Determination of the market value of the apartment. Appraisal of an apartment using the income approach Calculation of the market value of the appraisal object
When evaluating the object in relation to which the subjects intend to make a deal, the conditions of the deal itself are also taken into account. In the event that the object of assessment is free from the rights of third parties (for example, no one is registered in the apartment), i.e. free both legally and physically, then an adjustment for the terms of the transaction is applied - 10% more expensive. This is the average correction. In order to clarify, let's give an example - if you need to evaluate an apartment for sale with a simultaneous purchase (exchange), then the cost of the apartment will be less by the amount of the specified adjustment. The rationale for this is the waste of time looking for an exchange option that would satisfy the wishes of the two parties to the transaction.
- without finishing - there are no interior doorways, windows, walls, floor and ceiling were not subjected to finishing work. This is a new build that needs some refurbishment.
- simple decoration - the walls and ceilings of the apartment are whitewashed or wallpapered, the floor is tiled, linoleum or parquet, the bathroom and kitchen are equipped with plumbing.
- improved finishing - the walls and ceiling are covered with acrylic paint or wallpaper, the floor is tiled, linoleum or parquet, the bathroom and kitchen are equipped with high-quality sanitary ware.
- high-quality finishing - the apartment has been renovated to a high standard, using modern building technologies and high-quality materials. The existing surfaces are perfectly aligned, the apartment is equipped with the latest electrical wiring and plumbing. It is allowed to carry out redevelopment according to an individual project using structures of a complex composite configuration.
An appraisal report is a written document that meets all the requirements of professional ethics, clearly and in an accessible way reflecting the course of the appraisal process and containing the initial data used by the appraiser, their analysis, conclusions and the final value. The appraisal report appendix contains all photographs, sketches, and maps not included in the main sections of the report. Sometimes the appendix includes a glossary of terms.
In determining the price, the prices of apartments in your building with the same number of rooms are most important, then all other apartments in it, then apartments in similar buildings in your area. To select "similar" houses, we carried out a study on the typology of the housing stock in Moscow and the Moscow Region.
ASSESSMENT OF THE APARTMENT WITH A COMPARATIVE APPROACH
Analogues should be as similar as possible to the Object of Assessment and, first of all, in terms of the first five elements of comparison, and for residential real estate (apartments) and in terms of physical characteristics (number of rooms, total area, type of building, etc.). All selected analogues are summarized in Table 8, which includes primary data obtained from open sources and additional data obtained directly from the seller of analogues.
Appraisal of an apartment by a comparative approach
The following are the justification and calculation of the amount of adjustments for the elements of comparison, which are different for analogues and the Property under assessment. The technique of approximation of each object of comparison to the Object of assessment is used. Adjustments (amendments) can be cost and percentage. On quantitative grounds, differences are usually introduced in value terms, and on qualitative grounds, in percentage terms. Percentage adjustments are applied both to the cost of the comparison object and to the unit of comparison, and cost adjustments are applied to the cost of the comparison object. Adjustments for market conditions, location and depreciation are expressed as a percentage.
When applying the comparative approach, the value of the Property to be assessed is determined in comparison with the sale price of similar properties. The basis for applying this approach is the fact that the value of the Subject Property is directly related to the sale price of similar properties. Each comparable sale (object of comparison, analogue) is compared with the property being valued. The accuracy of calculating the value of the Valuation Object by the comparative approach depends on the volume (completeness) and quality (reliability) of information about sales transactions (or offers for sale).
Adjustment for the presence of furniture in the appraisal of the apartment
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In order to clarify, let's give an example - if you need to evaluate an apartment for sale with a simultaneous purchase (exchange), then the cost of the apartment will be less by the amount of the specified adjustment. The rationale for this is the waste of time looking for an exchange option that would satisfy the wishes of the two parties to the transaction.
Adjustment for furniture when evaluating an apartment
This is common practice. We will not leave her. Please note that sometimes there are discrepancies in the documents. Either way, evidence is paramount. It is only necessary to remember that in such a calculation it is necessary to use the area of \u200b\u200bthe apartment without taking into account cold rooms (loggias, balconies).
