Author: tien

(TDVC Appraisal Real Estate ) – Property appraisal is an indispensable financial service in the market economy, stemming from the objective demand to determine the value of assets; on that basis, the parties involved in the transaction can mutual agree on assets, help the property transactions successfully, ensure the legitimate interests of the parties.

Real estate appraisal means the determination of the monetary value of real estate by an agency or organization in accordance with the Civil Code in accordance with the market price at a given place and time for a certain purpose, according to the valuation criteria.

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1. What is Real Estate? 

According to the provisions of Article 107 of the Civil Code of the Socialist Republic of Vietnam in 2015, real estate includes:

• Land
• Houses, construction works associated with land
• Other assets associated with land, houses, construction works
• Other asset stipulated by law…

2. Real estate appraisal concept 

Real estate appraisal is an estimated amount of the value of real estate ownership rights (land use rights, ownership of houses, structures attached to land) being traded on the market at the time of the valuation and for a well-defined purpose under the conditions of a given market with appropriate valuation methods set forth in Vietnamese valuation standards or practice international.

3. Real estate appraisal method

When conducting real estate appraisal, the appraiser can apply the approaches and valuation methods in the Vietnam Valuation Standards about the market approach, the cost approach, approach from income on a case-by-case basis. Corresponding to each approach is the valuation method.

• Approach from the market: Comparative approach
• Income approach: Discounted cash flow method; Direct capitalization method
• Cost approach: Renewable costing approach; Alternative cost method
• The approach from the mixture is built on the basis of combining the approach from the market, the approach from the costs and the approach from income, including two methods: the subtraction method and the surplus method.

In addition, the appraiser can apply the deduction method and the residual method to determine the value of land use rights. The deduction method and the surplus method are built on the basis of combining the market approach, the cost approach and the income approach. For each type of real estate and valuation method, the appraiser selects the collected information to ensure the accuracy of the appraisal results.

Each method of real estate valuation has certain advantages and disadvantages. The choice of a certain appropriate method for valuing a particular property depends on:

• What factors are the properties of real estate affected by?
• Reliability and usability of information collected and documents on the market.
• Pricing objectives and principles.

Among the above methods, there is no method that is correct and only correct, but only the most suitable method, and other methods are used to support, supplement or check the results of the method best fit.

3.1. Comparative method

Appraisal of real estate by comparative method of market approach. Vietnam Valuation Standard No.08 (TDGVN) is issued together with Circular No. 126/2015/TT-BTC dated 20/08/2015 of the Minister of Finance. The direct comparison method is based mainly on the requirement to adhere to the principle of substitution: the value of the target property is considered to be completely equal to the value of comparable comparable properties.According, the appraiser must rely on the prices of those similar properties determined in the most recent time to estimate the price for the target property. Real estate valuation by the direct comparison method is the estimation of the value of real estate based on the market evidence of similar properties that have traded in the most recent time.

The properties to be assessed are called the target properties, of similar properties, which are evidence of transactions, are called comparable properties.

3.2. Direct capitalization method

TDGVN 10 Standard is issued together with Circular No. 126/2015/TT-BTC dated 20/08/2015 of the Minister of Finance valuation methods are: Direct capitalization method. The income approach, also known as the investment method, is built mainly on the adherence to the principle of forecasting future benefits. According to this principle, the current market value of a property is equal to the present value of all future earnings that can be received from the real estate. So, if the annual income generated by the property is known in advance, the value of the property can be found, which corresponds to the opportunity cost of generating those incomes. Real estate valuation by the investment method is the estimation of the value of real estate based on the future income that real estate can bring to investors. The earnings approach includes two methods: the direct capitalization method and the discounted cash flow method.

The direct capitalization method of the income approach is an appraisal method that determines the value of an appraised property on the basis of the expected steady annual net income stream from any property. assets to their present value through the use of an appropriate capitalization rate.

The capitalization rate is a ratio that reflects the relationship between the expected net operating income for a year and the value of the property.

