Valuation of real estate: methods and approaches. Approaches and methods for assessing real estate objects What are the different types of value in relation to real estate

26.06.2024

Types of cost

In valuation practice, there are different types of value. The cost of real estate is divided into the following types:

market price;
investment cost;
liquidation value;
cadastral value.

When determining market value of the valuation object the most probable price is determined at which the valuation object can be alienated on the valuation date on the open market in a competitive environment, when the parties to the transaction act reasonably, having all the necessary information, and the transaction price is not affected by any extraordinary circumstances, that is, when:

one of the parties to the transaction is not obliged to alienate the object of valuation, and the other party is not obliged to accept execution;
the parties to the transaction are well aware of the subject of the transaction and act in their own interests;
the valuation object is presented on the open market through a public offer, typical for similar valuation objects;
the price of the transaction represents a reasonable remuneration for the object of evaluation and there was no coercion to complete the transaction in relation to the parties to the transaction on any part;
payment for the valuation object is expressed in monetary form.

When determining investment value of the appraisal object the cost is determined for a specific person or group of persons for the investment purposes established by this person (persons) for using the object of assessment - investment real estate to generate income in the form of rent and increase in value. When determining the investment value, in contrast to determining the market value, it is not necessary to take into account the possibility of alienation at the investment value on the open market.

When determining liquidation value of the valuation object an estimated value is determined that reflects the most likely price at which a given valuation object can be alienated during the period of exposure of the valuation object, which is less than the typical exposure period for market conditions, in conditions where the seller is forced to make a transaction for the alienation of property. When determining the liquidation value, in contrast to determining the market value, the influence of extraordinary circumstances forcing the seller to sell the subject property on terms that do not correspond to market conditions is taken into account.

When determining cadastral value of the property being assessed determined by mass valuation methods is the market value established and approved in accordance with the legislation governing cadastral valuation. The cadastral value is determined by the appraiser, in particular for tax purposes.

Basic approaches to real estate valuation

There are several approaches (methods) to the valuation of any type of real estate used by professional appraisers: - comparative (or “market”) approach; - cost approach; - income approach.

Each of the 3 approaches has its own specific techniques.

Income approach

The income approach to real estate valuation is based on determining the value of a property based on the calculation of expected income from the ownership (use) of this property. This indicator is very important because it allows you to predict the cost of an object in the future.

The income approach is one of the most used methods of real estate valuation in valuation practice today.

According to the modern economist A.V. Vishnevetsky, this approach is also called “marginal” (from the English term “margin”, often used in Russia as an analogue of the concept of “profit”). The applicability of the marginal approach is clearly expressed during the period of economic growth in the state. The income approach is an integral part of the "Due Diligence" procedure.

The income method is mainly based on determining the value of real estate by calculating the discounted income stream (from the ownership or use of this object). This method is based on the principle of expectation - establishing the current value of income and other benefits that can be received in the future from owning this property. It is logical that the owner of the property will not give up his property for less than the amount that he could receive by continuing to exploit it, and the buyer will not pay more than the amount that the subsequent use of this property for commercial purposes will bring him. Thus, the price of the property is determined based on the value of future income through an agreement between the parties.

When calculating using the income approach, the following methods are used: capitalization of income and discounting of cash flows. These techniques are the main ones in this method.

1) In accordance with the technology of the direct capitalization method, the value is determined by the ratio of net operating income before tax to the capitalization rate. The capitalization rate is determined by the appraiser based on the base rate by adjusting it for risks.

2) The discounted cash flow method is used when cash flows are uneven (unstable income), or when using different capitalization ratios. According to the methodology, the cost of the object is determined as the sum of discounted income for the project. To do this, it is necessary to determine a cash flow model with a forecast of expenses and investments for the selected period. The discount rate is determined taking into account the same parameters as with the capitalization method.

The essence of the method is that the income approach estimates the value of real estate as the current value of future cash flows. Moreover, this approach reflects the level of risk for the property being assessed, as well as the quality and quantity of income that the property being assessed can bring during its service life. The main advantage of the income approach is that it allows you to take into account future investment risks now.

The disadvantage of the method is that future income - the predicted value of income from rent and the amount of future resale of the property - is determined by the appraiser by analyzing a number of factors, and therefore may contain a certain error, since it is impossible to absolutely accurately determine the state of the real estate market for the long term.

