Tag Archives: ibp cebu

Tips in Litigation Appraisal

downloadI attended a court hearing recently, and when the presiding judge read the facts of the case and the lawyer’s motion to nominate an Appraisal Commissioner, his (Judge) immediate response is “What is the qualification of Mr. Appraiser ?”

An appraiser play an integral role in every part of today’s civil litigation. Litigation appraisal involves taxation, estate planning, expropriation, litigation support, property settlement and others. That is why when selecting a real estate appraiser, a lawyer always perform comprehensive conflict-of-interest checks  on background and qualification before hiring or accepting appraisers.

This conflict of interest check is vital in cases where a lawyer is dealing with large business that offers myriad services and types of clients. While in checking the qualification of an appraiser, a lawyer does it in a profound way through the following attributes such us technical acumen, experience in appraisal, educator and communicator and readiness to appear and have demeanor in court.

Experience in Appraisal – An appraiser should have broad experience in appraisal of different types of properties such us office, retail, warehouse, industrial, apartments, hotels, memorial. Have knowledge in different type of appraisal like fee simple, leasehold or lease fee interest, insurable, retrospective, raw land development method and prospective appraisal.

Technical acumen – associated with professional experience, organizational experience for broader real estate and economic counselling skills capability to solve complex problems requires a greater depth of skills sets. Technical skills are key to an accurate and comprehensive expert report, thoughtful review and critique of the opposing expert report, depositions, and testimony.

Educator and communicator – an appraiser should be ready to explain and discuss  the report in the commissioners meeting or in an open court. A lawyer should pursue in selecting an appraiser’s prior publications and writings. The reasons for examining the expert’s writing are two-fold. First, this type of examination can help a lawyer to further determine the appraiser’s qualifications. Second, how an appraiser presented their arguments and the manner of reasoning and  arrived at their opinion. Is their analysis persuasive? Does the report and opinion make a sense to a lay person?  Have they presented their report in an easy to read and logical manner?

Appearance and demeanor – Lawyer have confidence that the expert will come across as professional and knowledgeable.  At trial or deposition, the appraiser knows the importance of establishing and maintaining credibility, presenting an appropriate appearance and demeanor, remaining composed, considering posed questions carefully, providing a simple and direct answer, giving opinions based on facts, following the standards of generally accepted appraisal practice, being impartial and not advocating for the client, and always telling the truth.

The above characteristics are interrelated. The expert’s qualifications should  matched to the demands of the case as it relates to areas such as property type, experience, or technical requirements. The expert’s ability to articulate his or her position will allow him to better convey his or her skills and qualifications to fellow commissioners, judge, lawyers and other officers of the court. Any aspiring appraiser to be part of this challenging job should muster the above attributes and be of help in our justice system.

See you in court.

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.

Tool for Brokers & Appraisers

 

In our practice of real estate appraisal and brokerage, it is basic to have knowledge on site location and lot plotting. I am sharing this presentation to real estate practitioners and the general public in general.

We should continue in educating ourselves to better serve the public and raise our professional practice to a new and higher level.

 

 

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.

ASEAN-logo-One-community

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.

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.

Retrospective Value Appraisal

Most appraisals are for current market value. So the very day an appraiser comes out and inspects a property, the value will be “as of today”. But there are appraisal that determines the value of a property from the past. It is called Retrospective value appraisal.

What is a Retrospective value appraisal? It is a historical determination of the market value. With a retrospective appraisal, the effective date of valuation is what the property was worth on a particular date in the past-maybe last month, last year or last 10 years ago.

What is the purpose of a historical appraisal? Many and varied reasons. Accountants and financial planners need to determine the value of property held in estate when the owner dies. This is known as a “Date of Death” appraisal. The BIR want a professional appraisal in the file to document the value as of that date. Lawyers use the historical appraisal to determine what assets belong to which party.

Historical appraisal is also needed in court litigations involving expropriation of private lands for public use, and ejectment cases. The court will appoint appraisal commissioner to determine the market value of the property on the date of taking. If the property was taken from the owner last year or five years ago, the date of the valuation will be the same.

I recently appraised a property using retrospective appraisal. The property was expropriated for a government project. To determine the market value as basis for just compensation, my client hired my services. In this case, I valued the property based on the comparables, market data and analysis at the time the expropriation took place.

If the appraisal is for court litigation, we may be called on the witness stand to testify to our report and defend it against the opposing lawyers and his witness. There are additional fees for this type of testimony. But be sure your report is defensible and ready to thwart any questions of the opposing counsel.

In this more complicated retrospective or historical appraisal, it is important to hire an appraiser with experience and familiar in the market area. An appraiser with sufficient experience has insight in this area before, during and after changes that have occurred over.

