate based on the comps, the expected reduction in gross income caused by vacancy and/or collection loss, and the anticipated annual operating expenses required to maintain the property.
Should any personal property be included with the sale of the home?
Is it beneficial for buyers to request that personal property — such as furniture, cars or boats — be included with the sale of a recreational property?
In an interview with radio station KPLU in Seattle, real estate appraiser Richard Hagar, SRA, says if the buyer is paying cash for the property, or if it is seller financing, then including personal property in the sale is not a problem. However, Hagar cautions that personal property is not supposed to be part of a mortgage.
“A mortgage should be a loan only on the value of real estate, so any personal property must be subtracted from the loan amount,” Hagar said.
Posted by Appraisal Institute Staff
Anytime you buy or sell real estate, you need a property appraisal. The primary purpose is to find out exactly how much your property is worth. Banks and similar lending companies also require it, before a buyer can obtain a mortgage.
An appraisal develops an “educated and trained opinion” on the value of the property. It also, in some circumstances, may ascertain the best use of the property, garnering the best selling price. For example, a long-time residential property may be in an area that has been rezoned for limited commerce, which could potentially bring in a higher sales price than marketing the real estate to potential residential buyers.
An appraiser differs from an inspector, who is looking for things that need to be corrected, repaired or replaced — things that are required by law to be completed before the property can be sold or to enhance your sale price. Though an appraiser will look at these same things, he/she is only interested in developing the value of the property.
A real estate appraisal is based on the highest and best use of real property — what use of the property will produce the highest possible value? The final appraisal must be both profitable and probable.
The real estate appraisal includes a definition of the type of value that is being developed — whether it is a market value (what most sellers need), a condemnation value, quick sale value, and so on.
The Process
The appraiser looks at each property individually, beginning with an objective inspection of the interior and exterior of the home or building, as well as driving through the surrounding neighborhood. The appraiser looks for the assets, as well as the detriments, of the property. For homes, gross living space, quality of construction, location, layout, the number of bedrooms and bathrooms, the lot size, condition of the home and land, central air conditioning, landscaping, number of fireplaces or the lack thereof, decks, pool, fencing, recent renovations, amenities provided by the surrounding neighborhood, and crime statistics of the area are all considered by the real estate appraiser.
Living space is calculated by measuring the outside of the home. It does not include such areas as the garage, porches, sheds, and so on. Basements are generally calculated separately from the living space. The contributory value of basements is determined by the local market, government regulation, if it is finished or not (and the quality of the finish), and so on.
The real estate appraiser usually only considers permanent buildings within his/her appraisal. Fixtures that can be relocated, such as above ground pools and sheds, are not included in the appraisal.
If you are the real estate seller, you should point out any features, amenities or improvements of your home that are not readily discernable.
Next, the real estate appraiser analyzes the available market data for your area and the surrounding neighborhood, including current and historical comparable sales, current offers for comparable homes, pending sales, and proposed improvements. The appraiser gathers data from a variety of sources, as well as his/her own personal knowledge of the local market. The appraiser then compares your real estate to the broader market.
Each real estate appraiser has his/her own process of analyzing, collecting and reconciling the needed appraisal data. If you get five different appraisals for your real estate, you may receive five different appraisal opinions. They should, however, all be within a similar value range, if they are completed within the same timeframe and under the same conditions.
Though the real estate appraisal is not for public consumption, it may be shared with all parties concerned. For instance, a buyer has offered $150,000 for a home, but the buyer-side, commissioned appraisal value is only $146,000. Sharing this appraisal with the seller means that the owner can do needed improvements to bring the price up or offer the real estate to the buyer for the appraisal amount.
For the highest appraisal possible, property sellers should have an inspection and appraisal done before putting the property on the market. First, the inspection in order to make any needed repairs or renovations. Then, get the appraisal to ensure you are getting the most for your real property.
John Harris is an expert researcher and writer on real estate topics such as economics, credit improvement tips, home selling advice and home buying preparations.
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