Philippine Association of Realty Appraisers, Inc.

PARA
CREASA
Comprehensive Real Estate Appraisal Seminar and Training
T
2015

INTRODUCTION TO PROPERTY APPRAISAL

WHAT IS APPRAISAL?

Appraisal or valuation is the process of developing an estimate of the value of an adequately

identified and described property as of a specific date, supported by logical presentation of
factual and relevant data primarily based on a personal inspection of the property.

Appraisal or Valuation includes all of the research, data, reasoning, analysis, and
st
conclusions necessary to arrive at a value estimate. (Philippine Valuation Standards, 1
Edition)

Appraisal does not create value but observes and interprets forces which create value.
In real property valuation, the need for appraisals arises from the heterogenous nature of
real property: no two real properties are identical, and all real properties differ from each
other.

Appraisals are performed for a diversity of purposes including –

• transactions involving transfers of property ownership,
• property considered as collateral to secure loans and mortgages,
• property subject to litigation or pending settlement of taxes, and
• property treated as fixed assets in financial reporting.

WHY IS THERE A NEED FOR A PROFESSIONAL REAL PROPERTY APPRAISER?

Real property is distinguished from most goods and services because of the relatively longer
period required to market what is a relatively illiquid commodity in order to achieve a price
that represents its value.

The characteristically longer exposure time, the absence of a ‘spot market’ (a market in
which commodities are available for immediate sale), and the nature and diversity of
properties and property markets give rise to the need for Professional Appraisers.

There exists no centralized setting for the trading of property assets, as there exists for
trade in corporate stock. The absence of a market-based pricing mechanism determines the
need for an expert appraisal/valuation of real estate/property.

Real property is different from most goods and services in the market –
 Longer exposure time
 Relatively illiquid commodity
 Diversity for which real property valuation is required
 Nature of real properties and real property situations
 Diversity of real property markets
 Complexity of real property valuation procedures

Page 1 INTRODUCTION TO PROPERTY APPRAISAL

 Philippine Association of Realty Appraisers, Inc. PARA
CREASA
Comprehensive Real Estate Appraisal Seminar and Training
T
2015
WHAT IS A PROFESSIONAL REAL PROPERTY APPRAISER?

Valuations performed should be provided by HONEST and COMPETENT Valuers or

st
Appraisers. (Philippine Valuation Standards, 1 Edition)

A Professional Real Property Appraiser is a person who possesses the necessary

qualifications, ability, and experience to estimate property value. (Philippine Valuation
st
Standards, 1 Edition)

A Professional Real Property Appraiser is a person who possesses intimate knowledge of a

property market; understands the interaction of participants in the market; and is, thereby,
able to judge the most likely prices to be concluded between buyers and sellers of property
in that market.

A Professional Real Property Appraiser is skilled and capable to offer estimation on the
worth of a real property.

A Professional Real Property Appraiser has a wide understanding of the market and
performs a methodical analysis in order to generate a correct appraisal of a property’s
value.

A Professional Appraiser may also possess the specific expertise to perform valuations of
other categories of property, i.e., personal property, businesses, and financial interests.

OPPORTUNITIES FOR PROFESSIONAL REAL PROPERTY APPRAISER

The service of a qualified appraiser is a recognized essential in many situations.

In a real estate transaction involving sale or lease of real property, an appraisal may be
desired to:

• help set the seller’s asking price;

• help a buyer determine the fairness of the asking price;
• set a value for real property when it is part of an estate;
• estimate the relative values of properties being traded;
• set value on property involved in corporate mergers, acquisition, liquidations or
bankruptcies;
• determine the amount of a mortgage loan; or
• set rental rates
• determining building insurance value;
• determining the effect on value of construction defects as part of a legal proceeding;
• assessing property for taxes;
• setting gift or inheritance taxes;
• estimating remodeling costs;
• valuing property as part of a marital dissolution;
• determining development costs;
• discovering a vacant property’s most profitable use;
• ascertaining whether the present use of a property is its most profitable use; and
• establishing a value for property in a condemnation proceeding.

Page 2 INTRODUCTION TO PROPERTY APPRAISAL

 Philippine Association of Realty Appraisers, Inc. PARA
CREASA
Comprehensive Real Estate Appraisal Seminar and Training
T
2015

Employment Opportunities
• Contractor – Property Appraisal Service Provider
• Appraisal Service Companies
• Bank and Other Financial Institutions
• Real Estate Companies
• Insurance Companies
• Government Offices

Page 3 INTRODUCTION TO PROPERTY APPRAISAL