The Hows of Real Estate | #RoadtoREA2024: The General Review |1

P H I L I P P I N E VA L U AT I O N S TA N D A R D S ( P V S )
Outline Summary & Notes by:
M A R Y J A N E T. R A F A E L , R E B , R E A , C L S , P P A , I R M

REFERENCE: PHILIPPINE VALUATION STANDARDS (2nd Edition, 2018)

Incorporating the INTERNATIONAL VALUATION STANDARDS (IVS) 2017 and
Providing Guidance Notes under Philippine Setting

LEGAL BASES:

A. Section 201 of the Local Government Code 1991 mandates the Department of Finance (DOF)
to promulgate the necessary rules and regulations for the classification, appraisal, and assessment
of real property;

B. Section 33 (1) and (2, Chapter 4, Title II, Book IV of Executive Order (EO) No. 292, series of
1987, otherwise known as the Administrative Code of 1987, directs the Bureau of Local
Government Finance (BLGF) to assist in the formulation and implementation of policies on local
government revenue administration and fund management, exercise administrative and technical
supervision and coordination over treasury and assessment operation of local governments;

C. Section 2 of Republic Act No. 9646, otherwise known as the Real Estate Service Act, provides
the policy of the State to develop and nurture through proper and effective regulation and
supervision a corps of technically competent, responsible and respected professional real estate
service practitioners whose standards of practice and service shall be globally competitive and will
promote the growth of the real estate industry; and

D. Section 4 (E) of Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration
and Inclusion (TRAIN), authorizes the Commissioner of the Bureau of Internal Revenue (BIR) to
prescribe the real property values based on the current PVS.

COVERAGE & OBJECTIVES:

The DOF recognizes the need for an efficient, effective and transparent real property valuation
system in the country:

❖ To ensure a robust and progressive real estate sector that will benefit the government and
the private sectors, and;

❖ To foster greater confidence and transparency in valuation practice at the national and local
levels for taxation and other purposes.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 The Hows of Real Estate | #RoadtoREA2024: The General Review |2

The PVS 2nd Edition intends to guide all concerned valuation stakeholders in the Philippines,
mainly the attached bureaus and agencies of the DOF performing or requiring valuation
service, to consistently use and apply internationally accepted valuation practices.

The PVS 2nd Edition aims to:

(i) raise the quality of public and private sector valuations and reporting of valuations,

(ii) provide consistency and understanding between providers and users of valuations, especially at
the local and national levels;

(iii) promote transparency and reliability of valuations for taxation and other purposes; and

(iv) reduce financial risk for users of valuations.

The PVS 2nd Edition shall primarily be used to guide valuation of real properties for property
taxation by:

❖ Local Government Units (LGUs),

❖ BLGF,
❖ BIR,

in conjunction with the pertinent laws, rules and regulations related to their respective mandates.

CONTENTS & STRUCTURE OF PVS 2nd EDITION, 2018:

The PVS 2nd Edition, 2018- Incorporating the IVS 2017 and Providing Guidance Notes under
Philippine Setting, which succeeds the PVS 1st Edition issued in 2009, is composed of three (3) parts,
namely:

Part I: International Valuation Standards (IVS) 2017

Part II: Philippine Context Focusing on Valuation for Taxation and Other Purposes
Part III: Guidance Notes

Part I: International Valuation Standards (IVS) 2017.

This refers to the full, unabridged text reproduction of the IVS 2017. The main sections include:

IVS General Standards. These set out requirements for the conduct of all valuation assignments
including establishing the terms of a valuation engagement, bases of value, valuation approaches
and methods, and reporting. They are designed to be applicable to valuations of all types of assets
and for any valuation purpose.

IVS Asset Standards. The Asset Standards include requirements related to specific types of assets.
These requirements must be followed in conjunction with the General Standards when performing a
valuation of a specific asset type. The Asset Standards include certain background information on
the characteristics of each asset type that influence value and additional asset-specific requirements
on common valuation approaches and methods used.

Part II: Philippine Context Focusing on Valuation for Taxation and Other Purposes.
This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 The Hows of Real Estate | #RoadtoREA2024: The General Review |3

This contains the departures or differences in application of the IVS based on Philippine contextual
setting or legal requisites, with particular focus on valuation for property taxation and other
purposes under Philippine setting.

Part III: Guidance Notes.

This includes Guidance Notes (GNs) deemed important within the context of the Philippines. The
GNs consider the same guidance notes issued in PVS 2009 to provide guidance on specific valuation
issues and how standards are to be applied. These GNs complement and expand on the Standards
with which they have equal importance.

BLGF as an Institutional Member of the IVSC

On 5 March 2018, the BLGF was officially admitted as an Institutional Member of the IVSC.
In line with its mandate, the BLGF is expected to cooperate and collaborate with IVSC and
its other members to establish a consistent and transparent framework for valuation practice
worldwide; bridge the gap between local and international valuation standards (IVS); and
provide trainings and capacity development programs, or issue locally applicable guidance and
quality measures.

COMPLIANCE:

❖ All Provincial, City and Municipal Assessors, and

❖ Heads of the BLGF and
❖ BIR

are hereby enjoined to properly, efficiently and strictly implement and comply with the provisions of
the PVS 2nd Edition in their respective jurisdictions, subject to the provisions of pertinent laws on
the matter.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 The Hows of Real Estate | #RoadtoREA2024: The General Review |4

TABLE OF CONTENTS

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 The Hows of Real Estate | #RoadtoREA2024: The General Review |5

LIST OF ACRONYMS

AIPO Accredited and Integrated Professional Organization

BIR Bureau of Internal Revenue
CA Compulsory Acquisition
CAMA Computer Assisted Mass Appraisal
CARP-LAD Comprehensive Agrarian Reform Program-Land Acquisition and Distribution
CPD Continuing Professional Development
DAR Department of Agrarian Reform
DARAB DAR Adjudication Board
DENR Department of Environment and Natural Resources
IVS International Valuation Standards
LAR Local Assessment Regulations
LGC Local Government Code
MAG Mass Appraisal Guidebook
MRPAAO Manual on Real Property Appraisal and Assessment Operations
MRC National Internal Revenue Code
PRBRES Professional Regulatory Board of Real Estate Service
PRC Professional Regulation Commission
PVS Philippine Valuation Standards
RA Republic Act
RCN Reproduction/Replacement Cost New
RESA Real Estate Service Act
RROW Road Right-of-Way
SMFV Schedule of Fair Market Value
SMV Schedule of Market Value
TRAIN Tax Reform for Acceleration and Inclusion
VOS Voluntary Offer to Sell
ZV Zonal Value

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 The Hows of Real Estate | #RoadtoREA2024: The General Review |6

PVS 2nd Edition, 2018 - INTRODUCTION:

❖ The contextualization to the Philippine setting was interspersed with the IVS 2007
manuscript which became the 1st Edition of the Philippine Valuation Standards (PVS) 2009.

❖ For PVS 2nd Edition, 2018, while IVS 2017 was adopted in toto in the first part, Part II
contains the Philippine Context Focusing on Valuation for Taxation and Other Purposes.

❖ Part II contains contextual discussion to clarify and explain any departure from the latest IVS
considering the recent changes in the Philippines’ legal and statutory framework. It takes
into account existing laws, rules and regulations pertaining to national and local valuation for
taxation and other purposes.

❖ A departure from the IVS as a result of existing legislative, regulatory or other authoritative
requirements in the Philippines is permitted in valuations performed in accordance with IVS.

