lbp appraisal

8/3/2019 LBP Appraisal

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OBJECTIVESOBJECTIVES

To discuss Basic Concepts in appraisal

To be able to compute value of propertiesbased on common approaches

To be able to enumarate relevant data to

be gathered during verification To be able to prepare an Appraisal Report


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APPRAISAL :APPRAISAL :

Rendition of sound estimate of value of realestate and /or any interest therein as of a giventime and for a specific purpose, for a fee.

Process of valuation

A systematic , analytic determination and

recording of property facts, investments andvalue based primarily on a personal inspectionand inventory.


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MARKET VALUE

The FUNDAMENTAL OBJECTIVE of APPRAISAL is to

estimate value , the most common of which is :

MARKET VALUE -

- The Highest price estimated in terms of money which a

property will bring if exposed for sale in the open market,allowing a reasonable time to find a purchaser who buys with

the knowledge of all the uses to which the property is adapted

and for which it is capable of being used.


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VALUE CONCEPTS

PriceValueCost


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Purpose Kind of Value Sale Market Value

Loan Loan Value

Taxation Assessed Value

Insurance Sound/Actual cash/insurable value

Forced liquidation Liquidation value

KINDS OF VALUE


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Factors of Value

Utility Scarcity

Desirability Affordability


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BASIC PRINCIPLES of PROPERTY APPRAISAL

Supply and Demand

Change Substitution Highest Best Value Surplus productivity

Increasing and decreasing returns Contribution Competition Uniformity Anticipation


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IDENTIFICATI

ON OF REAL

ESTATEPROPERTY

LocationPinpointing

TitleVerification


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LOCATION

PINTPOINTING

NORTH

WEST

SOUTH

EAST


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Property Location

Tie Line

Bearings and distance of boundary lines

Area of Property

Description of Property Corners

Boundaries


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Kinds of TITLEKinds of TITLE

Kind Examples

Judicial

AdministrativeTitle

Free Patent

Homestead patent

Emancipation patent


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Basic data:Legal description

Name of Resgistered Owner

Any restriction to the

exercise of the right of

ownership

ANNOTATED LIENS : Section 7 , RA 26 2 years lien over the

property because of the reconstitution

Section 4 , Rule 74 of the Rules ofCourt 2-year lien over the property which had

been the subject of inheritance

Lis pendens serves as notice that theproperty is subject to a lawsuit

Morgages, leases and assessments

TYPES OF TITLE: Good

Doubtful

Bad


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MARKET DATA OR COMPARABLE SALES

APPROACH

COST APPROACH

INCOME APPROACH

o Capitalization of net incomeo Capitalization of rental income


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Uses market data of all kinds

To be able to find the similarities between the proerty being

appriased and other similar property

Based on the market or exchange concept of value and price

Assumption :

VALUE is established by buyers and sellers in themarketplace


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Based on the principle of Substitution

No prudent purchaser will pay more than what it will cost him toacquire an equally desirable property/machinery

BASIC REQUIREMENTSS :

1) Estimate of the floor area, machinery or equipment2) Familiarization with current construction costs

3) Familiarization with prices of equipment/machineries

4) Knowledge of basic methods of depreciation


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Based on the principle of Anticipation

The value is created by the anticipated net income or benefits to bederived from the property in the future.

BASIC REQUIREMENTS :

1) Study income history of the property and comparable

property2) Evaluation of the need to stabilize income-expense data

3) Verification on the net return of comparable property in

the area

4) Estimate the remaining economic life of the property5) Method of conversion


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VERIFICATIONVERIFICATION

Establish ownership

Inspect and verify documenst submitted

Check current price with suppliers,dealers, et.

Estimate repdouction or replacement cost

Estimate accrued depreciation; and Come up with indicated value using the

above information


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Pricing and Cost EstimatingPricing and Cost Estimating

Cost of basic machine

Cost of auxiliaies/optional accessories

Freight from source to site

Insurance

Bank charges

Documentation

Brokerage, arraster and heavy lifts

Custom duties and taxes,a nd

Installation which includes cost of controls and wirings,electrical and mechanical connections, millwright andfoundation


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DepreciationDepreciation

The total observed depreciation or accumulateddepreciation is the sum of the following :

1) Physical deterioration wear and tear from use,exposure to elements, corrosion and vibration

2) Functional obsolescence - inadequacy orexcess construction; and

3) Economic obsolescence radical economicchanges, new technology and raw materials


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Guidelines in Observing the conditionsGuidelines in Observing the conditions

of machineries/equipmentsof machineries/equipments

Condition Description

Very good condition 0% - 20% accum. depreciation

Good condition Operates slightly lower than ratedcapacity

Fair condition Output is 50%

Poor condition75% - 90% Accum. depreciation

Junk condition 100% depreciated


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Rule of ThumbRule of Thumb

Type of Machinery Value/Cost

Brand New Current market value/Replacement Cost, New(RCN)

Second Hand, fullyreconditioned

50% of RCN or Market Value

As is , Where is :

a) Can still bereconditioned

b) Can no longer bereconditioned

25% of RCN

Scrap or junk value/kilo


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REPORT PREPARATIONREPORT PREPARATION

Samples of Appraisal Reports


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