In accordance with the law, the appraiser is obliged to apply all three approaches to valuation or justify the impossibility of applying one or another approach, therefore it is incorrect to say that one report is better than another due to the fact that it uses two approaches instead of one.
Adjustment for the presence of furniture in the appraisal of the apartment
Using the pair sales method involves comparing two objects offered for sale, which are an exact copy of each other, with the exception of one parameter (for example, floor), which explains the difference in the price of these objects. It is important that the rest of the parameters of the object of assessment and the analogue must be the same.
After the selection of analogues for calculating the cost of an apartment using a comparative approach, adjustments are made to the prices of analogues, which take into account the differences between analogues and the object of assessment. Adjustments can be either up or down. They can be percentage or absolute (based on 1 sq.m. of the area of the apartment).
Apartment appraisal
An important adjustment is the auction adjustment, which takes into account that the transaction price is usually lower than the price at which the object is listed on the open market. For apartments, the bargaining discount usually ranges from 2.5% to 5%. Accordingly, for an apartment worth about two million, the discount on the auction will be 50 - 100 thousand rubles. Very often, the appraiser does not take into account this discount or considers its size disputable, however, taking into account the bargaining discount is a mandatory requirement when evaluating an apartment for obtaining a mortgage.
Sooner or later, almost everyone has to deal with the services of appraisers. The vast majority of customers for this type of work are people who want to get a mortgage; valuation is also a necessary procedure when registering an inheritance, refinancing, dividing property in court and in some other cases. This article describes the nuances of apartment appraisal, which often cause bewilderment on the part of customers.
Correction for the number of storeys of the house when evaluating apartments
The comparative approach to valuation is a set of valuation methods based on comparing the object of valuation with its analogues, in respect of which there is information about the prices of transactions with them. Conditions for applying the comparative approach: 1. The object must not be unique. 2. Information must be comprehensive, including the conditions for making transactions.
The promotion runs until the end of this month. Details from the manager. To find out how much your apartment appraisal costs, call: We offer you an on-line apartment appraisal service. Please note that this estimate is approximate and not legally binding.
Correction per floor when evaluating apartments
4.2.4. Need for renovation (furnishings and equipment). The need for repairs leads to a decrease in the cost of the apartment, taking into account the upcoming costs of repair work. Adjustment v An adjustment is made to account for the increase in the attractiveness of the analogue. The need for repairs leads to a decrease in the cost of the apartment, taking into account the upcoming costs of repair work.
Derivation of average sales and rental prices for commercial premises located on the first floors of residential and administrative buildings and for those located in the basement and basement of buildings, depending on the price zone* of Ekaterinburg. In this case, the prices of offers are used, and not the real prices of transactions with real estate objects, the price of sale and lease of objects is displayed in the format of the cost per 1 sq.m.
Estimating the value of the apartment
The main argument for refusing to use the income approach is that when analyzing proposals on the housing rental market in Perm, variable factors have been identified, such as: the availability of furniture, household appliances, a telephone, the quality of repairs, the “cleanliness” of premises, and others that are difficult to identify on information gathering stage. These factors are usually revealed only during a direct inspection of the dwelling and can significantly affect the cost of the monthly rent, the difference can reach up to approximately 1.5 times. The presence of such factors complicates the calculation of the income that an object can bring. Also, these factors affect the calculation of the capitalization rate within the income approach, which also complicates further calculations and determination of the value of the object.
2. To determine the cost of replacing part of the premises, you must first calculate the cost of replacing the entire building. To do this, it is necessary to have design estimates or a space-planning solution and a technical description of the structural elements of the building in which the object of assessment is located.
