UNIVERSITY OF RWANDA

COLLEGE OF SCIENCE AND TECHNOLOGY

SCHOOL OF ARCHITECTURE AND BUILT ENVIRONMENT (SABE)

DEPARTMENT OF ESTATE MANAGEMENT AND VALUATION (EMV)

ACADEMIC YEAR 2019-2020

Module: Real Estate Practice and Procedures

SUBJECT CODE: EMV1162

Lecturer: Marc MINANI

Tel: 0783773233

Email:marcminani03@gmail.com
 Lecture 0: Module Content
1. Real Estate, Real Property, And Land—Basic Definitions And
Concepts
2. Estate Management and Valuation Professional
3.Legal Descriptions Of Real Estate
4.Real Estate Encumbrances: Liens, Deed Restrictions, Easements,
and Encroachments
5.Land-Use Controls: Comprehensive Plans, Zoning, and Property
Restrictions
6.Estates in Land: The Fee Simple Estate and the Life Estate
7.Forms of Real Estate Ownership, including Concurrent Estates or
Co-Ownership: Tenancy in Common, Joint Tenancy, Tenancy by the
Entirety, and Community Property
8.Types of Deeds: General and Special Warranty Deeds, Bargain and
Sale Deeds, Quitclaim Deeds, Trust Deeds, and Court-Order Deeds
WHAT IS REAL ESTATE?
 LESSON 1: Real Estate, Real Property,
And Land—Basic Definitions And
Concepts
1.1 Land primarily refers to the surface of the ground and all natural
objects within it or on top of it including the soil, terrain surface hydrology,
climate, sediments and associated ground water reserve, the biological
resources, human settlements pattern and infrastructure resulting from
human activity.
1.2 What is Real Estate
Real estate is land, buildings, and
things permanently attached to
land and buildings.
 1.2 What is Real Estate
Is this real estate?
WHAT IS ESTATE
Estate is an extensive area of land in the country,
usually with a large house, owned by one person,
family, or organization.
Or
An estate is everything comprising the net worth of
an individual, including all land, possessions, and
other assets that the individual owns or has a
controlling interest in.
EXAMPLES OF
ESTATE IN
RWANDA:
NYARUTARA
MA ESTATE
VISION CITY
ESTATE
(GACULIRO)
UMUCYO
ESTATE
1.3. REAL PROPERTY & PERSONAL PROPERTY
BASIC DEFINITIONS AND CONCEPTS

1.3.1 Real property

Real property includes all the rights, interests, and benefits related to the ownership of real
estate. An interest or interests in real property is normally demonstrated by some evidence
of ownership (eg.,a title deed) separate from the physical real estate. Real property is a
non-physical concept.

The definition of Real Property includes Real Estate plus the interests, benefits and rights
automatically included with the ownership of the Real Estate - Possession, Control,
Enjoyment, Exclusion, and Disposition.

Together, these rights are known as the “bundle of rights”

1.3. REAL PROPERTY & PERSONAL PROPERTY
BASIC DEFINITIONS AND CONCEPTS (Cont’)
• Possession is the right to occupy the premises.
• Control is the right to determine interests for others.
• Enjoyment is the right to possess your land without harassment or
interference.
• Exclusion is being able to legally refuse other interests in your
property.
• Disposition is the right to determine how the property will be sold or
transferred.
1.3. REAL PROPERTY & PERSONAL PROPERTY
BASIC DEFINITIONS AND CONCEPTS (Cont’)
Types of Real Property
1. Residential property
1.3. REAL PROPERTY & PERSONAL PROPERTY
BASIC DEFINITIONS AND CONCEPTS (Cont’)
2. Commercial property.
1.3. REAL PROPERTY & PERSONAL PROPERTY
BASIC DEFINITIONS AND CONCEPTS (Cont’)
3. Industrial property
1.3. REAL PROPERTY & PERSONAL PROPERTY
BASIC DEFINITIONS AND CONCEPTS (Cont’)
4. Agricultural property
1.3. REAL PROPERTY & PERSONAL PROPERTY
BASIC DEFINITIONS AND CONCEPTS (Cont’)
5. Recreational property
1.3. REAL PROPERTY & PERSONAL PROPERTY
BASIC DEFINITIONS AND CONCEPTS (Cont’)
6. Special Property
 1.3. REAL PROPERTY & PERSONAL PROPERTY
BASIC DEFINITIONS AND CONCEPTS (Cont’)
1.3.2 PERSONAL PROPERTY
a. Definition
Personal property also known as chattels, includes everything that is
movable, and thus, not real estate. This includes not only personal
belongings, but also annual crops that were planted.
2.1 Basic Skills of Estate Management
and Valuation Professionals
Economics
Marketing
Management
Law especially land law
Civil engineering and building technology
 Construction materials
Valuation knowledge
Computer skills.
2.2: TYPES OF PROFESSIONAL DISCIPLINES COMPRISED
IN ESTATE MANAGEMENT AND VALUATION PROFESSION
2.2.1. Valuation
2.2.2 Property Management
2.2.3 Real Estate Agency
2.2.4 Facility Management
2.2.5 Feasibility and Viability
2.2.6 Investment Appraisal
2.2.7 Property Marketing:
2.2.8 Property Auctioneering
2.2.9 Property Research and Advisory
2.2.10 Land Management and Administration
2.2.11 Real estate Finance
2.2.12 Project Management
2.2.1 Valuation
Define valuation?
Valuation : art or science, of estimating
the value of a particular interest in
property, for a specific purpose, at a
particular moment in time, taking into
account all the features of the property and
also considering all the underlying
economic factors of the market, including a
range of alternative investments.
2.2.1 Valuation
Who is Property Valuer, Asset Valuer and Appraiser?