Cost-effective approach

The cost approach (asset-based approach) is a set of valuation methods in which the value of an object is equal to the sum of the value of the land plot and the cost of reproduction (replacement) of all improvements, minus accumulated depreciation, and the cost of liabilities, that is, the value of the object being assessed depends on the cost of creating a similar one object. This approach is used to evaluate detached buildings and households.

Comparative approach

The comparative approach is a set of methods for assessing the value of a valuation object, based on a comparison of the valuation object with objects that are analogues of the valuation object, for which information on prices is available. An object - an analogue of the valuation object for valuation purposes is recognized as an object that is similar to the valuation object in the main economic, material, technical and other characteristics that determine its value. (see Federal Assessment Standard No. 1)

Basic methods of real estate valuation

Income capitalization method

The essence of the income capitalization method is that the value of a real estate property is determined by transforming annual net operating income(CHOD) to current value.

Basic formula:

- cost of the property (monetary units) - Net operating income or NOR (eng. Net operation income (NOI)) - Capitalization rate

Capitalization rate- an indicator reflecting the ratio of expected annual income (ANI) to the value of real estate:

- capitalization ratio - the investor's rate of return on invested capital - the rate of return expected by the investor from investing, taking into account the risk in the market.

- rate of return of capital - the interest rate that ensures the return of the initial investment. The rate divides income into two parts: reimbursement of capital investments in real estate and receipt of income from owning the property.

In valuation practice, 3 methods are used for calculating the rate of return on capital: the Ring method, the Inwood method and the Hoskold method. Ring method

This method is used when the principal amount is expected to be repaid in equal installments. The rate of return is the annual share of the original capital paid into the interest-free recovery fund. This share is at 100% return of capital. Inwood method

This method is used if the capital return amount is reinvested at the rate of return on investment. In this case, the rate of return as a component of the capitalization ratio is equal to the recovery fund factor at the same interest rate. Hoskold method

Used when the rate of return on the initial investment is somewhat high and reinvestment at the same rate is unlikely. Reinvested funds are expected to receive income at a risk-free rate.

This method is used if the income streams are stable over a long period and are significant, and also if the income stream is growing at a steady pace.

The method is not applicable in a situation where the property being assessed is an unfinished construction project or requires significant reconstruction, that is, it cannot generate stable income in the near future.

The “information opacity” of the Russian market makes it difficult to calculate Net Operating Income and the capitalization rate, due to the lack of information on actual sales transactions, operating payments, etc.

The discounted cash flow (DCF) method is more complex, detailed and allows you to evaluate an object in case of receiving unstable cash flows from it, modeling the characteristic features of their receipt.

The DCF method is used when:

it is expected that future cash flows will differ significantly from current ones;
there is data to justify the size of future cash flows from real estate;
income and expense flows are seasonal;
the property being assessed is a large multifunctional commercial facility;
the property is under construction or has just been built and commissioned: (or put into operation).

The discounted cash flow method is the most universal method for determining the present value of future cash flows. Cash flows may change arbitrarily, be uneven and have a high level of risk. This is due to the specifics of such a concept as real estate. Real estate is purchased by an investor primarily for certain future benefits. An investor views a property as a bundle of future benefits and evaluates its attractiveness in terms of how the monetary value of those future benefits compares to the price at which the property can be purchased.

The DCF method estimates the value of real estate based on the present value of income, consisting of projected cash flows and residual value.

Notes

Regulatory and legal framework for valuation activities

The work of independent appraisers is controlled by public organizations, for example, the Russian Society of Appraisers.

Literature

Evening N.F. Olkhovsky A.A. Investments in commercial real estate in St. Petersburg: 2005.
Tapman L.N. Real estate assessment. UNITY 2005
Ivanova E. N. Real estate assessment. M.: 2007
Friedman. D, Ordway. N. Analysis and assessment of income-generating real estate M.:, Delo, 1998

Reading time: 13 minutes

Real estate as a subject of market relations tends to change in price. However, objective value is an important component of any transactions with real estate: paying taxes, inheriting, buying and selling and other transactions. Only an assessment of real estate can determine the real figure. Let's discuss what this service includes, who has the right to conduct such events and how much they will cost customers in 2020.

land plots, regardless of their intended purpose;
agricultural shares;
apartments, houses and other types of residential real estate;
industrial and commercial premises;
office buildings and premises;
retail premises;
unfinished construction projects;
capital garages, commercial non-residential buildings and other objects of value.