How to independently evaluate an apartment in the capital
- The larger the area of the apartment, the less its liquidity, - explains Arslan Ainakulov. - It's much harder to sell. Accordingly, the price per square meter for a large apartment will be less. Let's say we have a residential complex "Sun City". There are apartments there, both 25 square meters and 30. That is, you come in - there is immediately a room and nothing else. There, a square meter reaches 3,000 dollars. If we are looking at an apartment on the left bank with an area of 70 "squares", there will be the same price per square meter - 2500-3000 dollars.
An analogue object should be located as close as possible to the object of assessment. Ideally, if in the same house or LCD. In Astana, in principle, there are no problems with the choice of options. Therefore, finding an apartment similar to yours in the same residential complex is usually not a problem. According to priorities, the criteria are distributed in the following sequence: residential building, street, city district.
Methods for calculating the cost of an apartment are widely covered and theoretically developed, as evidenced by a huge amount of literature and methodological recommendations for assessment.
This is facilitated by the developed real estate market. Moreover, the number of proposals is equally diverse both in the primary and secondary housing markets.
Current legislation and federal valuation standards require the use of three main valuation approaches: comparative, cost and income approaches. However, in the case of real estate appraisal, which is an apartment, the cost and income approaches are of little use. The assessment of the market value of an apartment is carried out using a comparative approach. The algorithm is as follows: 7-10 analogues of real estate are selected that correspond to the object of assessment in terms of the main characteristics. In case of discrepancy or differences from the object of assessment, corrective factors are introduced. As practice shows, the main adjustments are:
- To the location of the object
- Correction for physical characteristics (flat area, usable to total area ratio, availability of furniture, type of finish, kitchen size, type of bathroom, floor of the apartment in the house, balcony / loggia)
- Availability and type of parking
Further, after applying the appropriate adjustments, the average market value of 1 sq.m. apartments. Moreover, it should be noted that there is a difference between the concepts of "market value" and "selling price". The appraiser determines the market value of the object, which is understood as “the most probable price at which the object of appraisal can be alienated on the date of appraisal on the open market in a competitive environment” (Federal appraisal standard No. 2 Purpose of appraisal and types of value). This means that all participants in transactions are aware of the conditions and are free in their decisions. The market value is the subject of research and calculations of the Appraiser. The selling price, on the other hand, can be dictated by factors that do not fall under these restrictions, which fundamentally distinguishes the economic meaning of these definitions.
This difference is evident in the example of the appraisal of the share of an apartment. Meanwhile, a large number of citizens are convinced of the need for such an assessment: this is the entry into an inheritance, which is sometimes part of an apartment, and judicial procedures in the division of property, for example, in a divorce, and, in the end, transactions for the sale of the corresponding shares of an apartment .
In valuation practice, there is no single point of view among specialists. The main discussion arises around the need to apply adjustments, discounts per 1 sq.m. share of the apartment compared to 1 sq.m. apartments as a single piece of real estate. This confusion is also facilitated by the lack of a full-fledged market for transactions for the purchase and sale of shares in an apartment.
First of all, it is necessary to have a clear understanding of the context and legal nuances in which the need for an assessment arises. The first thing to determine is what the estimated share of the apartment is - whether it can be allocated in kind, in the form of a room. If the answer is yes, then the classical methods of assessing the share as a separate room, room work here.
The acquisition of a share in an apartment is associated with a number of difficulties, which obliges to reduce the cost per square meter when assessing the share of an apartment, however, it should be noted that these problems and inconveniences are difficult to translate into monetary terms.
Each co-owner has equal rights to the share in the apartment that is assigned to him. When the appraisal of a share in an apartment increases the price per square meter compared to the price per square meter in the entire apartment, the Appraiser puts the co-owners in a somewhat unequal position, since the buying party must pay more for the ownership of the entire apartment than in the case of purchasing a similar apartment on the open market . If the valuation of the share in the apartment reduces the cost of a square meter compared to the cost of a square meter in the entire apartment, the selling party does not have the opportunity to purchase an equivalent property for the proceeds.