❖ A departure, as defined in IVS 2017, “is a circumstance where specific legislative, regulatory
or other authoritative requirements must be followed that differs from some of the
requirements within IVS. Departures are mandatory in that a valuer must comply with
legislative, regulatory and other authoritative requirements appropriate to the purpose and
jurisdiction of the valuation to be in compliance with IVS. A valuer may still state that the
valuation was performed in accordance with IVS when there are departures in these
circumstances.” (Paragraph 60.1, IVS Framework)

❖ “The requirement to depart from IVS pursuant to legislative, regulatory or other

authoritative requirements takes precedence over all other IVS requirements.” (Paragraph
60.2, IVS Framework)

❖ This section likewise contains clarificatory statements or other terminologies widely

used in the Philippines, which may be an elaboration of terminologies in the IVS.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 The Hows of Real Estate | #RoadtoREA2024: The General Review |7

PART II: PHILIPPINE VALUATION STANDARDS, 2nd Edition, 2018

Part II: Philippine Context Focusing on Valuation for Taxation and Other Purposes

❖ Introduction
❖ Glossary
❖ Framework
❖ General Standards
➢ PVS 101 Scope of Work
➢ PVS 102 Investigations and Compliance
➢ PVS 103 Reporting
➢ PVS 104 Bases of Value
➢ PVS 105 Valuation Approaches and Methods
❖ Asset Standards
➢ PVS 300 Plant, Machinery and Equipment
➢ PVS 400 Real Property Interests
➢ PVS 410 Development Property
➢ Valuation for Taxation Purposes
➢ References for Valuation of Property for Other Purposes

OVERVIEW OF THE GLOSSARY:

❖ The glossary is an addendum that defines several terms used in the IVS.

❖ It provides additional terminologies related to selected IVS-defined terms as

❖ they are widely used in the Philippines.
❖

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 The Hows of Real Estate | #RoadtoREA2024: The General Review |8

GLOSSARY:

Client

This refers to the party requesting a valuation or appraisal. In the public sector, the word “client”
also refers to the property owners, national and local government units, including any
interested person or entity in the general public requiring appraisal or valuation services.

Jurisdiction

This refers to the sectors (e.g., finance, agriculture, trade, etc.) where existing laws, rules and
regulations clearly define which government agencies, institutions, instrumentalities, or
government-owned and controlled corporation (GOCC) are mandated to regulate them. In spatial
terms, the tiers of local government jurisdictions in the Philippines are provinces, cities,
municipalities and barangays. It also refers to regional jurisdictions and revenue districts.

Market Data Approach

It is also known as the Comparative or Comparable Sales Approach. This is an appraisal

procedure in which the market value estimate is predicated upon prices paid in actual market
transactions and current listings. It is a process of analyzing sales of similar sold properties (sold
at or around the relevant date) in order to derive an indication of the most probable sale prices of
the property being appraised.

The reliability of this technique is dependent upon:

a) the availability of comparable sales data;
b) the verification of the sales
date;
c) the degree of compatibility or extent of adjustment necessary for time differences; and
d) the absence of non-typical conditions affecting the sales price.

Must

The term “shall” is used to indicate statutory compliance in the Philippines.

Plant

In the Philippines, the term “Plant” is not in general use. ‘Machinery and Equipment’ is the
collective term adopted by Appraisers, while ‘Plant and Equipment’ is adopted by Accountants.

Machinery is defined to embrace machines, equipment, mechanical contrivances, instruments,

appliances, or apparatus which may or may not be attached, permanently or temporarily, to the real
property.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 The Hows of Real Estate | #RoadtoREA2024: The General Review |9

Purpose

The word “objective” is used to indicate the reason for conducting a valuation.

Valuation Reviewer

Valuation reviewers are licensed appraisers or public officers who perform valuation review
based on the agency mandates.

Valuer

The term “valuer” may also refer to “appraiser” and “assessor”, which are widely used in the
Philippines. Specifically, Section 3 of the RA No. 9646 or the Real Estate Service Act (RESA) of 2009,
the following terms were defined:

(a) “Appraiser,” also known as valuer, refers to a person who conducts valuation/appraisal;
specifically, one who possesses the necessary qualifications, license, ability and experience to
execute or direct the valuation/appraisal of real property.

(b) “Assessor” refers to an official in the local government unit, who performs appraisal and
assessment of real properties, including plants, equipment, and machineries, essentially for taxation
purposes. This definition also includes assistant assessors.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 10

FRAMEWORK:

In relation to the IVS Framework, other synonymous terminologies used in the Philippines, as well
as the statutory requirements, are herein defined and discussed to ensure objectivity and
compliance.

Under RESA, professional real estate appraisers, including local government

assessors, require Real Estate Appraiser License. This is granted by the
Professional Regulation Commission (PRC) through a licensure examination
(Section 12 of RA No. 9646), or by registration without examination during
the early part of RESA implementation (Section 20, RA No. 9646).

Valuer For government officers performing valuations based on their agency

mandates, Section 28 of RESA applies, to wit:

“Section 28. Exemptions from the Acts Constituting the Practice of Real Estate
Service. - The provisions of this Act and its rules and regulations shall not
apply to the following: xxx…

(e) Public officers in the performance of their official duties and functions,
except government assessors and appraisers.

The Code of Ethics and Responsibilities for real estate service practitioners
is provided under Section 35 of RA No. 9646, which shall be prescribed and
issued by the Accredited and Integrated Professional Organization (AIPO) to
be adopted and promulgated by the Professional Regulatory Board of Real
Objectivity Estate Service (PRBRES).

These codes of conduct shall serve as guide to valuation practitioners in the

attainment of transparent and impartial analysis, judgments, opinions and
conclusions.

The PRC, through the PRBRES, shall formulate the operational guidelines
in the implementation of RA No. 10912, or the Continuing Professional
Competence Development (CPD) Act of 2016. The CPD Programs would ensure that real
estate service professionals shall be equipped with the proper skills and
knowledge in the face of emerging trends and technologies in the property
market. These would be evaluated by the CPD Council as they accredit
CPD providers. Prescribed CPD credit units are required for the renewal of
professional licenses.

A departure from the IVS as a result of existing legislative, regulatory or

Departures other authoritative requirements in the Philippines is permitted in valuations
performed in accordance with IVS.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 11

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 12

GENERAL STANDARDS

PVS 101 SCOPE OF WORK:

The standards are intended to apply to national and local valuation for taxation and other purposes
in the Philippines.

A valuer must communicate the scope of work to its client prior to completion
of the assignment, including the following:

(a) Identity of the valuer: The valuer may be the assessor, appraiser or
appraisal committee or other individuals performing valuation for taxation
and other purposes.

(b) Identity of the client(s): Under IVS 101, Section 20, General
Requirements, para. 20.1 (b), confirmation of those for whom the
valuation assignment is being produced is important when determining
the form and content of the report to ensure that it contains information
General relevant to their needs. In the Philippines, property owners/administrators,
Requirements local government units, national agencies, and other interested parties are
the clients.

(c) Identity of other intended users: Other users of valuation reports

are public and the private sector depending upon the purpose of the
appraisal.

(d) Asset(s)/Properties being valued: The identity of the real estate being
valued shall include land, building, machineries and other improvements.

(e) The valuation currency: The Philippine peso is the standard valuation
currency, unless otherwise stated.