As a professional appraiser it is my responsibility to be the best and be credible as possible for my client. If you have questions on real estate appraisal, feel free to contact me.

Appraisal 101: How an appraisal is done

It has been a normal scene for prospective client and practitioners to ask an appraiser for the value of a certain property. Some people also thought that after site inspection, an appraiser can render a value opinion already. So, there is a need to answer questions on how an appraisal is done? And why it is important to follow the process?

Appraisal may seem as a simple and fast process. An appraiser shows up at a property for a short time with a camera and tape measure and that’s it. However, the property inspections are only a part of a big process. A typical appraisal report requires 12 to 13 combined hours by appraiser and staff to complete.

Ordering an Appraisal
The process usually begins when a client call or visit the appraiser to order an appraisal. In the telephone or in-person conversation, the appraiser will asks data of the property such as title, building plan, tax declaration, as well as preliminary information of the client, and agree on the scope of work and professional fee. The most important is scheduling of the site inspection.

Identifying the Property
In preparation for the site inspection, the appraiser will study the documents provided by the client focusing on the location, shape and size of the lot, design of the house and decide on what valuation approach that he will use. Additional research will be done in different government offices for the identification of the property.

The Site Visit
Then the appraiser conducts a careful physical inspection of the property and the neighborhood. Take photographs and verify area measurements. Don’t worry about the kids, toys or household disorder. The appraiser is looking at the structure, condition and features of your home.

The appraiser will also roam the neighborhood to observe, estimate the distance between known landmarks in the area. Also, to look for any factors and characteristics that may affect the value of the property, and searching for comparable properties or “comps”. In the language of appraisal, ‘comps’ are sales and listings available in the market.

Pulling It All Together
Next, the appraiser performs in depth analysis of all of the available data. Returning to office is crucial part of the appraisal process. The appraiser will gather all the information about the properties and the financial aspects. Make phone calls to agents, government offices and other parties involved in the transactions to confirm observations or to gather more information. Examine the title and tax declaration for any encumbrance, annotation and non-compliance with the law. Often, property information from several sources is in conflict and it is the appraiser’s task to determine the true state of affairs by means of research, experience and good judgment.

Guided by the principles of appraisal, he will analyze the neighborhood, market, zoning, the predominant use of the area and determine the highest and best use of the property, as vacant and as improved.

In using market data approach, the appraiser will select at least three comps, but generally four or five are necessary to support the basis for the final appraised value. The appraiser makes adjustments to reflect differences in comp properties. Upgrades like painting, chandelier, air conditioners, recent redecorating, or home improvements may add value to a property.

There are other approaches or methods in valuing properties. Every approach is made to substantiate the appraiser’s opinion of market value.

Finalization of a Report
The last part is the preparation and printing of a detailed report, outlining the value of the property appraised and the approaches to value with several addenda including copies of title and neighborhood maps as well as photographs of the property.

The completed appraisal is packaged and transmitted to the client—the property owner, lawyer or company representative who ordered the appraisal.

Thus, appraisal is not a mere “opinion of value”, it follow process and guidelines set by authorities and international standards. Following thoughtful and thorough procedures will provide a complete and credible appraisal.

Challenges In Appraising Warehouse Properties

Appraisal of a warehouse can appear straightforward compared to other appraisal assignments. A warehouse appraisal involves comparing a building that is primarily an open shell to similar buildings. Some appraisers tend to assume that one “box” is pretty much the same as another. However, a number of warehouse characteristics can present challenges during the valuation process.

Some appraisers end in using Cost Approach method as a generic method in appraising buildings. But there are several critical differences appraisers need to keep in mind. First, knowing the remaining economic life of a structure is a big factor in determining what method should be used. Appraising old structures using the cost approach method may generate an incorrect result. Income approach is the reasonable method in this situation. Second, the importance of solving the question of the highest and best use of the property- as vacant and as improved, gains ground when the subject property is old and located in a neighborhood where other best use is possible and more feasible.

In appraising these warehouses using Income Approach, it is essential to carefully consider the following factors in selecting comparables:

• Excess land
• Truss height
• Percent of office space
• Loading facilities
• Truck maneuvering distance
• Floor thickness/loading capacity
• Power service
• Land-to-building ratio
• Size relative to typical building size

The most important, location-related factors can differentiate warehouses located within the same community. The value of a warehouse facility is tied to the ability to move goods efficiently in and out of the warehouse. Any inefficiency reduces profitability.

In a challenging profession, an appraiser should think “out of the box” in looking methods that will result in a reliable and unbiased opinion of value.