In general, the answer to the question of what is real estate valuation includes analysis:

the general state of the economy in a particular region;
individual characteristics of the object: location, condition, quantitative characteristics, architectural features, decoration, and so on;
prices for other objects with similar qualitative and quantitative characteristics.

Such a study allows us to establish the relationship between the principles, factors and parameters that form the value of the item being valued. It is this formulation that most accurately describes the concept and purposes of real estate valuation.

A more complete analysis of information allows you to predict market trends, determine the dynamics of growth or decline in value, and even determine the investment attractiveness of a particular property in the future.

Relevance of assessment in modern market conditions

Few ordinary people are familiar with the specifics of valuation activities. Therefore, it is not surprising that many people wonder what a real estate appraisal is for today. There are several reasons for its relevance:

In some cases, the valuation of real estate is required by law, for example, when it comes to transactions with state and municipal real estate or when objects are pledged, for example, when obtaining a loan.
Determination of the amount of tax payments and fees, payment of notary services, clarification of the tax base if the cadastre contains an inflated figure.
When assessing a property, not only the market value, but also the investment value can be established, for example, if the property is transferred as a share in the authorized capital of a business company.
When resolving property disputes regarding real estate: division of inherited property or joint property of spouses, payment of compensation, and so on.
To carry out purchase and sale transactions. If the price is too high, the chances of selling the property are greatly reduced, and a low price is unprofitable for the seller.

So, the relevance of real estate valuation in modern market conditions is undeniable. Any object has value as long as it is present on the market.

The market environment is the basis for price formation. Without other objects and subjects of relations, real estate itself will have no value, and therefore no value for the owner and other persons. Therefore, the presence of an object on the market is an integral condition for valuation. Without this, real estate is not a volume of rights, but only a concrete structure or a layer of soil.

Regulatory assessment framework in the Russian Federation

Since valuation activities are important for the normal functioning of the market, they require separate government regulation. Therefore, the legislator has formed a regulatory framework for real estate valuation. It includes:

Federal Law No. 135 of July 29, 1998 “On valuation activities in the Russian Federation”. The law discusses:
- the basis for regulating this activity;
- relations arising between the parties;
- persons who have the right to provide such services;
- grounds for carrying out assessment actions;
- the procedure for recording their results;
- basics of control over appraisal activities;
- rules for conducting cadastral valuation.
Federal assessment standard FSO No. 7, approved. By Order of the Ministry of Energy No. 611 of September 25, 2014. The document specifies:
- objects of assessment;
- requirements for the assessment procedure;
- the procedure for assigning tasks to the appraiser;
- features of market information analysis;
- the use of different approaches in assessment activities;
- a procedure for harmonizing results obtained by different methods and approaches, and so on.
1. Conclusion of an agreement and assignment.
2. Collection and analysis of information necessary to obtain the most reliable price.
3. Selection of approaches and methods, carrying out calculations.
4. If several methods are selected, their coordination is required. Calculations for real estate valuation made within the framework of different methods and approaches are brought into conformity.
5. Drawing up a written report describing the work done, justifying the assessment results, listing the main facts and conclusions reached by the expert.
The report is transmitted to the customer in written and, if necessary, electronic form.
If payment was not made in advance, the appraiser's fee is paid upon delivery of the report. Who pays for the real estate appraisal, the seller or the buyer, depends on the preliminary agreement of the parties and the purpose of the appraisal. For example, when drawing up a mortgage agreement, the costs are borne by the buyer. If it is needed for tax purposes - for the taxpayer, when registering an insurance policy - for the buyer of the insurance and others in whose interests the assessment is being carried out.

Principles of real estate valuation

The basic concepts and principles of assessment are not defined in Federal Law No. 135 - these are only theoretical rules not reflected in legislation. They are the basis for conducting appraisal work, which the appraiser must primarily follow.
There are 3 groups of principles, each of which includes:
- The principle of the user's position. It involves reflecting the benefits of an object, determining the most favorable price for it and assessing future benefits.
- The principles of interconnection of parts of real estate, within which the price is based on the most profitable use of each individual part of a single real estate.
- Market position principles by which price is determined according to conditions dictated by the market.
The principle of best use summarizes these three groups, fully reflecting the objectives of real estate valuation.