Purpose of the valuation. For national and local taxation, and other
purposes in the Philippines, subject to applicable governing laws, rules and
regulations.

The Code of Ethics and Responsibilities for real estate service practitioners
is provided under Section 35 of RA No. 9646, which shall be prescribed and
issued by the Accredited and Integrated Professional Organization (AIPO) to
be adopted and promulgated by the Professional Regulatory Board of Real
Objectivity Estate Service (PRBRES).

These codes of conduct shall serve as guide to valuation practitioners in the

attainment of transparent and impartial analysis, judgments, opinions and
conclusions.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 13

The PRC, through the PRBRES, shall formulate the operational guidelines
in the implementation of RA No. 10912, or the Continuing Professional
Competence Development (CPD) Act of 2016. The CPD Programs would ensure that real
estate service professionals shall be equipped with the proper skills and
knowledge in the face of emerging trends and technologies in the property
market. These would be evaluated by the CPD Council as they accredit
CPD providers. Prescribed CPD credit units are required for the renewal of
professional licenses.

A departure from the IVS as a result of existing legislative, regulatory or

Departures other authoritative requirements in the Philippines is permitted in valuations
performed in accordance with IVS.

PVS 102 INVESTIGATIONS & COMPLIANCE:

For the Local Government Units, the Manual on Real Property Appraisal
and Assessment Operations (MRPAAO), issued under Local Assessment
Regulations No. 1-04, prescribes the process, procedures and requirements
for the appraisal of land, building, and other improvements, and machineries,
Investigations which includes gathering of data and other evidences, and inspection of
property, to ensure that the valuation is properly supported.

For other national agencies, such as the Bureau of Internal Revenue (BIR),
investigation and collection of information should be in accordance with their
own internal policies and regulations.

The local assessor shall maintain the prescribed forms under the MRPAAO.
Valuation Record Other government agencies and stakeholders shall maintain and keep
their valuation records in accordance with their established policies and
procedures.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 14

PVS 103 REPORTING:

Valuation reports can be categorized into:

a) Narrative reports, either long or short, prepared by licensed appraisers or

local assessors and the provincial/city appraisal committee;
Valuation Reports b) Schedule of real property values such as Schedule of Fair Market Value
(SMFV) and Zonal Value (ZV);
c) Form reports prescribed by appropriate government agencies; and
d) Oral reports or depositions during testimonies before adjudicatory or
collegial bodies.

Valuation review reports should be conducted by competent and licensed

Valuation Review appraiser exercising impartial judgment, or in accordance with Section 28
Reports of RESA. The valuation review report should contain the scope of review,
documents reviewed in terms of form and content, findings and comments,
including recommendations, and the date of review.

PVS 104 BASES OF VALUE:

Defined Basis of Fair market value is defined as “the price at which a property may be sold
Value by a seller who is not compelled to sell and bought by a buyer who is not
(Fair Market Value) compelled to buy”. [Section 199 (l), RA No. 7160].

Real Property shall be classified, valued and assessed on the basis of its
Premise of Value actual use regardless of where located, whoever owns it, and whoever uses
(Actual/Predominant it. (Section 217, RA No. 7160)
Use)
“Actual Use” refers to the purpose for which the property is principally or
predominantly utilized by the person in possession thereof. [Section 199
(b), RA No. 7160]

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 15

PVS 104 VALUATION APPROACHES AND METHODS:

The three (3) widely used valuation approaches to value are: (1) Market Data Approach; (2) Income
Capitalization Approach; and (3) Cost Approach.

These approaches are also used by the LGUs in the preparation of their SFMV pursuant to
Department of Finance (DOF) Order No. 10-2010.

It is also known as Market Data Approach which is synonymous to

Comparative or Comparable Sales Approach. This is an appraisal
procedure in which the market value estimate is predicated upon prices paid
in actual market transactions and current listings. It is a process of analyzing
sales of similar sold properties (sold at or around the relevant date) in order
to derive an indication of the most probable sale prices of the property being
appraised.

The reliability of this technique is dependent upon:

a) the availability of comparable sales data;
b) the verification of the sales date;
Market Approach c) the degree of compatibility or extent of adjustment necessary for time
differences; and
d) the absence of non-typical conditions affecting the sales
price.

In some cases, Abstraction Method, as part of Market Data Approach, is

used to estimate the value of the land by estimating first the value of the
improvement pursuant to Section 210 of the Local Government Code (LGC).
The value of the improvement is deducted from the sales price to derive the
land value. [Section 21 (A) (2), Local Assessment Regulations (LAR) No. 1-92]

In the LGU, valid sales data are gathered from:

(a) Registrar of Deeds and Notaries Public (Section 278, RA No. 7160);
(b) Sworn statements of property owner (Section 202, RA No. 7160);
(c) Insurance Companies (Section 279, RA No. 7160);
(d) Building Officials Issuing Permit or Certificate of Registration of
Machinery (Section 210, RA No. 7160); and
(e) Other reliable sources of information on sales data.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 16

Criteria to be considered for sales analysis:

❖ The date of the transaction must be reasonably near the general

assessment date. Sales transactions for the current year or preceding
year, if adequate, would also serve as a good basis for studies on trends
of market values. This should not extend for more than three (3) years
from general re-assessment date.

❖ The type of conveyance representing a normal transaction is one

which envisions willing, able and well-informed buyers and sellers.
Quitclaims and transfers between relatives, inter-related corporations
and the like, should not be considered as these are not “arm’s-length”
transactions.

❖ The amount of consideration reflects a strong presumption of the fair

market value of the property involved.

It is also known as Income Capitalization Approach. It is a direct

approach to estimate the value of property. It is based on the theory that
the value of an income-producing property is no more than the return derived
Income Approach from it.

It requires an analysis of the income produced by the property in order to

estimate the sum which might be invested in the purchase of the property. A
detailed financial study must be made of the property.

Cost Approach is also known as the Reproduction/Replacement Cost New

(RCN) Approach, which is a factual approach used exclusively in
Cost Approach appraising man-made improvements such as buildings and other
structures.

This approach depends on guides and standards, based on such data

materials and labor costs. [Section 21 (C), LAR No. 1-92]

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 17

PVS 104 BASES OF VALUE:

Defined Basis of Fair market value is defined as “the price at which a property may be sold
Value by a seller who is not compelled to sell and bought by a buyer who is not
(Fair Market Value) compelled to buy”. [Section 199 (l), RA No. 7160].

Real Property shall be classified, valued and assessed on the basis of its
Premise of Value actual use regardless of where located, whoever owns it, and whoever uses
(Actual/Predominant it. (Section 217, RA No. 7160)
Use)
“Actual Use” refers to the purpose for which the property is principally or
predominantly utilized by the person in possession thereof. [Section 199
(b), RA No. 7160]

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 18

ASSET STANDARDS

PVS 300 PLANT, MACHNIERY AND EQUIPMENT:

Section 199(o) of the Local Government of Code of 1991 (RA No. 7160) defines the term
“Machinery” to refer to plant and equipment.

The appraisal and assessment of machinery for real property tax purposes is
provided under Section 224 of the RA No. 7160 which states:

(a) The fair market value of brand-new machinery shall be the acquisition
cost. In all other cases, the fair market value shall be determined by
dividing the remaining economic life of the machinery by its estimated
economic life and multiplied by the replacement or reproduction cost.

