LBP Appraisal
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Transcript of 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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