Assessment Methodology

There are several most common qualitative and quantitative assessment methods, as well as many combinations of them. Their selection is carried out by the appraiser; a combination of methods is allowed. They reflect how real estate is assessed depending on the goals and objectives set by the customer.
The most common methods include:
- Comparative - analysis of the average prices of the market segment to which the subject of the assessment belongs, and calculation of the cost based on a comparison of the characteristics of the studied and other objects.
- Capitalization method. Involves determining the present value in the form of net income that can be received.
- Method of discounting financial flows. Allows you to determine the current amount of unstable potential income that the owner will receive in the future.
Real estate valuation technology may involve the use of several methods at once.

Valuation of commercial properties

Any object whose operation should bring profit is considered commercial. Therefore, the choice of the income valuation approach is logical. That is, the present reasonable value must include future profits that the owner can and most likely will receive from the operation or alienation of such an object.
The main type of profit from commercial properties is rent, therefore, when assessing them, net rental income should be calculated, minus the landlord's main expenses for:
- Maintenance;
- communal payments;
- clearing services;
- insurance and so on.
In this situation, when assessing real estate, an inspection is mandatory, because calculating the rental price requires studying the condition of the property.
A comparative approach is also used. When calculating the price of a commercial property, the appraiser assumes that the buyer will not pay more than what a similar property costs on the market.
More information about the features of business objects in the article "".

Valuation of residential properties

Estimating the value of premises in a residential building is the most common type of valuation action. Residential is any property that, according to sanitary and technical standards, is intended for permanent residence of people: apartments and dorm rooms, houses and country houses, cottages, apartments, penthouses, and so on.
The main reasons for its assessment:
- obtaining a mortgage loan and registering collateral;
- entry into inheritance;
- making transactions - assessing real estate for sale, registering a deed of gift, concluding an exchange agreement, life annuity, and so on;
- resolution of property disputes, including during its division.
When valuing residential real estate, the comparative method is most often used. The most correct price will be one that is fair taking into account the market situation, prices for other similar objects, supply and demand.
Taking into account individual characteristics is also important. For example, the procedure for evaluating small-sized economy housing will differ from how to correctly evaluate luxury real estate.

Assessment and examination

The valuation of real estate is based on identifying the likely price, taking into account the objective circumstances of the market and the subjective characteristics of the property being valued. At the same time, the assessment of subjective characteristics is carried out on the basis of visible and publicly available information about the object, without taking into account possible hidden defects. Their presence explains the shortcomings of the real estate appraisal report - the report will not be objective.
To obtain the most reliable information about the condition of the property, especially if there are doubts about it, it is recommended to conduct an examination of the property. Its results sometimes reveal, for example:
- defects in supporting structures;
- hidden breakdowns or severe wear and tear of internal communications;
- not properly registered and unauthorized redevelopment;
- other qualitative factors that should influence the assessment result.
An examination is carried out when the coordination of the results of real estate assessment has given an inflated result that does not meet the interests of the customer.

Evaluation for trial

An assessment for the court is usually caused by a property dispute. This most often involves the division of probate or marital property, especially when it comes to the amount of compensation one party must pay in exchange for sole ownership.
An assessment for a trial can be carried out either on the initiative of one of the parties to the dispute or by decision of the judge.
Many people strive to value real estate cheaply. But this type of assessment should be the most objective, because its results, scrupulously examined by the judge, can be called into question.
If the objectivity of the assessment report appears doubtful to the judge, its results will not be taken into account, and the court will order a new examination.

Another feature: such an assessment will have to be paid not by the person who orders it, but by the person who is charged with the legal costs. As a rule, this is done by the loser or both sides, depending on what the judge decides.