Property Valuers, Asset Valuers and Appraisers are those who deal
with the special discipline of economics associated with preparing and
reporting valuations. As professionals, Valuers must meet rigorous
tests of education, training, competence, and demonstrated
skills.They must also exhibit and maintain a Code of Conduct (ethics
and competency) and Standards of professional practice and follow
Generally Accepted Valuation Principles (GAVP)
2.2.1 Valuation (CONT’)
What is a valuer?
A valuer is a professional who carries out inspections
in order to help determine the current market value of
property and/or land.
A valuer is the one who estimates or assesses the
value professionally. He is an expert in his field. He is
authorized to declare the worth of a particular
commodity. May be Immovable Properties, Agricultural
Lands, Plantations-Coffee, Tea, Forests Mines & Queries
and Plant and Machinery.
 2.2.1 PRINCIPLES OF VALUATION
DEFINITION OF COST, PRICE AND VALUE
Cost : It is the expenditure to produce a commodity having a value. In our
construction Industry cost means the original cost of the construction including
the cost of materials and labour.

Price : is THE MONETARY RETURN ACHIEVED IN THE MARKET. ie what a buyer

has paid.

Valuation is AN ATTEMPT TO PREDICT THE LIKELY SELLING PRICE IN THE MARKET.

DEFINITION OF COST, PRICE AND VALUE
Value: Valuation is an opinion or an estimate
which will be determined by many factors like the
purpose, supply, demand, depreciation,
obsolescence etc. Valuation is a function of place,
date and purpose.
 KINDS OF VALUES AND DEFINITIONS
Market Value: It is defined as the sum the property will fetch if it is sold in the
open market.
Book Value: It shows the original investment of a Company on its assets,
including properties and machinery less depreciation for the period passed.
Salvage Value: Value of Machinery realised on sales when its useful span of
life is over but still it has not become useless.
Scrap Value: It is also called as Junk Value or Breakup Value of Demolition
Value. It will represent the value of old materials in a building less cost of
demolition.
 KINDS OF VALUES AND DEFINITIONS
Disposal Value: It is defined as the Value that can be realised if the
assets were to be removed from the foundation and sold as separate
stand alone items.

Insurance Value: It is the value of the Building for which the building is
insured. Normally the Building is insured for the superstructure alone
(not for the foundation).

Earning Value: It is the present value of a property which will start

yielding an income in future.
 KINDS OF VALUES AND DEFINITIONS
Speculative Value: When the property is purchased so as to sell the same
at a profit after some duration, the price paid is known as Speculative Value.
Replacement Value: Replacement Value is the cost of reproduction of a
similar Building with similar specifications at the current Market Price on the
date of Valuation. It is also called as Reproduction Value or Reinstatement
Value.
Depreciation Value: It is the reduction of Value of the property due to age,
deterioration, lack of maintenance, obsolescence, decay, wear and tear etc.,
Depreciation Value depends upon the age and its future life.
Present Value: It is replacement value less depreciation value.
FACTORS AFFECTING THE PROPERTY VALUE IN
GENERAL
Supply and Demand
 Cost of reproduction
Occupational value
Town Planning Act
Rent Control Act
 Urban Land Ceiling Act
Any abnormal conditions like War, Riots, etc.
WHY DO WE NEED VALUATION
 PURPOSE OF VALUATION
Six important Purposes of Valuation
1. Buying or Selling Property :When it is required to buy or sell a property,
its valuation is required.
2. Taxation : To assess the tax of a property, its valuation is required. Taxes
may be municipal tax, wealth tax, Property tax etc, and all the taxes are
fixed on the valuation of the property.
3. Rent Function : In order to determine the rent of a property, valuation is
required. Rent is usually fixed on the certain percentage of the amount of
valuation which is 6% to 10% of valuation.
 PURPOSE OF VALUATION
4. Security of loans or Mortgage : When loans are taken against the security of the property,
its valuation is required.

5. Compulsory acquisition (Expropriation purpose)

Whenever a property is acquired by law; compensation is paid to the owner. To determine the
amount of compensation, valuation of the property is required.