(b) If the machinery is imported the acquisition cost includes freight,

insurance and other charges, brokerage, arrastre and handling, duties
and taxes, plus cost of in-land transportation, handling, and installation
Valuation of charges at the present site.
Machinery
Acquisition cost for newly acquired machinery not yet depreciated and
appraised within the year of its purchase, refers to the actual cost of the
machinery to its present owner plus the cost of transportation, handling, and
installation at the present site.

The valuation of Plant, Machinery, Equipment and Facilities of Renewable

Energy pursuant to Chapter VII (c) of RA No. 9513, otherwise known as
Renewable Energy Act of 2008, shall be the original cost less accumulated
normal depreciation or net book value.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 19

PVS 400 REAL PROPERTY INTEREST:

Real property refers to all the rights, interests and benefits related to the ownership of real
estate. These rights are lumped into a “bundle of rights.” [p. xii, Mass Appraisal Guidebook
(MAG)]

Real Property shall be classified, valued and assessed on the basis of its actual use regardless of
where located, whoever owns it, and whoever uses it. (Section 217, RA No. 7160)

“Actual Use” refers to the purpose for which the property is principally or predominantly
utilized by the person in possession thereof. [Section 199 (b), RA No. 7160]

Legal Bases for the Pursuant to Section 201 of the RA No. 7160, the DOF shall promulgate the
Valuation of Real necessary rules and regulations for the classification, appraisal and
Property assessment of real property in the form of Department Order, LAR and other
form of issuances.

The Civil Code of the Philippines (RA No. 386) enumerates the mode of
acquiring ownership of real property under Article 712, Book III, thereof:

(a) Occupation;
Modes of Acquiring (b) Intellectual creation;
Ownership of Real (c) By law;
Property (d) By donation;
(e) By testate and intestate succession;
(f) In consequence of certain contracts;
(g) By tradition; and
(h) By means of prescription.

For purposes of assessment, real property shall be classified as the following:

Classes of Real (a) Residential,

Property for (b) Agricultural,
Assessment (c) Commercial,
Purposes (d) Industrial,
(e) Mineral,
(f) Timberland, or
(g) Special.

PVS 400 REAL PROPERTY INTEREST:

Valuation of Development Property for taxation purposes must follow the PVS 400 Real Property
Interests on Asset Standards. However, valuation for other purposes must refer to IVS 410
Development Property on Asset Standards.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 20

VALUATION FOR TAXATION PURPOSES:

Valuation, also known as appraisal, refers to the systematic, analytic and logical analysis of the
recording of property facts, circumstances, investments and other relevant data resulting in a
supportable estimate or professional opinion of the value of the property as of a specific date and
for a specific purpose.

RA No. 9646 declares the policy of the State to recognize the “vital role of real
estate service practitioners in the social, political, economic development and
progress of the country by promoting the real estate market, stimulating
economic activity and enhancing government income from real property -
based transactions. Hence, it shall nurture through proper and effective
regulation and supervision a corps of technically competent, responsible and
respected professional real estate service practitioners whose standards of
Valuation Practice practice and service shall be globally competitive and will promote the
growth of the real estate industry.”

Real Estate Service Practitioners, pursuant to RA No. 9646, consist of the

following:
(a) Real estate consultant;
(b) Real estate appraiser;
(c) Real estate assessor;
(d) Real estate broker; and
(e) Real estate salesperson

Authority of the The Department of Finance promulgates the necessary rules and regulations
Department of for the classification, appraisal, and assessment of real property pursuant to
Finance (DOF) the provisions of the Local Government Code of 1991. (Section 201, RA No.
7160)

The preparation of the Schedule of Market Value (SMV) is a mass appraisal

process which facilitates the appraisal of multiple properties at a given
Preparation of date by a systematic and uniform application of appraisal methods and
Schedule of Market techniques. The blend of cost and sales/direct comparison approaches to
Value value may be used as technique for preparing the SMV.

There are four (4) major stages of the SMV development, namely:
1) Preparatory stage,
2) Data Collection Stage,
3) Data Analysis Stage, and
4) Testing of SMV Stage.

The electronic system for developing the Schedule of Market Values is

also called Computer-Assisted Mass Appraisal (CAMA).

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 21

Section 219 of the RA No. 7160 prescribes the conduct of General Revision
of Assessments and Property Classification where the provincial, city or
municipal assessor shall undertake a general revision of real property
assessment within two (2) years after the effectivity of this Code and every
three (3) years thereafter.

The Commissioner of the BIR has the authority to prescribe real property
values pursuant to Section 4 of the TRAIN, or RA No. 10963, which amended
Section 6(E) of the National Internal Revenue Code (NIRC).

Commissioner is hereby authorized to divide the Philippines into different

zones or areas and shall, upon mandatory consultation with competent
appraisers both from the private and public sectors, and with prior notice to
affected taxpayers, determine the fair market value of real properties located
in each zone or area, subject to automatic adjustment once every three (3)
years through rules and regulations issued by the Secretary of Finance based
on current Philippine valuation standards:

Zonal Valuation Provided, that no adjustment in zonal valuation shall be valid unless
published in a newspaper of general circulation in the province, city or
municipality concerned, or in the absence thereof, shall be posted in the
provincial capitol, city or municipal hall and in two (2) other conspicuous
public places therein:

Provided, further, That the basis of any valuation, including the records of
consultations done, shall be public records open to the inquiry of any
taxpayer.

For purposes of computing any internal revenue tax, the value of the property
shall be, whichever is the higher of:

(1) the fair market value as determined by the Commissioner; or

(2) the fair market value as shown in the schedule of values of the Provincial
and City Assessors.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 22

REFERENCES FOR VALUATION OF PROPERTY FOR OTHER PURPOSES:

Executive Order No. 132, s. 1937, as amended, provides the composition

of appraisal committee for province and city; and municipality within the
Metro Manila Area as follows:

1. Provincial/City Appraisal Committee

Provincial/City Assessor - Chairperson
Provincial/City Engineer - Member
Creation of Provincial/City Treasurer – Member
Appraisal
Committee If the province has no position of Provincial Engineer, the Public Works
Engineer or Highways District Engineer shall sit as member.

2. Metro Manila Area

a. City Appraisal Committee

❖ MMDA Chairperson - Chairperson

❖ City Assessor - Member
❖ City Treasurer - Member
❖ City Engineer - Member
❖ DPWH District Engineer – Member

b. Municipal Appraisal Committee

❖ MMDA Chairperson - Chairperson

❖ DPWH District Engineer - Member
❖ Municipal Assessor - Member
❖ Municipal Engineer - Member
❖ Municipal Treasurer – Member

National government agencies and other instrumentalities also have their

own internal appraisers, and may create their own appraisal committee
depending on the nature of their agency, and the specific mandated
functions and authorities.

Acquisition of National and local governments, GOCCs, and instrumentalities of government

Private Property may acquire private properties for government programs and projects.

❖ Agricultural Land Valuation and Landowner Compensation

❖ Valuation of Lands for Socialized Housing

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 23

Valuation of private land for acquisition of the national government for

road right-of-way (RROW) shall be governed by the provisions of
Sections 5, 6 and 7 of RA No. 10752, an Act Facilitating the Acquisition of
Right-of-Way Site or Location for National Government Infrastructure
Projects, and its implementing rules and regulations.