Assessment results and reporting

The report, according to clause 3 of FSO No. 3, is a document of evidentiary value, containing market and other value based on the goals and objectives of valuation actions. A report on the assessment of the market value of a property includes the conclusions and informed judgment of a specialist, which are formulated on the basis of open and reliable information received by him.
When drawing up a report, the appraiser takes into account three main principles:
- it includes any information that the author considers significant;
- information that forms the basis for determining the value under study must be reliable and confirmed;
- The data reflected in the document should not imply ambiguous interpretation and mislead the customer.
The report covers every detail of how the property is appraised, including:
- information about all involved specialists and studied objects;
- analysis of market conditions, use of specific pricing factors;
- description of the assessment process: justification for the use of certain approaches, the sequence of using methods, as well as the final results;
- procedure for harmonizing assessment results obtained by different methods;
- main conclusions, results in value terms.
The real estate valuation procedure involves drawing up a report in paper and electronic form. The paper document must be numbered, bound and signed personally by the subject of the assessment activity.
Valuation Agreement

According to Art. 9 F No. 135, the contract is the main and mandatory basis for carrying out appraisal actions. In addition, the assessment can only be carried out on the basis of a court ruling.
The agreement between the customer and the appraiser defines the main responsibilities of the parties, including how the real estate appraisal is carried out. The points reflected in it will subsequently determine the content of the assessment report.
- assessment objectives;
- description of the object being studied;
- type of value to be determined;
- the amount of the appraiser's fee and the procedure for its payment;
- deadlines for carrying out assessment actions and preparing a report;
- information about the expert’s civil liability insurance, information about the SRO;
- FSO that will be used during the work and other information.
We invite you to familiarize yourself with a sample assessment agreement.

Technical task

Before the procedure, a technical specification for the valuation of real estate is drawn up. According to clause 21 of FSO No. 1, clause 8 of FSO No. 7, it must contain:
- a description of the object that allows you to identify each of its parts;
- a list of rights that are subject to valuation, as well as encumbrances and other restrictions affecting the price;
- characteristics of the object;
- the purpose of the study and the intended use of the report;
- the type of price and the date on which it should be set;
- assumptions supporting the assessment results and other important information.
The terms of reference for real estate valuation may contain other values that must be taken into account: the amount of rent, repair costs, losses, and so on. Usually it is compiled by the appraiser himself, taking into account the goals and objectives stated when signing the contract with the customer.
The task is an integral part of the assessment report, since it describes the main metrics from which the performer of the assessment work proceeds.
Validity period for assessment results

The relevant legislation does not determine the validity period of the assessment of the market value of real estate. This is due to the fact that the report is compiled for a specific date: at the current time or at a certain point in the past. Therefore, such a document simply cannot have an expiration date; it is unlimited. Nevertheless, it determines the price precisely for the date indicated in the document and not for any other.
Still, this does not mean that the report can only be used on the day for which the price is set. The approximate period for which a real estate assessment is valid is determined by clause 2 of Art. 12 Federal Law No. 135.
According to the law, the price obtained based on the results of the assessment can be recommended for completing a transaction within six months from the date of drawing up the report.

For example, when selling an apartment, the market value based on the assessment results remains valid for 6 months. After this time, the market situation is likely to change, which will also affect the market price.
Amount of appraiser's remuneration

The price for real estate appraiser services is not regulated by law. Each subject of valuation activities engaged in private practice is free to independently regulate the cost of their services.
As a rule, the appraiser's fee depends on his training, authority among other specialists and guarantees of objectivity of the results that he can give to the customer.
Other subjective factors also influence how much a real estate valuation costs:
- location of the object and region of location;
- real estate class. Valuation of business real estate is more expensive;
- object area. The larger the object, the more expensive the appraisal;
- urgency of service provision;
- the purposes for which the cost calculation is carried out;
- depth of research and other features of the situation.
The cost of services should be specified in the contract. Average prices vary from region to region. In the capital, the cost of assessing commercial properties starts from 20 thousand rubles, residential – from 5-6 thousand rubles.

Self-assessment of real estate

Not everyone is willing to pay for appraisals, especially if the price is necessary to publish an advertisement for the sale of an apartment. The easiest way to evaluate real estate yourself is to study the available offers on the market, find similar properties, compare their characteristics and calculate your approximate price, taking into account the individual characteristics of your apartment.
As a rule, the price is influenced by the following factors:
- floor. The outermost floors are priced cheaper;
- infrastructure development. The presence of kindergartens, schools, transport stops, supermarkets, hospitals, parking lots and other infrastructure nearby increases the cost, while their absence reduces it;
- Condition of housing. Fresh renovations, equipment, and new plumbing potentially increase the price.
Find out more about other pricing factors from the material "".