In this case, one should proceed from the essence of the transaction with the corresponding share. For example, in the case of buying out the remaining share of an apartment from other owners, the value of the share may increase, because in this situation, a part of the apartment is bought that ensures the unity of ownership, i.e. there is a synergistic effect - i.e. buy something more than part of the apartment. When it comes to buying a share of third parties, then, perhaps, the application of downward adjustments.
But neither the increase in the cost of a unit area of a share of an apartment, nor the decrease in relation to the cost of a unit area of the entire apartment can be accurately calculated, but can only be assumed. It should be noted that the transaction price may differ significantly from the market value of the share of the apartment.
Thus, Appraisers should use the cost of 1 sq.m. share of the apartment of the corresponding cost of 1 sq.m. apartments as a whole, subject to Art. 250 “Preemptive right to purchase” of the Civil Code of the Russian Federation, which reads as follows: “when selling a share in the right of common ownership to an outsider, the remaining participants in shared ownership have the pre-emptive right to purchase the sold share at the price for which it is sold, and on other equal terms, except for the case of sale with public auction”, which means obligatory observance of the legal procedure for granting the right of the co-owners of the apartment to acquire this share in a priority mode.
When applying this approach, the ability of real estate to generate a certain income is analyzed, which is usually expressed in the form of income from the operation (renting) and income from the sale.
Capitalization and discounting methods are used to assess the value of profitable real estate.
Discount method is used to bring the flow of income and costs distributed over time to one point in order to obtain the current value of the cash flow as the value of the income-generating Object of Assessment. The discounted cash flow method assumes that a potential investor will not pay more for real estate than the present value of future income from this property, and the owner will not sell the property at a price less than the present value of future income from this property. As a result, the seller and the buyer agree on a market price corresponding to the present value of the amount of future income.
Direct capitalization method allows, based on data on income and capitalization rate at the time of valuation or the prospect, to draw a conclusion about the value of the Property. The method of capitalization of profit proceeds from the fact that the value of the property (Object of Assessment) is equal to the current value of future cash income that this property will bring, and is expressed by formula 4:
The capitalization method is most used in the valuation of real estate, which over a long period brings approximately the same amount of profit or the rate of profit growth is constant. The method is more often used in real estate valuation than in business valuation and does not require long-term forecasts.
To assess the value of an apartment using the direct capitalization method, it is necessary to determine the capitalization coefficient based on market data, which reflects the relationship between annual income and the value of the apartment. Using the method of comparative analysis of sales of similar objects, with a known declared sale price and estimated potential gross income, the estimated capitalization rate (capitalization ratio) is determined.
Used information on analogs is formed in table. 10. For comparison, 3-room apartments of a similar area in panel houses were selected.
Table 10
Comparison elements | Object of assessment | Objects of comparison (analogues) | |||
Location, address | Biryulevskaya, d.1, bldg. 3 | 115404, Moscow, st. Lipetskaya, d.36/20 | 115404, Moscow, st. Berry, d.8 | 115404 Moscow, st. Zagoryevskaya, 21 | 115404, Moscow, st. Zagoryevskaya, 23 |
Listed Price | 54 000 | 55 000 | 50 000 | 50 000 | |
Total area, m 2 | 59.3 | 57.8 | 55.2 | ||
Market conditions (time) | similar | similar | similar | similar | |
Distance to the Moscow metro station, min | |||||
No | No | No | No | ||
House type | Panel | Panel | Panel | Panel | Panel |
Floor | Laminate | Parquet | n/a | Laminate | n/a |
bathroom | Separated | Separated | Separated | Separated | Separated |
Availability: | |||||
- furniture | Available | Available | Available | Available | Available |
- kitchens | Available | Available | Available | Available | Available |
- telephone, | Available | Available | n/a | n/a | Available |
- Internet | Available | Available | Available | Available | No |
- intercom | Available | Available | Available | Available | Available |
- steel door | Available | Available | Available | Available | Available |
Balcony and loggia | available | no balcony | no balcony | no balcony | Balcony no loggia |
Condition of the apartment | After renovation | After renovation | Good condition | ||
Potential Gross Revenue | 608 597 | 679 140 | 581 767 | 561 450 | |
Capitalization ratio | 0,051 | 0,055 | 0,049 | 0,047 |
Potential gross income is calculated at the market rental rate that is most representative of a typical peer. The capitalization ratio is determined for each analogue by dividing the potential gross income by the proposed (declared) sale price.