Valuations of Private Valuation of private lands for acquisition of local governments shall be
Lands for Acquisition through the power of Eminent Domain as provided for in Section 19 of RA
by the Government No. 7160. Local governments may adopt the prescribed procedures in
Sections 5, 6, and 7 of RA No. 10752. Otherwise, they shall be guided by
Executive Order. No. 132, series of 1937, as amended, which provides the
procedures to be followed in the acquisition of private property for public
use and creating appraisal committees.

Appraisal of Public Lands and Other Patrimonial Property

The specific provisions of Section 3 of Department of Environment and
Natural Resources (DENR) Administrative Order (AO) No. 98-20 are
presented as follows:

Manner of Conducting the Appraisal – In conducting the appraisal or

reappraisal, the fair market value of the property shall, as much as possible,
be ascertained by considering the following factors, to wit:

a) Extent, classification, location, actual use and development trends of the

area;
Valuation for b) Assessed value and BIR zonal valuation;
Disposition of c) Sales and holding prices of lands of similar character located in the area;
Properties d) Highest and best use or potential of the property;
e) The purpose for which the property is to be disposed of; and
f) Other relevant factors or circumstances.

❖ If the property has not yet been declared for taxation purposes or its
assessed value is not available, the assessed value of another
property located in the area which is of similar character with that of
the property being appraised shall be used.

❖ If the zonal value is not available, the fair market value or the current
selling price of properties of similar character in the area as
determined by the Assessor’s Office concerned, shall be utilized.

❖ The foregoing, notwithstanding, part or parts not exceeding thirty

percent (30%) of its total area, of industrial or commercial land
covered by lease application or contract, which are devoted to and
actually utilized for growing of trees, shall be appraised or re-
appraised at zero value.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 24

GUIDANCE NOTES

TABLE OF CONTENTS:

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 25

INTRODUCTION:

Part III contains the Guidance Notes that cover issues in the application of the Standards which
frequently arise in valuation practice and from those who use valuation services. The herein
Guidance Notes provide guidance on valuation issues and how Standards are to be applied in more
specific situations.

The Guidance Notes, as in the PVS 2009, complement and expand certain discussions on the
Standards and Applications, with which they have equal importance and relevance.

In PVS 2009, it included fifteen (15) guidance notes. In the succeeding editions of IVS 2007,
however, the guidance notes were removed for various reasons. Either the elements were carried
forward and merged with other relevant topics/sections, or the IVSC produced revised Technical
Information Papers (TIP) on the topics. After deliberations and consultations with stakeholders, the
Guidance Notes in the earlier PVS are still deemed valid with regard to valuation practice in the
Philippines, and identified and updated eight (8) Guidance Notes to form part of the PVS 2nd
Edition, 2018.

OUTLINE:

➢ PVS GN 100 Mass Appraisal for Property Taxation

➢ PVS GN 200 Valuation of Agricultural Properties
➢ PVS GN 300 Reviewing Valuations
➢ PVS GN 400 Valuation of Properties in the Extractive Industries
➢ PVS GN 500 Valuation of Historic Property
➢ PVS GN 600 Consideration of Hazardous and Toxic Substances in Valuation
➢ PVS GN 700 Valuation of Trade Related Property
➢ PVS GN 800 Valuation for Compulsory Acquisition

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 26

PVS GN 100 Mass Appraisal for Property Taxation:

The objective of this Guidance Note is to provide a framework for the performance of Mass
Appraisal assignments for Ad Valorem Property Taxation throughout the Philippines. The
Guidance Note provides assistance in understanding recognized Mass Appraisal methods, the design
and implementation of property taxation systems and the relationship of Mass Appraisal to
International Valuation Standards.

The Mass Appraisal Process may be utilized as a methodology for Ad

Valorem Property Taxation, or statistical and economic studies under
government administrative programs. The appraisal outputs facilitate
revenue raising, revenue equalization, and the distribution of financial
benefits or grants to government authorities.

For a property taxation system to be effective, the following elements

must be in place:
a) a legal system and legal infrastructure that define, support and protect
property rights;
b) a recording and inventory system for all parcels of land, which represents
the basis of taxation;
c) sufficient market data from which valuations may be determined;
d) sufficient resources and trained personnel to implement the system;
e) continued maintenance of the inventory and databases to ensure more
refined data, more accurate valuations, and more equitable taxation; and
f) a process for sampling and testing developed models to ensure
consistency in methodology and application.

The Mass Appraisal process includes:

Mass Appraisal a) identifying properties to be appraised;
Process b) defining the market area in terms of consistent behavior on the part of
property owners and would-be purchasers;
c) identifying characteristics of supply and demand that affect the creation
of value in the defined market area;
d) developing a model structure that reflects the relationship among the
characteristics affecting value in the market area;
e) calibrating the model structure to determine, among other attributes, the
contribution of the individual property features affecting value;
f) applying the conclusions reflected in the model to the characteristics of
the property(ies) being appraised;
g) validating the adopted mass appraisal process, model, measurements
or other readings including the performance measures, on an ongoing
basis and/or at discrete stages throughout the process; and
h) reviewing and reconciling the Mass Appraisal results.

Requirements under the Code of Ethics and Responsibilities apply to:

a) the mass valuation process itself; and
b) the use of computers and computer-generated models in the mass
appraisal process

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 27

❖ The professional responsibility of valuers is prescribed by statute of

❖ regulations affecting mass appraisal assignments.
Scope ❖ Mass appraisal outputs have financial implications in government
❖ administration.
❖ Revenue raising
❖ Revenue equalization
❖ Distribution of benefits/grants
❖ Any departure from an accurate basis of assessment will result in
❖ inequities.
❖ Local statutes prescribe:
❖ The basis and definition of values
❖ Administrative procedures
❖ Time frames
❖ Processes for appeals

Ad valorem property taxation – a revenue raising procedure based on the

assessed value of property related to a scale of charges defined by statute
within a specified time, frame.

Calibration – the process of analyzing sets of property and market data to

determine the specific parameters operating upon a model.
Definitions
Mass appraisal – the practice of appraising multiple properties as of a given
date by a systematic and uniform application of appraisal methods and
techniques that allow for statistical review and analysis of results.

Mass appraisal process – the procedures applied in mass appraisal

assignments for arriving at assessments and/or indices.

❖ Mass Appraisal does not fall under the governance of national or

international accounting standards.

❖ Valuers should be aware that revaluation procedures for financial

Relationship to reporting purposes are unrelated to Mass Appraisal procedures for
Accounting Ad Valorem Property Taxation.
Standards
❖ Legislative requirements and standards of appraisal level and
uniformity in valuations for Ad Valorem Property Taxation are likely
to produce variations in property values from those determined for
financial reporting purposes.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 28

Data Collection and System Recording

A robust data collection system must be available to the Valuer. The
recording of data has evolved from the use of manual methods to the
creation of sophisticated data banks that facilitate computer-assisted
appraisal, often incorporating geographic information systems (GIS).

Characteristics of the market that are relevant to the purpose and

Guidance intended use of the Mass Appraisal shall be recorded in the system
including:
(a) location of the defined market area;
(b) physical, legal, and economic attributes of the properties;
(c) time-frame of market activity; and
(d) property interests reflected in the market.

The Development and Maintenance of Assessment Lists (Assessment

Roll)
Assessment Lists/Roll will contain information on property ownership,
value definitions, details of the assessment, date of the assessment, and date
on which the assessment comes into force.

Mass Appraisal Value Definitions

Where mass appraisal is undertaken for the purpose of Ad Valorem Property
Taxation, value definitions are generally mandated by local statute. Specific
valuation methodologies may be required under different value definitions.