6. Insurance: Insurance valuations can be prepared for all types of property. Insurance
valuations include replacement cost of the subject building on a ‘replacement cost new’ basis,
allowances for demolition and removal of debris, professional and consultants’ fees, and
future escalation in building costs. If required by the client, loss of rent during the rebuilding
period can be included within the valuation.
PURPOSE OF VALUATION

Other purposes of valuations:

Auctioning

 Arbitration

Assessing property Tax

Income Tax, Wealth Tax

 2.2.1 Valuation (Cont’)
Principals applied in valuing real estate:

Principle of supply and demand: States that if supply of real estate

exceeds demand, prices will go down, but if demand exceeds supply,

prices will go up.

Principle of conformity: States that real estate whose use and style

conforms with property in the immediate area usually has a higher value

than property that doesn't.

 2.2.1 Valuation (Cont’)
Principals applied in valuing real estate:

Principle of substitution: Is simply the ability of one piece of real estate to be an acceptable

substitution of another. For example, if three-bedroom ranch homes in your neighborhood are selling for

$200,000, you're not going to get much more than $200,000 for your own three-bedroom ranch home if

you sell it. This is because buyers can substitute your house for another one for that price.

Principle of highest and best use: States that property will get the best price when it is being used in a

way that produces the highest economic value. For example, a single-family home in an industrial area is

not the highest and best use of the real estate because an owner can get a better return by using the

property for commercial use. Remember, most people don't want to buy houses in the middle of an

industrial park.
 2.2.1 Valuation (Cont’)
Principle Of Progression :dictates that neighboring higher value real
estate can pull up the value of lesser value property in the same area.
For example, if you are selling an old house, but the surrounding homes
in the area are renovated and thereby have increased in value, the price
of your property will also be pulled up because of its location.

Principle of regression: is the inverse of the principle of progression.

If a high-valued property is surrounded by lower-valued property, the
price of the higher value property tends to be pulled down.
 2.2.1 Valuation (Cont’)
Principle of anticipation: Buyers buy properties for future benefits. The
principle says that value rises using anticipated benefits (money or amenities) to
be gained from a property in the future. For example…You purchase a home with
a pool for $190,000. A similar home without pool sells for $140,000. Effectively
you pay $30,000 for anticipated benefits of the pool, not its cost.

Principle of change: Recognizes that various forces act upon and change the
real estate market and property values. For example, pollution that spills into a
residential neighborhood is an environmental change that would lower property
values.
THE ROLE OF A PROFESSIONAL VALUER
THE ROLE OF A PROFESSIONAL VALUER
(Cont….)
 Advising the commercial banks on the most reasonable market values of the properties
presented to these banks by their clients as collateral securities.

Advising the local authorities on the appropriate property taxes to be paid by property
owners/occupiers after determining both capital values and rental values.

 Advising on the reasonable compensation package to be paid to the affected persons

during expropriation and compulsory purchase of private properties for pubic interests.

Determining the insurance values for properties that need to be insured which enables
insurance companies to charge appropriate premium as a percentage of insured sum.
THE ROLE OF A PROFESSIONAL VALUER (Cont….)
Determining the market values of real properties for sale/purchase purposes
which ease negotiation between the parties in a transaction.
A valuer is useful in carrying out a development appraisal of a proposed
project to ascertain the developer’s profit.
 Carrying out the investment appraisals of one or more real estate
development projects to choose the best alternative that best suits investor’s
objectives.
Advising on the reasonable terms and covenants of the leases that promote
landlord’s property value while meeting the tenant’s business requirements.
 THE ROLE OF A PROFESSIONAL
VALUER (Cont….)
 Advising the Architect on the appropriate design that suits the current demand of space/accommodation in the
market to ensure efficient space utilisation.

 Acting as expert witness in courts where there is a dispute between the parties regarding the property value or
full rental value.

 Working in the capacity of an arbitrator to settle disputes related to property values, lease terms, lease renewals
and appropriate rent to be paid by the tenant.

 Returning the total value of the company assets for book keeping/accounting purposes or for sharing in case of
winding up the company.

 Estimating the reserve prices for properties to be taken for auctioning or foreclosure which will be used as a
basis of negotiation.
END OF WEEK ONE
How to become a Valuer
 How to become a Valuer
Valuers assess land, property and other items such as commercial
equipment and objects of art, and provide advice about the
administration and commercial use of land and property.

 Valuers generally specialise in a particular type of valuation according to

their knowledge and experience, such as real estate or art.

Valuers have a lot of contact with the public and may be required to
spend a lot of time travelling.
 Personal requirements of a Valuer
Good character and reputation

Good communication skills

Reasonable ability in mathematics

Sound judgment and good analytical skills

Education & Training for a Valuer
 Subjects and prerequisites can vary between institutions, you
should contact your chosen institution for further information.

You can become a valuer by studying property, property economics

or valuation at university.

In Rwanda, All valuers are registered by Insitute of Real Property

Valuers in Rwanda (IRPV)
VALUER OPPORTUNITIES

Banks
Insurance companies
Public institutions
Private firms