real property appraisal - essential part based similarities and differences kaarel sahk, lecturer...

Real property appraisal - essential part based

similarities and differences

Kaarel Sahk, lecturer Estonian University of Life Sciences

European Real Estate Society

19th Annual Conference 13th-16th June 2012

Abstract While we think about real estate, it is quite common to limit

with land or buildings. Other way, while we are speaking about real property early, then beside the land and buildings we commonly imagine not only finance or the bundle of rights but also the essential parts like forest, structures, and landscape are eligible. The lastly named diversification points us attention that we can draw down a nomenclature of different things that should be valued or their value, metric or non metric as a component will influence the estimated value. The last approach explains that some components, things, are non metric and they are described under some different circumstances like emotional, natural, social, etc. types of values that are not the common characteristics enclosed into the real estate value. The named situation, linked with the other contemporary situation of valuation which must account sustainability as a generic name, or energy efficiency, green etc, as its extensions, supply us with the huge multiplicity of resolutions that includes the both, similarities and differences.

Keywords: essential part, real property, metric and non metric, types of values

14-16.06.2012 2ERES 2012# Kaarel Sahk # Real property appraisal - essential part based similarities and differences

Legal definiton based issue

14-16.06.2012ERES 2012# Kaarel Sahk # Real property appraisal - essential part based similarities and differences 3

Detailed

OverallPROPERTY

REAL ESTATE

ESSENTIAL PARTS LAND

REAL PROPERT

Y

BUNDEL OF THE RIGHTS

BUILDINGS STANDING WOOD

UN HARVESTED

GROP

SECURITY

SERVITUDES

PRE EMPTION

ENCUMBRANCE

SUPERFICIES

OTHER PLANTS

•Un harvested grop

What happen while to summarize otherway?

Pairs of antipodes Pairs of antipodes

Natural landscape

Nature Rural

landscape Natrual palce

Cultural landscape

Artifact, Urban

landscape Simulated palce


Owerall principles

Roose, A, Sepp, K, et. al. Neighborhood-defined approaches for integrating and designing landscape monitoring in Estonia


Place and Camus – one more description We may refer here and hereafter to the

definition offered in the world-famous novel by Albert Camus, The Myth of Sisyphus where the place as a complexity of various implications is constituted from three basic components:

the physical settingsthe activities andthe meanings


Place as a complexity

Sence of

Place

Activity

Meaning

Physical setting


Data based approach of

Qualitative data Quantative data Land owners &

users Building owners &

users Forest owners &

users Developers Real estate

professionals Local authorities State agencies 3-d sector Society

Land register Web map service

Sales price register Forets register

GPS & GIS info Register of

Environment GPS & GIS info

Buildings register Premesies register


APPRAISAL’s DATA

Multiplicity of Register of Environment

Biota Protected nature Monitoring Natural

recourses Water conditions Air conditions Permits &

licenses Waste & hazards

Nature protection objects

Valuable habitation

Areas with international significance


Values of landscape due appraisal

Cultural value Historical value Ethics value Identity value Natural value Recreate value Tourism potential value Restful value


Commonly nonmetric paramters

Some possible diversifications. Vol 1

Recreational value + Tourism potential value = Restful value

Existence of traditional approaches to category Commonly, in many occasions summarizing the

all earlier values of landscape Some basic drivers of restful value

Beauty Variety of relief and greenery Multiplicity of forest Existence of water bodies or accessible coastline Area is a carrier of local traditions and history Availability of popular sights and showplaces


Ethics value Beauty of landscape Diversity of landscape Individuality of landscape Maintenance of landscape

Variety of landscape, i.e relation of fields, grassland, groves and buildings or structures

Traditionality of landscape Variety and spectacular relief Beautiful views, i.e attractive




Identity value Similar to the sensitive value (e.g Persson)

Applied property valuation in Europe. A study of 19 countries. Master of science thesis No. 13, (1998)Stockholm: Kungl Tekniska Högskolan.

Important and valuable for local residents and neighbourhood

Commonly associated with former or future owner

In practice hard or commonly impossible to attachable to other properties


Value of land - basic types of land use

Commonly metric parameters Value of land is in straight correlation

with the intended use of it, fixed in the Land cadastre as a specified cadastral unit use under the legislation and their determination (Land Cadastre Act).

Different schemes of diversifications; local v.s international


Value of land - basic types of land use IVS regualtion

1. Land for housing2. Land for business 3. Land for manufacturing4. Land for bodies of water5. Land for transport6. Land for garbage disposal 7. Land for national defence8. Land for nature protection9. Land for profit yielding 10.Land without intended use11.Land for mining industry12.Land for peat handling13.Land for social use

Crop(ping) Farms Irrigated Land Perennial Plantings Specialised Livestock

Facilities Livestock

Ranches/Stations Dairy Farms Forestry/Timberland Specialised or Special

Purpose, Properties Integrated Unit Agricultural Activity Biological Assets


Value of land - Land Valuation Act

Valuation - The object of a valuation is a plot of land without the buildings, forest, other vegetation or accessories situated thereon.