Standards of Appraisal Level and Uniformity

In the interests of assessment equity, standards of appraisal level (the
proximity between assessments and actual prices) and uniformity (the
statistical measure of valuation consistency) must be observed in the
application of mass appraisal systems.

Disclosure in Mass Appraisal Assignment Reports

Valuers undertaking Mass Appraisal assignments are subject to the
provisions of IVS 103, Reporting. The Valuer shall disclose the following
essential data that is specific to Mass Appraisal reporting:
(a) the client and other intended users;
(b) the purpose and intended use of the appraisal;
(c) the scope of work necessary to complete the assignment, including any
special limiting conditions;
(d) any extraordinary assumptions and hypothetical conditions needed to
carry out the assignment, provided these are reasonable and result in a
credible analysis;
(e) the relevant basis of valuation if, under reasonable terms and conditions,
the value opinion to be developed is other than Market Value;
(f) the characteristics of the properties that are relevant to the purpose and
intended use of the Mass Appraisal;

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 29

(g) a reference to each individual property in the Assessment List or

grouping, indicating where information is stored in the property record
relating to its identity;
(h) the characteristics of the market that are relevant to the purpose and
intended use of the Mass Appraisal.

Disclosure Departure from the instructions in this Guidance Note should only result
from required compliance with statutory provisions, administrative
instructions, or the agreed or amended terms of appraisal contracts.

G
PVS GN 200 Valuation of Agricultural Properties:

❖ In many regions of the world, lands devoted to the production of agricultural commodities
are the major economic asset and, frequently, the sole economic base of a region.

❖ Providing a reliable and accurate valuation service for agricultural properties requires that
the Valuer have a sound knowledge and understanding of the physical and economic
elements that affect the productive capacity of agricultural lands and the value of the
commodities
❖ produced thereon.

❖ The physical and economic characteristics of agricultural lands differ from those of non-
agricultural or urban environments in degree of importance.

❖ The income stream associated with agricultural property will vary from year to year,
depending on the type of agriculture for which it is used, the commodities produced, and the
cyclical nature of the commodity markets.

This GN encompasses:
Scope ❖ Those characteristics of value associate with agricultural properties,
and the basic requirements of the Valuation Standards and
Applications as they apply to the valuation of agricultural properties.
❖ The basic requirements of the Valuation Standards and Applications
as they apply to the valuation of agricultural properties.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 30

Crop Farms – agricultural properties used for growing commodities that

are typically planted and harvested within a twelve-month cycle. Some
commodities are annual crops that may be left in the ground beyond a
twelve- month cycle.

Dairy Farms – agricultural properties used for the production of milk from
cows, carabaos, goats or other dairy products. These properties usually
have extensive structural improvements and equipment. Feed may be
produced on the property, imported or supplied by both sources.

Forestry/ Timberland – agricultural property used for the growing of non-

orchard trees that are periodically harvested over extended growing
periods (10 to 20 more years). Considered to be agricultural properties
because they produce a crop i.e., wood, even though crop requires a long
term growing period.

Irrigated Land – land used to produce crops of forage for livestock and
which require the application of water other than that from natural
rainfall. Properties that lack a water source other than natural rainfall are
referred to as dry land agricultural properties.
Definitions
Livestock Ranches/Stations – agricultural properties used to raise and
feed animals such as cattle, sheep, pigs, goats, horses, or combinations
thereof. The actual use of these properties can take many forms. The
animals may be bred, raised, and sold within the operation of the
property.

Perennial Plantings – crops grown from plantings that have a life extending
beyond one year or one-crop cycle.

Agricultural Land as defined in R.A. 7160, Local Government Code of 1991,

Sec.199, para. (d) “is land devoted principally to the planting of trees, raising
of crops, livestock and poultry, dairying, salt making, inland fishing and
similar aqua-cultural activities, and is not classified as mineral, timber,
residential, commercial or industrial land.

Specialized or Special Purpose Properties: Agricultural properties that do

not typically produce a crop but are used for the handling, processing, or
storage of crops following harvest.

Agricultural Activity: Management by entity of the biological

transformation of biological assets for sale, into agricultural produce, or into
additional biological assets.

Biological Asset: A living animal or plant.

Integrated Unit: An agricultural entity that has common ownership of all or

part of the processes involving the production and marketing of its products
and/or commodities.
This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 31

Integrated Forest Management Agreement (IFMA) as defined in DENR

Administrative Order (AO) No. 99-53: ―is a production sharing contract
entered into by and between the DENR and a qualified applicant wherein the
DENR grants to the latter the exclusive right to develop, manage, protect and
utilize a specified area of forestland and forest resources therein for a period
of 25 years and may be renewed for another 25-year period, consistent with
the principle of sustainable development and in accordance with an approved
Comprehensive Development and Management Plan (CDMP) and under which
both parties share in its produce.

Agricultural property assets can be classified as:

❖ Land
❖ Structural improvements
❖ Plant, machinery and equipment (attached to the land)
❖ Plant, machinery and equipment (not attached to the land)
❖ Biological assets (attached to the land)
❖ Biological assets (not attached to the land)

❖ Market Value must be recognized as the fundamental basis of

valuation.
❖ Where other basis of valuation is used, they must be distinguished
from the Market Value basis.

❖ Non-Realty Elements:
❖ When the valuation is made of an agricultural property that may
include non-realty elements such as livestock, stored crops, and
equipment, the Valuer needs to understand when a crop or other
commodity is real property and when it may become personal
property. Timber for example, is part of the real property while
growing but becomes personal property when it is removed from the
Guidance land.
❖ The Valuer must understand the unique nature of agricultural
productive factors, commodity markets, production practices, and
cycles in the market region.

❖ The estimate of stabilized income to the agricultural property must

be based on the crop patterns and cycles in the market area.

❖ The Valuer of agricultural property that has more than one physical
component of class of agricultural use must clearly state whether the
value of each component or use is its value contribution as art of the
whole property or its value as a separate, free-standing component.

❖ The requirements for valuation reports are addressed in the IVS

Framework and IVS 103, Valuation Reporting.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 32

PVS GN 300 Reviewing Valuations:

A valuation review is a review of a valuer’s work undertaken by another valuer exercising impartial
judgment.

In a valuation review, the correctness, consistency, reasonableness, and completeness of the

valuation are considered.

A valuation review provides a credibility check on the valuation under review and tests its strength
by focusing on the following:
1. The apparent adequacy and relevance of the data used and enquiries made;
2. The appropriateness of the methods and techniques used;
3. Whether the analysis, opinions, and conclusions are appropriate and reasonable; and
4. Whether the overall product presented meets or exceeds those contained in the IVS Framework
and IVS General Standards.

Valuation reviews are performed for the ff; reasons, including:

❖ Due diligence required of financial reporting and asset mgt.;
❖ Expert testimony in legal proceeding and circumstances;
❖ A basis for business decisions; and
❖ Determination of whether a report complies with regulatory requirements such as:
➢ Valuations are used as part of the mortgage lending process, especially mortgages insured or
regulated by the government and it is necessary to test whether valuers have met regulatory
standards and requirements within their jurisdiction.

❖ Applies to the development and reporting of valuation reviews; and

Scope ❖ Incumbent upon any valuer who, in a supervisory or managerial
capacity, signs a valuation review, thereby accepting responsibility for
the contents of that review.