Cadastral price

One of the publicly available types of real estate prices is (KS). It is determined based on the results of an assessment carried out under the control of Rosreestr. This cost is calculated for tax purposes and is established in each region separately by decision of local governments.

Valuation of BTI real estate involves the use of mass valuation methods, which inevitably entails a large error in determining the value, and can overestimate/underestimate the amount of tax payable.
Information about the CS of the assessed objects is publicly available. The easiest way to obtain them is through the Public Cadastral Map. To do this, follow the link and click on the area of interest on the map.

Conclusion

Real estate valuation is a set of actions by an appraiser aimed at determining the most probable value of an object under given circumstances. The procedure is carried out for various reasons, but only by expert appraisers with a qualification certificate. They collect and analyze the necessary information and, based on the results of the analysis, calculate the most likely price. The results are included in the report, which is the result of the assessment. It is considered an evidentiary document and, until proven otherwise in court, is considered objective.

Master of Law in the field of Civil and Family Law. In 2005 he graduated from St. Petersburg State University, in 2012 from the Faculty of Economics of Moscow State University. M.V. Lomonosov with a degree in Financial Analytics. After receiving a second higher education, he founded an independent appraisal company. I am engaged in the assessment of real estate, land and other property.

Real estate valuation is one of the main stages in the real estate market. Each object must be clearly assessed based on various characteristics, ranging from sq. meters and ending with the level of prestige of the area, developed infrastructure.

To begin the assessment, it is necessary to research the market, study consumer preferences, the ratios of certain types of real estate, or rather their commercial or non-commercial stay

The purposes of real estate valuation can be different (purchase and sale of an object, insurance and property disputes, taxation of real estate, implementation of investment projects, secured lending, etc.), they correspond to several types of value. Before starting real estate valuation work, the appraiser needs to determine the type of value applicable in a given situation. The report must reflect the type of value being assessed and justify its choice.

There are several approaches to real estate valuation: comparative, income and cost.

Income approach used to evaluate investment projects and in calculating the shares of the municipality and private individuals investing in capital construction or reconstruction. Those. approach used for projected income of objects - the value of real estate is equal to the value of future income from its use. The cost of monetary resources depends not only on the magnitude of their supply, but also on the conditions for their provision and return. Therefore, the buyer of a property, aimed at making a profit from its use, must compare his expenses for purchasing real estate and the planned income. If purchased for 1,000,000 rubles. the object can generate a profit of 100,000 rubles over the next 10 years. per year, after which it will completely lose its value, then after 10 years the buyer will only be able to return his funds. At the same time, having invested them in the bank, he would receive interest on the deposit for the same 10 years.

Any investment in real estate is inevitably associated with risk, due to many factors. The risk depends on the stability of the socio-political and economic situation. Obviously, the more risk an investor is willing to expose his funds to, the more income he plans to receive from their investment.

Another important point: future income must compensate not only for the investments spent, but also for the losses caused by the fact that these investments do not work for some time.

Cost-effective approach is a set of assessment methods based on determining the costs necessary to restore or replace an object, taking into account accumulated wear and tear. Based on the assumption that the buyer will not pay more for a finished object than for the creation of an object of similar utility. However, it should be taken into account that the costs of creating a property are not equivalent to its market value. Therefore, the scope of application of the cost approach is quite narrow and is used in the absence of sufficient information when assessing the value of real estate; when insuring real estate, when the insured amount, insurance premium, insurance compensation are determined based on the costs of the policyholder; when assessing specialized buildings (schools, hospitals, train stations, etc.); when calculating taxes and fees established by law; in the revaluation of fixed assets.

Property valuation using the cost method is carried out in stages.

Market (comparative) approach- this is a set of methods for assessing value, based on comparison of the object of assessment with its analogues, for which there is information on the prices of transactions with them, where the value of the object cannot exceed the cost of similar objects with identical characteristics. In my work, I will consider the market approach, or rather the method of paired sales, which consists of determining the market value by considering the sales prices of comparable plots as the market value of the assessed plot.