Appraisal - In an appraisal, the object of the appraisal may be a plot of land together with its essential parts and accessories.

Valuations of land are classified as assessments, appraisals and valuations of unlawfully expropriated land.


Value of forest Commonly metric parameters Value of forest is not synonymous

with value of forest land. Forest land valuation is

subordinated to land valuation procedure. Common land valuation rules are employed

Forest valuation is a procedure of appraisal of standing wood. Standing wood value gain + marketability


Value of forest Peggy Petrzelka, et.al in paper (Land use policy

2013), The elephant in the room: Absentee landowner issues in conservation and land management – absence of owners

It means – forest value approach is linked with ownership

The aim is value and the goal is evaluation of existing situation and extracting of standing wood value form the aspect of the Forest management plan

Site class of forestland is in correlation with standing wood classification and management plan


Value of buildings Commonly metric parameters and

non metric parameters (sustainability, green aspect)

On possibility for diversification is: as it planned v.s as it built, all of these approaches are covering the full part of lifecycle, i.e from plans up till permit (license) of use (occupy).

The more demonstrative is built up the environment of buildings value according the different phase from idea up till the permit (license) of use (occupy).


Value of buildings Idea master planning detail planning

terms of reference of design design permit to build building project construction works inspections permit to use use & utilization maintenance & reconstruction demolition reuse or waste

Here is key point of appraisers knowledge –to know current prices on to be able to compare them

Here is a key point of appraisers as an artist, we speak a ability to atract


Similarities. Vol 1 Every item (type) of comparison is a subject

to organization or management plans like Landscape – Protection plans, maintenance plans Land - land adjustment and readjustment plans Building – building project, maintenance and

facility management plant Forest – Forest management plan

Every item is placed under degradation Every item as an asset needs a classification,

condition assessment and maintenance for derivation best value in the future


Similarities. Vol 2

Subordinated to lifecycle, economical (50 years) and physical (up till 200-300 years) -

buildings Changeable in time Open to changes in surrounding

environment Sensitive to legal situation Permanent maintenace procedures

are required


Differences. Vol 1 Methods applied for extracting Different usage of results – loan

security, economic objective Different ownerships – different

values approaches Power institutions influences –

ministries, departments Parameters describing the value are

varying Very different professional regulation


Differences. Vol 2 Influence of the Structure of holding Chronological extent (amplitude) Extracted value - non economic Different types of extracted value –

special value, compensation value, investment value, synergetic value, fair value, market value, insurance value, ordinary value,

earlier applied - owners value i.e value in use


About the situation The questionary is on the way. Based

on the involved parties of procedure Co-operation for deeper and

profounded layout with professor Sepp -landscape applicationassistant professor Lang – forest valuation Goal – paper for journal “Baltic forestry” or “Land use”


BVC2011#Kaarel Sahk#Mutual recognation ... 26

Refererences 1. Encyclopedia of real estate terms : based on American and English practice,

with terms from the Commonwealth as well as the civil law, Scots, and French law / Damien Abbott London ; Washington, DC : Delta Alpha, c2000

2. Enemark, S. Educating Suveyors for Land Management, FIG; Com 2 sysmposium18-20.10.2000

3. Real estate valuation theory/ edited by Ko Wang and Marvin L. Wolverton Boston [etc.]: Kluwer Academic Publishers, 2002

4. The Valuation of Property A Treatise on the Appraisal of Property for Different Legal Purposes. Volume I. By James C. Bonbright. McGraw-Hill Book Company, Inc. New York and London, 1937

5. Real Estate Valuation. A Statement of the Appraisal problem and a Discussion of the Principles Involved in the Development of Valuation Methods by Frederick M. Babcock. University of Michigan, 1932

6. The Appraisal of Real Estate by Frederick M. Babcock. B.S. New York The MacMillan Company,1924

7. Tõnisson, J. Liikumatu varanduse hindamisest Liivimaal. Postimees, Jurjev, 1902

8. Väljaspool linnu ja aleveid asuvate kinnisvarade hindmaise seadus. Riigi Teataja nr 23, 1927.a

9. International Valuation Standards 2011. International Valuation Standards Council, London 2011

10. International Valuation Standards. Eight Edition. 2007. International Valuation Standards Committee, London 2007

11. A Valuer’s guide to the Red Book, RICS, 200722.07.2011

Author’s additional information:https://www.etis.ee/Portaal/isikuCV.aspx?LastNameFirstLetter=S&PersonVID=43875&lang=en&FromUrl0=isikud.aspx

E-mail [email protected]

Mail addressKreutzwaldi 5, 51014TartuEstonia 14-16.06.2012 27

ERES 2012# Kaarel Sahk # Real property appraisal - essential part based similarities and differences

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