Tag Archives: prc

Letter to the editor on Valuation Profession

Dear Editor,

This is in response to the article of Mr. Ramon Clarete  published on 6 January 2019 on Property Valuation Service: Are we losing competitiveness?

I thank Mr. Ramon Clarete for his interest in our work and for the stimulating comments which highlights our profession and offer a broader perspective. I am certainly in agreement with the writer  on the role of property valuation to economies in weathering crisis.  However, I was appalled on some points of his letter and allow me to comment. His assertion on the maturity of the real estate appraisal profession; quality of service and the valuation standards are quiet disturbing.

Real estate appraisal in the country is in its infancy stage, as a profession. Even though it started in 1961 but it was considered as a trade rather than a profession. However, on July 2009, the passage into law of the Republic Act 9646 or the Real Estate Service Act of the Philippines (RESA), real estate appraisal has been recognized as a profession and strengthened.

Mr. Clarete pointed his pen on the 90% of the appraisers. He consistently mixes the know-how in real estate practice and the quality of service. However, Mr. Clarete misses the point.  The number of appraisers might triple in number, but the question is do the opportunities to practice the profession also tripled?

 

To practice the profession, appraisers have been subjected to different barriers that only few can endure. Take for example the government projects under President Duterte, the Department of Public Works and Highways required appraisers to have an accreditation with the Bangko Sentral ng Pilipinas to qualify in a bidding.  BSP has its own criteria in evaluating of appraisers outlined in their guidelines “BSP Acceptable Appraisal Companies for Ocular Inspection and Appraisal of Real Estate Properties”. To be part of the list, the appraiser or the appraisal company must comply with certain criteria to be accredited. One of which is the setting of company net worth to P 4 Million; and the other one is the setting of ten (10) years’ experience in real estate appraisal business as a requirement to manage and sign the appraisal report.

Securities and Exchange Commission, Energy Regulatory Commission other government agencies and even commercial banks have their own guidelines and requirement. It is not surprising that only 11 companies, as of December 31, 2017, were accredited by the Securities and Exchange Commission, and 22 under the BSP.

In the broader context, these accreditation requirements and non-implementation of certain provision of Real Estate Service Act have a multiplier effect to appraisal practice. Negating the appraisers of the opportunity to participate in government projects and practice their profession. And it has been 10 years now.

On the International Standards.  Mr. Clarete should never forget that the International Valuation Standards was adopted and prescribed as the reference standards in the country only on October 2009, by prescribing the Philippine Valuation Standards. It is only since then that the country laid down the foundation, through education and training, in developing the capability of property appraisers in the country to be at par with other countries. Thus, appraisers now are attending international seminars and conferences to learn best practices of other countries and also share our situation and experiences. In an increasingly globalised world, the consistency and compatibility of standards across jurisdictions is an important issue

The valuation practice and standards in the appraisal are intertwined. Theories will remain a theory if it will not be applied. Provide the appraisers with the venue to practice their profession, and they will surely rise to a new and higher level of professional practice.

We should endeavour in helping real estate appraisers to developed and fulfil its role in the economy, society and our people and be globally competitive in professional practice and standards. #

 

Read here:

https://www.bworldonline.com/letter-to-the-editor/?fbclid=IwAR0roGpyewKd7A_rTR4e89ToWgzjV9RR10TLElEADUCzLXCJr5DhMpUrWQw

Why valuation standards are important

I attended a seminar on Philippine Valuation Standards (PVS) recently and spoke to the technical committee members that produce it. The seminar was attended by Assessors of different local government units, nationwide. While the speakers were both members of the Technical Committee on drafting the Philippine Valuation Standards 2017.

I outlined the most important points in the discussion, relate to my experiences in valuation and share it with you.

Enhance the reputation of the profession and be at par around the world. Currently, there are multiple valuation methods used by different government agencies, local government units, private individuals, and banks. Thus it results in as many conflicting values for the same piece of property.

An established set of consistent standards would help in appraising assets and liabilities for financial reporting, especially for companies that control assets in various countries and work across national borders. For valuations for other purposes, the reputation of the profession would be enhanced if the clients could expect consistency in valuation reporting internationally.

Simplify the appraisal process. I work an appraisal for a client in U.S. and Australian federal territories, which typically require different standards. But if an appraiser-member of RICS is performing the appraisal in U.K., it should also comply with RICS standards, which differ in subtle ways.

PVS is the accepted set of standards for valuation in the Philippine setting. Contrary to some notions, it is not only applicable to the government agencies but rather it includes and should also be applied to bank institutions and private individuals.

A single set of standards and guidance notes would enable appraisers to produce a credible valuation with a similar report structure regardless of membership or the location of the asset to be valued.

An era of unified professional standards. There are many associations in the country which offer seminars and training for appraisers. All of this would be simplified through learning and adopting valuation standards. Regardless of which association you align with, the pathway for new appraisers to be a competent appraiser need to be consistent.

 With the Philippine Valuation Standards, the international valuation standards in the broader context, we now have a uniform term of engagements, report disclosures, recognized bases of value, terminology used in reporting and guidance notes.

We have valuation standards that are accepted regardless of location or the professional organization of the appraiser. What we need to do now is to encourage consistency and professionalism, further strengthening the public’s trust in valuations. The first step to this could be asking the members of multiple organizations who are active in the various leadership councils to ensure that their members are actively using the relevant sets of standards in their practice and continually looking for ways to streamline the process in a manner that works for all.

Our generation should be happy to be in the era in which we have now a uniform sets of standards. But there is still work to be done. We should endeavor to unite appraisers in different organizations and location to study, adopt and implement the valuation standards.

In this way, we can raise the level of consistency and professionalism, further strengthening the public’s trust in valuations.

 

Gus Agosto is the Vice-President for Visayas of the Philippine Association of Real Estate Board (PAREB). He is the Managing Owner of AA RealtyPro Solutions, an appraisal and consulting business organization. He also serves as faculty of University of San Carlos, Cebu City and took up Master of Arts in Economics (Candidate) in the same university. 

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.