Administrative (Compliance) Review – a valuation review performed by a

client or user of valuation service as an exercise in due diligence when the
valuation is to be used for purposes of decision-making such as
underwriting, purchasing, or selling the property. This is also done to
ensure that a valuation meets or exceeds compliance requirements or
guidelines of the specific market, and at a minimum, conforms with GAVP.
Definition
Desk Review – review limited to the data presented in the report, which
may or may not be independently confirmed. Generally performed using
a checklist of items i.e., accuracy of the calculation, the reasonableness of
data, the appropriateness of methodology and compliance with client
guidelines, regulatory req. and professional standards

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 33

Field Review – review that includes inspection of the exterior and

sometimes the interior of the property and possibly inspection of the
comparable properties to confirm the data provided in the report,
generally performed using a checklist that covers the items examined in a
desk review, which include confirmation of market data, research to
gather additional data, and verification of the software used in preparing
Definition the report.

Technical Review – review performed by a valuer to form an opinion as to

whether the analyses, opinions, and conclusions in the report under
review are appropriate, reasonable and supportable.

Valuation Review –a review may support the same value conclusion in

the valuation under review or it may result in disagreement with that
value conclusion.

❖ Identify the client and intended users of the valuation review, the
intended use of the review valuers’ opinions and conclusions and the
purpose of the assignment;

❖ Identify the subject property, the date of the valuation review, the
property and ownership interest valued in the report under review,
the date of the report under review, the effective date of the opinion
in the report under review, and the valuers who completed the report
under review;

❖ Identify the scope of the review process to be performed;

❖ Identify all assumptions and limiting conditions in the valuation

review;
Guidance
❖ Develop an opinion as to the completeness of the report under
review within the scope of work applicable to the assignment;

❖ Develop an opinion on the adequacy and relevance of the data and

any adjustments;

❖ Develop an opinion on the appropriateness of the methods and

techniques used and develop the reason for agreement or any
disagreement with the report under review; and

❖ Develop an opinion as to whether the analyses, opinions, and

conclusions in the work under review are appropriate, reasonable,
and supportable.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 34

PVS GN 400 Valuation of Properties in the Extractive Industries:

The purpose of this Guidance Note (GN) is to provide clarification and guidance on the valuation of
assets or property interests (rights) held by entities involved in the Extractive Industries.

Extractive Industries comprise the Minerals Industry and Petroleum Industry, but do not include
activities focused on the extraction of water from the earth.

The Minerals and Petroleum Industries are characterized by the extraction from the earth of natural
resources, which may pass through a series of ownership, processing and measurement stages.

It is important to Valuers and the users of valuation services that distinctions are made among real
property, personal property, and business interests involved in these stages.

Valuations in the Extractive Industries must often rely heavily on information provided by (a)
Technical Expert(s) or other accredited specialist(s) specific to the industry.

A typical characteristic of the Extractive Industries that sets them apart from other industries or
economic sectors is the depletion or wasting of natural resources that can be replaced in their
original state by natural actions following extraction only in special cases.
Examples of depleting or wasting natural resources include, but are not limited to:

Metallic Mineral deposits containing metals such as copper, aluminum, gold, iron, manganese,
nickel, cobalt, zinc, lead, silver, tin, tungsten, uranium, and platinum group metals;

Non-metallic Mineral deposits such as coal, potash, phosphates, Sulphur, magnesium, limestone,
salt, mineral sands, diamonds and other gemstones;

Construction materials such as sand, gravel, crushed stone, and dimension stone;

Petroleum deposits including oil, natural gas, natural gas liquids, other gases, heavy oil, and oil
sands.

The projected net earnings derived or potentially derived from an Extractive Industry natural
resource property is its main source of value. The net earnings may vary from year to year,
depending on the type of natural resource commodity, the cyclical nature of the commodity
markets and prices, and variations in production rate and costs.

The fixed assets and specialized plant, machinery and equipment used in the extraction and
processing of raw products of the Extractive Industries, may retain relatively little or no
value when separated from production at the site.

Exploration Properties have asset value derived from their potential for the existence and discovery
of economically viable Mineral or Petroleum deposits contained within. Exploration Property
interests are bought and sold in the market.

Many of these transactions involve partial interest arrangements, such as farm-in, option or joint
venture arrangements.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 35

The residual value of the real property interest, plant, machinery and equipment as well as
environmental reclamation requirements (as liabilities and property improvements), are pertinent
factors in the valuation process for Extractive Industries properties.

EXTRACTIVE INDUSTRIES —Those industries involved in the finding, extracting and associated
processing of natural resources located on, in or near the earth's crust. They are composed of the
Minerals Industry and Petroleum Industry, but do not include activities focused on the extraction of
water from the earth.

EXPLORATION PROPERTY OR AREA - a Mineral or Petroleum real property interest that is being
actively explored for mineral deposits or petroleum accumulations, but for which economic viability
has not been demonstrated.

MINERAL— any naturally occurring material useful to, and/or having a value placed on it by
humankind, and found in or on the earth's crust.

MINERAL RESERVE — as defined by Combined (Mineral] Reserves International Reporting

Standard Committee (CRIRSCO): the economically mineable part of a Measured and/or Indicated
Mineral Resource.

MINERAL RESOURCES - as defined by CR/RSCO: a concentration of occurrence of material of

intrinsic economic interest in or on the earth's crust (a deposit) in such form and quantity that there
are reasonable prospects for eventual economic extraction.

MINERALS INDUSTRY - entities involved in the exploration for minerals, and the mining,
processing and marketing of minerals.

PETROLEUM — any naturally occurring hydrocarbon, whether in gaseous, liquid, or solid state.
Primarily crude Oil and natural gas.

PETROLEUM INDUSTRY — entities involved in the exploration for petroleum, and the extraction,
processing, refining and marketing of crude petroleum and associated gases.

PETROLEUM RESERVES — as defined by Society of Petroleum Engineers (SPE) and the World
Petroleum Congress (WPC): those quantities of petroleum, which are anticipated to be commercially
recovered from known accumulations from a given date forward.

PETROLEUM RESOURCES — petroleum reserves and contingent resources.

ROYALTY OR ROYALTY INTEREST IN THE EXTRACTIVE INDUSTRIES - the landowner's or lessor's

shares of production, in money or product, free of charge for expenses of production.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 36

❖ This Guidance Note provides specific guidance for the valuation of

assets and interests of the Extractive Industries. It provides
supplemental guidance for application of the IVS General Standards
and Asset Standards - IVS 200 Business and Business Interests; IVS
210 Intangible Assets, IVS 300 Plant and Equipment, IVS 400 Real
Property Interests and IVS 500 Financial Instruments.
Scope ❖ The ownership of, or rights to, an industrial water supply and water
storage system, can form an important component in the valuation of
Properties in the Extractive Industries. Water rights may attach to
land or may be obtained elsewhere. Adequate rights and facilities for
transportation and storage of off-site water may be required for a
reliable water supply. Valuation of the contribution of such rights
poses special problems that must be addressed by the Valuer.
However, this GN does not provide specific guidance for valuation of
water ownership, rights, transportation and storage.

