What is Real Estate Appraisal, How is it Done?

What is Real Estate Appraisal?

Real estate appraisal is the process of independent and impartial appraisal of the value of all kinds of real estate, rights and benefits belonging to real estate, at a certain date, by using international methods, within the framework of the legislation and laws in force.

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Valuation helps to determine whether the asset should be sold and to determine the investment value of the asset. For a correct Real Estate Appraisal, experts with experience and knowledge should be selected.

Real estate valuation, which is the process of determining how much a property is actually worth, or the value that will emerge in a property valuation may or may not be the same as the price of the property. Real estate valuation is made according to the income from the property, its location and other factors.

What are Real Estate (Property) Appraisal Approaches?

Three basic approaches are used in the World and Turkey regarding Real Estate Valuation.

1- Market Approach (Peer Comparison Method): It is the determination of the value of a real estate by comparing it with similar real estates traded in the market.

2- Cost Approach: This approach is based on the principle that the price that a buyer in the market will pay for the real estate being valued will not exceed the cost of an equivalent asset, whether through purchase or construction. The value is reached by deducting the depreciation cost from this cost, taking into account the wear and tear of the appraised property.

3- Income Approach: In this approach, the value of the real estate is determined based on the present value of the revenues, cash flows or cost savings generated by the real estate.

Emergence of Real Estate Appraisal Need

The importance of the real estate sector in our country’s economy and the obligation to protect the savers (investors), which is one of the main duties of the Capital Markets Board, brought the concept of “Real Value” with it. Therefore, the SPK pioneered the establishment, development and institutionalization of the real estate appraisal profession in the field of capital markets and the development of valuation standards.

In order to develop the Board Valuation Sector; regulations on valuation activities and the licensing principles of companies that will provide valuation services. In addition, the Board aimed to integrate the International Literature and National Legislation by translating the valuation standards published by the International Valuation Standards Council (IVSC) into our language.

Who Can Perform Real Estate Valuation? Authorized by Which Legislation?

In 2001, the SPK published a Communiqué on the “Regulations Regarding Valuation Activities in the Capital Markets” and “The Principles Regarding the Companies to Provide Real Estate Valuation Services within the Framework of the Capital Market Legislation and the Listing of These Companies by the Board”.

The purpose of these communiqués is to determine the framework in our country’s legislation, by whom the valuation service can be performed and how and under what conditions the valuations will be made. Real estate valuation service in accordance with the legislation; It is carried out by Real Estate Appraisers, who are employed full-time or who are contracted to the company without being employed full-time, who are also licensed by the Board within the body of Real Estate Appraisal Companies licensed by the Board. Real Estate Appraisers are licensed individuals who have at least 4 years of university degrees, at least 3 years of experience in real estate appraisal, or who have successfully completed the required professional training.

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The powers of Real Estate Appraisers have been increased with the changes made in the legislation recently. For example; In collateral valuation transactions, by the Banking Supervision and Regulatory Authority, the regulation on banks’ procurement of Valuation Services and the obligation to prepare Valuation Reports by Real Estate Appraisers licensed by the CMB. (Within the scope of the relevant regulation, an additional period of 1 year has been granted for the appraisal companies to comply with the regulation article, and this period has expired on 01.01.2018.) In addition, with the Expertise Law No. 6754, conditions have been brought to the persons who have expertise in the courts and a professional qualification certificate has been made obligatory. Therefore, in cases requiring valuation of immovables in court processes, a workload has arisen for appraisers.

How Does the Real Estate Appraisal Process Work?

The real estate appraisal process begins with the customer/demand owner transmitting the information about the real estate for which the appraisal is requested. The Real Estate Appraisal process works as follows:

1- Signing the contract in which the parties, scope, conditions and valuation service fee regarding the valuation transaction to be made are determined,
2- Directing the valuation process to the Appraiser,
3- Investigation of the records of the asset/immovable to be appraised in the relevant institutions (Municipal, Land Registry and Cadastre Directorates, etc.)
4- On-site investigations of the real estate and collection of findings
5- Preparing the valuation report in line with the rules and principles determined by the National Legislation and/or International Valuation Standards
6- Delivery of the real estate valuation report to the claimant

Whether you are buying or selling an investment property or a home, you need to consider how much the property is actually worth.

So what are the factors that affect property value? There are many factors that affect the value of a property, from location to planned infrastructure, facilities, size and aesthetics. Meet with our Real Estate Appraisers to learn what drives property values ​​down, what drives them up, and how you can determine the value of your investment property or home.