This method, in my opinion, is the most successful, but it is quite difficult for a newcomer to the real estate market to determine the exact price, relying on logic and primary information; here you need to be a middle-class specialist.

Real estate is in free civil circulation and is the subject of various transactions, which creates the need to assess its value, i.e. in determining the monetary equivalent of various types of real estate at a specific point in time.

All types of real estate values can be divided into two large subtypes:

Exchange cost

Exchange cost- used when buying, selling, leasing, pledging, that is, in the real estate market.

market;
rental;
collateral;
insurance;
liquidation

Market price- the most probable price at which a given object can be alienated on the open market in a competitive environment, when the parties to the transaction have all the necessary information, and the value of the transaction is not affected by any extraordinary circumstances.

Insurance value— the cost of full compensation for property damage upon the occurrence of an insured event.

Liquidation value- the cost of the appraisal object in the event that the appraisal object must be alienated within a period shorter than the usual period of exposure of similar objects.

Cost in use

Cost in use— expresses the value of the object for the owner who is not going to sell it. It is necessary for comparison with alternative investment options, comparison with cost estimates for the creation of similar objects and other purposes.

investment;
balance;
cadastral;
taxable;
restorative;
substitutions.

Investment cost— the value of the object of assessment, determined on the basis of its profitability for a specific person for given investment purposes.

The calculation of investment value is based on a subjective assessment of discounted costs and investor income expected from the use of a given property in a promising investment project.

Cadastral value— the value of the valuation object, determined by mass valuation methods in accordance with the provisions of regulatory legal acts on cadastral valuation.

Taxable value- the value of the valuation object, determined for calculating the tax base and calculated in accordance with the provisions of regulatory legal acts.

Replacement cost- the amount of costs for creating an object similar to the object of assessment, in market prices existing on the date of the assessment, taking into account the depreciation of the object of assessment.

Property valuation

Types of real estate valuation

Mass assessment real estate is the assessment of a large number of real estate properties on a specific date using standard statistical analysis techniques. At the same time, the procedure for assessing a large number of objects is unified.

Individual assessment real estate is the assessment of a specific object on a certain date.

Stages of the real estate valuation process

1. Problem definition:

the object of assessment and the purpose of its assessment are indicated;
property rights are being established;
the date for the assessment is set;
the type of cost that needs to be determined is formulated.

2. Preliminary inspection and assessment plan:

it is determined what data is necessary and sufficient to analyze the object;
the sources of their receipt are established;
an assessment implementation plan is drawn up;
A written agreement is concluded between the appraiser and the customer.

3. Data collection and verification:

accounting and reporting;
on the technical and operational characteristics of the facility;
title documents, information about the encumbrance of the object of assessment.

4. Application of assessment approaches:

costly method;
comparative method;
income method.

5. Agreement on the assessment result:

Obtaining a final valuation of property based on the results of applying various approaches to valuation. Taking into account all significant parameters, the final value of the object is determined based on the expert opinion of the appraiser.

6. Final stage

An appraisal report is being drawn up - a document containing the rationale for the appraiser’s opinion on the value of the property.

Approaches to real estate valuation

Comparative approach

The comparative approach to valuation is a set of methods for assessing value based on comparison of the subject of valuation with its analogues, for which information is available on the prices of transactions with them.

Conditions for applying the comparative approach:

the object does not have to be unique;
information about transactions must be comprehensive;
factors influencing the cost of comparable analogues of the property being valued must be comparable.

Advantages comparative approach:

Quite easy to use and gives reliable results;
the final price reflects the opinion of typical sellers and buyers;
Sales prices reflect inflation and changes in financial conditions.

Flaws approach:

the difficulty of collecting information on practical sales prices;
dependence on market activity and stability;
sales differences.

Cost-effective approach

The cost approach to real estate valuation is a set of valuation methods based on determining the costs necessary to restore or replace the property being valued, taking into account accumulated wear and tear.

It is based on the assumption that the buyer will not pay more for a finished object than for the creation of an object of similar value.

Advantages cost approach

The cost approach is the most reliable and appropriate when:
analysis of the best and most effective land plot;
valuation of objects in inactive markets;
valuation for insurance and tax purposes;
economic analysis of new construction.