With a small range of deviation of the capitalization ratio, the arithmetic mean of the capitalization ratio is calculated, which is then used in the formula
With a significant difference in the calculated capitalization ratios for individual analogues, an analysis is carried out in order to identify the causes of these deviations (incorrect selection of analogues, lack of additional information on similar objects, etc.).
Potential gross income is calculated based on adjusted rent. To calculate it, an adjustment of the market rent of a typical analogue is necessary.
This adjustment is carried out in the same way as in the comparative approach, and the following are used as elements of comparison:
Distance to the center of the municipality;
Physical characteristics;
The presence of furniture, kitchen, telephone, metal door;
The condition of the apartment (the need for repairs).
The calculation of the adjusted market fee is given in Table. eleven.
The applied adjustments are shown in Table. 12
Table 11
Comparison elements | Object of assessment | Objects of comparison (analogues) | |||
Location, address | Biryulevskaya, d.1, bldg. 3 | Elevatornaya street | Lipetskaya street | Yerevan St | Lebedyanskaya street |
Listed Price | 42 000 | 35 000 | 34 000 | 50 000 | |
Market rent, rub/m2 | 705,13 | 694,44 | 666,67 | ||
Metro station accessibility, min | |||||
Adjustment for metro station accessibility | -4% | 0% | 0% | +1,5% | |
691,20 | 705,13 | 694,44 | 676,67 | ||
Total area, m 2 | 59.3 | 57,8 | 55,2 | ||
2% | -3% | 1% | -4% | ||
Adjusted rent | 705,02 | 683,98 | 701,38 | 649,60 | |
Utilities in the rental price | No | No | No | No | |
House type | Panel | Panel | Panel | Panel | Panel |
House type adjustment | 0% | 0% | 0% | 0% | |
Adjusted rent | 715,13 | 755,38 | 692,43 | 633,65 | |
Floor | Laminate | Parquet | n/a | Laminate | n/a |
Floor Type Adjustment | -5% | 0% | 0% | 0% | |
Adjusted rent | 679,37 | 755,38 | 692,43 | 633,65 | |
bathroom | Separated | Separated | Separated | Separated | Separated |
Adjustment for the bathroom | 0% | 0% | 0% | 0% | |
Adjusted rent | 679,37 | 755,38 | 692,43 | 633,65 | |
Availability: | |||||
- furniture | Available | Available | Available | Available | Available |
- kitchens | Available | Available | Available | Available | Available |
- telephone, | Available | Available | n/a | n/a | Available |
- Internet | Available | Available | Available | Available | n/a |
- intercom | Available | Available | Available | Available | Available |
- steel door | Available | Available | Available | Available | Available |
Adjustment for staffing | 0% | 0% | 0% | 0% | |
Adjusted rent | 679,37 | 755,38 | 692,43 | 633,65 | |
Balcony and loggia | Available | no balcony | no balcony | no balcony | Balcony |
Loggia | Loggia | Loggia | no loggia | ||
Adjustment to the balcony, loggia | 2% | 2% | 2% | 5% | |
Adjusted rent | 692,96 | 770,49 | 706,28 | 665,33 | |
Condition of the apartment | After cosmetic repair | After renovation | After cosmetic repair | After renovation | After cosmetic repair |
Adjustment for the condition of the apartment | -3% | 0% | -3% | 0% | |
Adjusted rent | 672,17 | 770,49 | 685,09 | 665,33 | |
Number of adjustments | |||||
Total net correction | -47,83 | 65,36 | -9,35 | -1,34 | |
(same as a percentage) | -7% | 9% | -1% | 0% | |
Total Gross Correction | 57,60 | 7,05 | 0,00 | 16,67 | |
(same as a percentage) | 8% | 1% | 0% | 3% |
Table 12 - Rationale for adjustments
Type of adjustment | Description of the nature of the adjustment | Adjustments introduced |
Location Adjustment | The adjustment consists of the prestige of the area, the distance to the nearest metro station | 0.5% for every minute |
Correction for total area | An adjustment is made if the total area of the object of assessment deviates from the area of the analogue by more than 1 m 2 | 1% for each m2. |