• Determination formula: V = I/R

In there:

• V: Appraisal real estate value
• I: Net operating income
• R: Capitalization rate

3.3. Discounted cash flow method

TDGVN 10 Standard is issued together with Circular No. 126/2015/TT-BTC dated 20/08/2015 of the Minister of Finance valuation methods are: Discounted cash flow method. The discounted cash flow method is a valuation method that determines the value of the appraised asset on the basis of converting the expected future cash flows from the asset to the present value through the use of the asset. Use an appropriate discount rate. The discount rate is the rate used to convert a future stream of income to present value. The discount rate reflects not only the time value of money, but also the risk in generating income from appraised real estate. The discounted cash flow method is often applied to determine the value of land use rights of a parcel of land that generates income for the user.

3.4. Renewable cost method

Renewable cost method belong TDGVN 09 Standard is issued together with Circular No. 126/2015/TT-BTC dated 20/08/2015 of the Minister of Finance. The cost approach is a method of determining the value of real estate appraised through the cost of creating a property with a construction work that has the same or similar functions and uses as the construction work. Existing construction of the appraised real estate and the wear and tear of the appraised construction work. The cost method is a valuation method based on the cost of creating an asset similar to the asset to be appraised to determine the market value of the asset to be appraised. The approach from costing includes two methods: the renewable costing method; Alternative cost method

Renewable cost method: Is a valuation method that determines the value of the appraised real estate based on the difference between the cost of recreating the identical construction work with the appraised construction work. according to the current market price and the depreciation value of the appraised construction works.

3.5. Alternative cost method

The replacement cost method is a valuation method that determines the value of the appraised real estate on the basis of the difference between the replacement cost of creating similar construction works and the appraised construction work. according to the current market price and the depreciation value of the appraised construction works.

3.6. Extraction method

The subtraction method is a valuation method that determines the value of land use rights of a parcel of land with assets attached to the land by subtracting the value of assets attached to land from the total value of the real property (including the value of land use rights and the value of assets attached to the land).

3.7. Residual method

The residual method is a valuation method that determines the value of real estate with potential for development based on the estimated value of the hypothetical development of the property (total development revenue) minus all all expected costs incurred (including investor returns) to generate such development.

General formula: V = DT – CP

V: Appraisal property value;

DT: Total growth revenue;

CP: Total development cost.

4. Purpose of real estate appraisal

• To make as a basis for consideration and approv[1]al of state budget expenditures;
• To make as a basis for consulting and making investment projects, approving foreign direct investment projects, investment projects using owned-state capital, approving cost estimates of projects and works;
• To make as a basis for trial and execution of civil, criminal and administrative judgments related to the value of rights and interests contained in the properties of related parties;
• Buying, selling, transferring assets, buying and selling of debt settlement, settlement of mort-gaged assets, outstanding assets;
• Enterprise mergers and acquisitions (M&A), joint venture capital contribution, enterprise dissolu-tion, division, bankruptcy, establishment of enter-prise; E
• nterprise equitization, transformating the method of enterprise ownership;
• To make as a basis for mortgage Bank loans, property auctions, bid consideration for projects; accounting, tax calculation; Compensation, insurance, complaints, settlement and handling of disputed properties in cases;
• Determining the value of foreign settlement assets, proving finance, tourism….
• Refer to market price;
• Other purpose in accordance with the law regula-tion.

Thanh Do Valuation Join Stock Company – Professional valuation enterprise, reputation provide real value to customers in the service valuation. In 2019, (TDVC) was honored to be certified as “Top 50 Brand – Trademark Reputabale 2019”, In 2020 Thanh Do was honored with “Top 50 Trusted Brand 2020” and “Top 50 Brand Dat Viet Reputabale 2020”. In addition, TDVC applies the International Standard ISO 9001: 2015 for the quality management system in property appraisal services, making an important contribution to help customers to have decisions in investment, business and transparent trading in the market.

Contact for appraisal:   0985 103 666   0906 020 090

Website: www.thamdinhgiathanhdo.com