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PHILIPPINE VALUATION STANDARDS Notes
PHILIPPINE VALUATION STANDARDS Notes
2. Assessor’s primary role- proper property appraisal to fairly distribute the tax burden.
45. Business – any commercial, industrial, service or investment entity pursuing an economic
activity.
47. Financial instrument – a contract that gives rise to both financial asset of one entity and
financial liability of another entity.
e. Market rent – probable rent in an open market or economic rent; sometimes called passing rent
f. Contract rent - rental amount as appearing in the lease contract
g. Turnover rent or passing rent – rent based on earnings of the lease
h. Percentage lease – an example of turnover rent where lease is based on a certain percentage of
sales
i. Positive leasehold – if market rent is higher than contract rent
j. Negative leasehold – if market rent is lower than contract rent
k. Positive sandwich lease – if contract rent is lower than than sandwich lease rent
l. Freehold interest – fee simple estate
m. Ground lease – usually long term lease where lessee is permitted to improve the land
n. Headlease or master lease – lease to a single entitly with the intention of subleasing it to several
sublesses
o. Headleasehold interest – same as sandwich lessor interest – the holder of master lease or the
lessee.
p. Lease – contract arrangement between owner-lessor and lessee.
q. Finance lease – lease that transfers substantially all the risks and rewards incidental to
ownership of an asset.
b. Auction price – final accepted bid price at a public auction. Sometimes called hammer
price.
c. Collectibles – broad descriptive term for objects collected because of the interest they
arouse owing to their rarity, novelty, or uniqueness. Examples: antiques, paintings,
gems, jewelry, musical instruments, rare books, cars, etc.
d. Replica – copy of the original item, as near as possible to the original in terms of nature,
quality and age of materials but created by means of modern construction methods.
e. Facsimile – exact copy of the original item, created with materials of closely similar in
nature, quality and age and using construction methods of the originalperiod.
f. Fixture and fittings – totality of improvements integral to a property, valued
collectively.
g. Furniture, fixtures and equipment – term used in North America to refer to tangible
personal property plus trade fixtures and leasehold improvements.
h. Intrinsic value – amount considered, on the basis of an evaluation of available facts, to
be true or real worth of an item.
i. Personalty –legal term used in certain countries to designate items of personal
property.
c. Add valorem property taxation – a revenue raising procedure based on the assessed
value of the property related to a scale of charges defined by stature within a specified
time-frame.
d. Calibration – the process of analyzing sets of property and market data to determine
the specific parameters operating upon a model.
e. Mass appraisal process – the procedure applied in mass appraisal assignments for
arriving at assessments and /or indices.
It is based on the notion that although two or more parcels of real estate may have
physical similarities and closely resemble to one another, there may be a significant differences in
how they can be used. How a property can be optimally utilized is the foundation for
determining its market value.
2. Is the use legal, or is there a reasonable likelihood that a legal entitlement for the use can be
obtained? (legally permissible)
3. Is the property physically suited to the use or can it be adapted to the use? (physically possible)
Of those uses that meet the first four tests, is the selected HABU the most productive use of the land?
2. Cost approach
Appropriate when properties are new or of relatively new construction
Formula :
11. Value = RCN less Depreciation + Land Value
3. Income approach
• Applicable to properties that were purchased and sold on the basis of their
earning capabilities
• It is not merely quantitative or mathematical but requires qualitative assessments
as well.
• For direct capitalization approach, it uses an overall rate or all risks yield:
12. Value = NOI (one year income) / Rate (OAR)
13. Overall rate based on market formula:
= NOI of comparable / Selling price of comparable)
14. Overall rate based on band of investment method
15. Value = GIM of comparable property x Income of subject property
16. Value = GRM comparable property x Income of subject property
• For residual method (straight line capitalization)
17. Land residual method : if building value can easily be computed
18. Building residual method: if land value can easily be computed
19. Property residual method – just like direct capitalization
method/applicable to old properties
• For annuity method (straight line discounting)
20. Land, building and property residual method
21. Discounted cash flow (usually estimated income is discounted on a per
year basis)