Adjustment for the presence of a balcony | The presence of a balcony and a loggia increases the value of the appraisal object | 2% - a balcony 5% - a loggia |
Floor adjustment | High-quality flooring increases the value of the object of assessment | Parquet: -5% Linoleum: +2% |
Adjustment for the bathroom | A separate bathroom is more convenient, as a result of which the value of the appraisal object increases | Combined: +2% |
Adjustment for condition and quality of finish | The good condition and finishing of the apartment have a positive effect on the value of the appraisal object | After cosmetic repairs: 0% After renovation: +3% |
Analog No. 3 has the smallest gross correction. Analog No. 2 has a gross correction slightly larger than analog No. 3. Analog No. 1 has the highest gross correction. We choose the weighting factors based on the conclusions made:
For analogue No. 1 - 0.1, for No. 2 - 0.3, No. 3 - 0.4; No. 4 - 0.2, therefore:
Thus, the cost of 1 m 2 of the object of assessment will be:
672.17 * 0.1 + 770.49 * 0.3 + 685.09 * 0.4 + 665.33 * 0.2 \u003d 705.466 rubles / m 2
In table. 13 shows the calculation of the capitalization ratio. Since the sales prices of the objects of comparison were not indicated, they were determined using the site www.irn.ru.
Table 13 -
Then the value of the object of appraisal by the income approach will be:
C O.O. = 705.466*59.3*12/0.041= RUB 12,244,136
1) Adjustment for "bargaining" allows you to bring the offer price to the sale price. As a result of a survey of participants in the residential real estate market in Simferopol (Real Estate Agencies "Russian Crimea", "Orion", "Rielcom", "Veta", "Crimean Terem", "Real Estate Parade", "VIP Chance"), it was revealed that the discount on bargaining in the sale of such residential real estate is on average 10%.
2. Adjustment for "real estate services" allows you to adjust the prices of offers from real estate agencies to the cost without taking into account the costs of their services. As a result of the analysis of average prices for real estate services (of Real Estate Agencies "Infoservice", "Business Crimea", "Crimea Plus", "RIO", "World of Real Estate", "Dom-Plus"), the appraiser found that the average cost of services of real estate agencies is 5%.
3. Adjustment for "location" for all objects-analogues was 0%, since the object of assessment and these analogues are comparable in this factor.
4. Adjustment for "wall material" for all analogues was 0%, since the object of assessment and analogues are located in panel houses.
5. Adjustment for the "year of construction". Ceteris paribus, the price of an apartment in inverse proportion depends on the year of construction of the house due to the increasing physical deterioration of the building. This adjustment was not applied because the object of appraisal and objects-analogues are comparable according to this criterion.
6. Adjustment for the "floor". Apartments located on the extreme floors of residential buildings, ceteris paribus, have a lower value in terms of 1 sq.m. cost compared to apartments located on the middle floors. This adjustment was not applied, since the appraised object and similar objects are located on the top floor of five-story buildings.
7. Adjustment for the "number of rooms" of all analogous objects is identical, so the adjustment was not applied.
8. Adjustment for the condition (availability of equipment and furniture). Based on the market analysis carried out in Section 3, it was revealed that the cost of 1 sq.m. apartments with furniture and built-in appliances are on average 12% higher than in apartments without such equipment. Therefore, the appraiser applied a downward adjustment by this amount
Table 13
Thus, the sample is homogeneous and can be used to determine the value of the appraisal object. In addition, the value of the value of the offer of selected analogues is in the mid-market range.