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COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)

Engr. Raul T. Punzalan


VALUATION OF
CONDOMINIUM UNITS
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
REPUBLIC ACT NO. 4726
June 18, 1966

CONDOMINIUM ACT

AN ACT TO DEFINE CONDOMINIUM,
ESTABLISH REQUIREMENTS FOR ITS
CREATION, AND GOVERN ITS
INCIDENTS.
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
A condominium is an interest in real property
consisting of separate interest in a unit in a
residential, industrial or commercial building and an
undivided interest in common, directly or indirectly,
in the land on which it is located and in other
common areas of the building.
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
Title to the common areas, including the land, or the
appurtenant interests in such areas, may be held by a
corporation specially formed for the purpose
(hereinafter known as the "condominium corporation")
in which the holders of separate interest shall
automatically be members or shareholders, to the
exclusion of others, in proportion to the appurtenant
interest of their respective units in the common areas.
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
DEFINITION OF TERMS

"Condominium" means a condominium as defined
in the next preceding section.

"Unit" means a part of the condominium project
intended for any type of independent use or
ownership, including one or more rooms or spaces
located in one or more floors (or part or parts of
floors) in a building or buildings and such
accessories as may be appended thereto.
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
"Project" means the entire parcel of real property
divided or to be divided in condominiums, including
all structures thereon.

"Common areas" means the entire project
excepting all units separately granted or held or
reserved.

"To divide" real property means to divide the
ownership thereof or other interest therein by
conveying one or more condominiums therein but
less than the whole thereof.
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
A condominium project can be defined as a
vertical subdivision on a parcel of land and a
multi-storey building structure erected thereon.

A condominium project can be a residential,
commercial or industrial project .

The unit-owners enjoys a fee simple ownership
on the unit and enjoys a common ownership
(with the other unit-owners) on the land and the
common elements of the building.
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
Major documents associated with a Condominium
Project which the appraiser should be familiar with
are:
Condominium Certificate of Title (CCT).
Master Deed and Declaration of Restrictions.
Articles of Incorporation and By-Laws of the
Condominium Association or Corporation.
House Rules and Regulations.
Deed of Sale and/or Contract to Sell
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
Condominium Master Deed and Declaration of Restrictions
Description of the land or lot.
Description of the building structure.
Description of the condominium units.
Statement of the nature and interest required in the units and
common areas and whether title to the common areas is to be
held by the condominium corporation.
Purpose for which the building and condominium units are
intended.
Survey plan of the land.
Diagrammatic floor plans of the building and units and their
relative locations and approximate dimensions.
Any reasonable restrictions in the rights of the unit owners
and the condominium corporation not contrary to law, morals
or public policy.
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
ADDITIONAL FACTORS AFFECTING VALUES OF
CONDOMINIUM PROJECT OR UNITS

Location relative location to center of activity, relative location of the
unit within the project.
Classification residential, commercial, industrial,
Type of Unit regular, corner, single level, with loft
Size floor area is ideal to its utility or highest and best use
Layout floor plan lay-out
Highest and Best Use maximum potential of property is realized
Design architectural, floor lay-out, building features
Depreciation condition, physical wear and tear
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
VALUATION METHODS

Whether the appraisers assignment involves the
valuation of a condominium unit or several
condominium units, or the entire condominium
project, the three approaches to value can be
applied.

The three approaches to value
Market Data Approach
Cost Approach
Income Approach
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
VALUATION OF A CONDOMINIUM PROJECT

Land: 900 sq. m. @ P60,000 P 54,000.000
Bldg: 7,560 sq. m. @ P24,000 181,440,000
Bldg ME: 7,560 sq. m. @ P 6,000 45,360,000
Swim. Pool 6,000,000
Spa & Gym 5,000,000
Development Cost P291,800,000
Plus:
Admin. Cost: 3% of Devt. Cost P 8,754,000
Selling Expenses: 5% of Devt Cost 14,590,000
Cost of Borrowed Money: Devt Cost x 60% x 12% x 2 years 42,020,000
Developers Profit: 30% 87,540,000
Total Cost P444,704,000

Net Floor Area: 6,048 sq.m.

Average Selling Price: P444,704,000 / 6,048 sq.m. = P 73,500 per sq.m.

Based on market research, going prices of condo units in the area ranges from
P70,000 to P75,000 per sq.m. Therefore, project is feasible.
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
VALUATION OF A CONDOMINIUM UNIT BY MARKET DATA APPROACH
SUBJECT DATA 1 DATA 2 DATA 3
PRICE ??? P 8,234,000 P 7,600,000 P 8,900,000
SIZE (SQ.M.) 124 132 128 125
FLOOR / LEVEL 2OTH 18TH

19TH 12TH

FINISHES GOOD GOOD GOOD GOOD
FLOOR LAYOUT GOOD BETTER GOOD GOOD
AMENITIES GOOD GOOD POOR BETTER
ADJUSTMENTS:
SIZE 5% 0% 0%
FLOOR / LEVEL 3% 0% 5%
FINISHES 0% 0% 0%
FLOOR LAYOUT -5% 0% 0%
AMENITIES 0% 10% -10%
TOTAL ADJUSTMENT 3% 10% -5%
ADJUSTED PRICE P 8,481,000 P 8,360,000 P 8,455,000
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
VALUATION OF A CONDOMINIUM UNIT BY INCOME APPROACH

The value of a condominium unit is the present worth of the rental
income plus the reversion value of the unit at the end of lease
contract.
Rental Income:
124 sq. m. @ P350 per sq.m. per month x 12 months P 520,800
Present Worth Factor as annuity for 5 years at 10% x 3.79079

Present Value of Rental Income P 1,974,200

Plus: Reversion Value of Condominium Unit
Value of Unit at end of contract x present worth factor
124 sq.m. @ P 60,000 per sq.m. = P 7,440,000
Present Worth Factor (lump sum) x 0.62092 P 4,620,000
Indicated Value P 6,594,200
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
Engr. Raul T. Punzalan