7.12.2022
Before clarifying the subject of real estate appraisal or its widespread use and real estate appraisal/property appraisal, “What is valuation?” You have to answer the question. In its simplest sense, valuation is the work of appraising, determining the value of a commodity and appraising its value. Appraisers do valuation work.
What is Real Estate Valuation?
A real estate appraisal is the realization of the probable value appraisal of the relevant property at a certain date by independent and impartial real estate appraisers, based on independent, impartial, and objective measures. In summary, the real estate appraisal process is defined as the appraisal of the value of a real estate, real estate project, or the rights and benefits associated with a real estate, by choosing the most appropriate valuation method for the property, within the framework of certain laws and regulations, and accordingly preparing the real estate valuation report.
Who is a Real Estate Appraiser and What Does He Do?
Real estate appraisers are experts who are permanently employed in real estate appraisal firms or provide services on the condition of a contract. As a result of the exam organized by the SPL (Capital Markets Licensing Registry and Education Board, Inc.), one is entitled to become a real estate appraiser or a residential appraiser, provided that certain education and experience requirements are met.
Real estate appraisers and real estate appraisal companies are members of TDUB (Association of Appraisers of Turkey) in our country and can carry out their activities subject to the regulations of the CMB (Capital Markets Board) and/or BRSA (Banking Regulation and Supervision Agency).
How to Calculate the Value of a Real Estate?
While determining the value of the real estate, 3 main approaches are generally applied, namely the Market Approach, Cost Approach, and Revenue Approach within the framework of IVS (International Valuation Standards). To briefly mention these approaches.
Market Approach refers to the approach in which the indicative value is determined by comparing the asset with the same or comparable (similar) assets for which price information is available. It considers the sale of properties similar to the appraised property or relevant market data and does a valuation with a comparative transaction. Although it is also called the Peer Comparison Approach in the industry, in IDS 2017, 2020, and 2022 versions, it is presented as a sub-title, as a Market Approach Method as the Comparable Transactions Method.
The Cost Approach determines the indicative value by calculating the current replacement or reproduction cost of an asset and deducting any depreciation that occurs in physical deterioration and other forms. The cost approach is separated into three methods in IAS replacement cost method, reproduction cost, and collection method.
The Income Approach allows the indicative value to be determined by converting future cash flows into a single current value. In the income approach, the asset's value is determined based on the present value of the revenues, cash flows, or cost savings generated by the support. It is an approach in which the income expectation and potential of the real estate are associated with the value of the real estate. From a value-based perspective, the income approach is required to cover the amount and timing of all future cash inflows and outflows related to the subject asset.