The Valuer shall take account of, and make reference to other matters that
have a material impact on the Valuation. Dependent on the property type
and rights being valued, these may include:
❖ the status of tenements, rights and other interests;
❖ all Mineral or Petroleum deposits within the boundaries of the
❖ tenements or rights;
❖ access to markets and the quality and quantity of product that can be
Special sold;
Considerations ❖ services and infrastructures, and any toll arrangements, fees or
of Extractive ❖ liabilities related thereto;
Industries Valuations ❖ environmental assessments and rehabilitation liabilities;
❖ any Native Title or Ancestral Domain Title aspects;
❖ capital and operating costs;
❖ timing and completion of capital projects;
❖ residual value estimates;
❖ material agreements and statutory/ legal requirements;
❖ taxation and Royalties;
❖ liabilities and financial exposures;
❖ site rehabilitation, reclamation and closure costs; and
❖ any other aspect that has a material bearing on the Valuation.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 37

❖ Maps, geological sections, diagrams, and photographs shall be

included in the Valuation Report, if appropriate and possible, to aid
the communication of information. Relevant technical information
supporting the Valuation of a subject natural resource property(ies),
Disclosure in including estimates of Resources and Reserves being valued, shall be
Extractive Industries disclosed and discussed in a Technical Assessment.
Valuation Reports
❖ The Valuation Report shall disclose whether or not the entity
employing/retaining the Valuer, or the owner of the subject asset or
its operating management, has provided the Valuer with a statement
that all available data and information requested by the Valuer or
otherwise relevant to the Valuation have been supplied to the Valuer.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 38

PVS GN 500 Valuation of Historic Property:

❖ Historic properties are assets that embody a cultural, historic, and/ or architectural heritage.

❖ Historic properties may have legal or statutory protection because of their cultural and
economic importance. Many governments have enacted measures to safeguard specific
historic properties or to protect whole areas of special architectural or historic interest.

❖ The valuation of historic properties requires consideration of a variety of factors that are
associated with the importance of these properties, including:

➢ the legal and statutory protections to which they are subject;

➢ the various restraints upon their use, alteration and disposal; and
➢ possible financial grants or rate/tax exemption to the owners of such properties in some
jurisdictions.

❖ The costs to restore and maintain historic properties may be

considerable and these costs, in turn, affect the value of properties.

Scope ❖ The assessment of the highest and best use of historic properties will
depend on the specific restrictions that apply to them. In some
situations, the use of historic properties is limited to restoration for
non-commercial use whilst in others, adaptation to some other use,
including commercial use is permissible.

Historic House Owner Associations. Not-for-profit membership

associations that promote the preservation of historic properties and
provide their owner-members with advice on matters such as the
management, repair, maintenance, taxation and insurance of historic
properties.

Definition Historic Property. Real property publicly recognized or officially

designated by a government-chartered body as having cultural or historic
importance because of its association with an historic event or period, with
an architectural style, or with the nation‘s heritage.

Four characteristics are commonly associated with historic properties:

1) their historic, architectural and/or cultural importance;
2) the statutory or legal protection to which they may be subject;
3) restraints and limitations placed upon their use, alteration
and disposal; and
4) the frequent obligation in some jurisdictions that they be accessible to the
public.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 39

Listing of (Heritage) Buildings or Historic Properties Register. A

recording of officially designated historic properties. Not all historic
properties are necessarily listed in registers. Many properties publicly
recognized as having cultural and historic importance also qualify as
historic properties.

Preservation Incentives. Incentives to the owners of historic properties,

primarily fiscal in nature, to promote the restoration and maintenance of
such properties.

Publicly Designated Historic Properties. Those properties, the historic

status of which is officially recognized by government-chartered bodies to
identify historic properties and to promote historic preservation.

Heritage Asset. An asset having some cultural, environmental, or historical

significance. Heritage assets may include historical buildings and
monuments, archeological sites, conservation areas and natural reserves,
and works of art. Heritage assets often display the following characteristics
(although these characteristics are not necessarily limited to heritage
assets):

a) Their economic benefit in cultural, educational and historic terms is

unlikely to be fully reflected in a financial value based purely on market
price;
b) Legal and/or statutory obligations may impose prohibitions or severe
restrictions on disposal by sale;
c) They are often irreplaceable and their economic benefits may increase
over time even if their physical condition deteriorates; and
d) It may be difficult to estimate their useful lives, which in some cases
could be hundreds of years.

UNESCO Glossary of World Heritage Terms

Cultural Heritage. Three groups of assets are recognized:

1. Monuments: architectural works, works of monumental sculpture and

painting, elements or structures of an archaeological nature, inscriptions,
cave dwellings and combinations of features, which are of outstanding
universal value from the point of view of history, art or science;

2. Groups of buildings: groups of separate or connected buildings which,

because of their architecture, their homogeneity or their place in the
landscape, are of outstanding universal value from the point of view of
history, art or science; and

3. Sites: works of man or the combined works of nature and man, and
areas including archaeological sites, which are of outstanding universal
value from the historical, aesthetic, ethnological or anthropological point
of view.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 40

World Heritage Convention, Article I, UNESCO, 1972

Cultural Property. Property inscribed in the World Heritage List after

having met at least one of the cultural heritage criteria and the test of
authenticity. (World Heritage Convention, Article II, UNESCO, 1972)

❖ The valuation of historic properties involves special considerations

dealing with:
➢ The nature of older construction methods and materials;
➢ the current efficiency and performance of such properties in
terms of modern equivalent assets;
➢ the appropriateness of methods used to repair, restore,
Guidance refurbish, or rehabilitate the properties; and
➢ the character and extent of legal and statutory protections
affecting the properties.
➢ The market approach, cost and income capitalization
approaches may be employed in the valuation of historic
properties. The selection of the approach or approaches to be
used depends on the availability of data required to apply that
or those approaches.

❖ In applying the market approach, the historic nature of the property

may change the order of priority normally given to attributes of
comparable properties.

➢ It is especially important that the Valuer find comparable

properties with historic features similar to those of the
subject.
➢ Criteria for the selection of comparable properties include
similarity in location (i.e., in zoning, permissible use, legal
protection, and concentration of historic properties),
architectural style, property size, and the specific cultural or
historic associations of the subject property.
➢ A variety of adjustments may have to be made to the
comparable sales. These involve differences in location, costs
of restoration or rehabilitation, or specific encumbrances.

❖ Historic properties having a commercial use are often valued by

means of the income capitalization approach.

➢ The distinctive architecture and ambiance of an historic

property contribute to its drawing power under an income-
producing use.
➢ The income-producing use is considered to be the highest and
best use of the historic property.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 41

➢ The income capitalization approach should consider the cost

effectiveness of an income-producing historic property in
terms of the rental and/or commercial income the property is
able to generate.

❖ When applying the cost approach to historic property, the Valuer

needs to consider whether the historic features of a building would
be of intrinsic value in the market for that property.

➢ Some historic buildings will be of value simply because of

their symbolic status, for example a famous art gallery where
the building is as, or more, important than the function it
fulfills.
➢ In other words, the service potential of such a building is
inseparable from its historic features.
➢ The modern equivalent of such properties would need to
reflect either the cost of reproducing a replica, or if this is not
possible because the original materials or techniques are no
longer available, the cost of the modern building with a
similarly distinctive and high specification.

❖ In many cases the historic features will add no value, or be viewed as

an encumbrance by a purchaser in the market, for example a hospital
operating in an historic building. In such cases the modern equivalent
would reflect the cost of a new building constructed to a conventional
modern specification.

❖ In all cases the adjustments for physical deterioration and functional

obsolescence will need to reflect factors such as the higher cost of
maintenance associated with historic property and the loss of
flexibility for adapting the building to the changing needs of an
occupier.

❖ The land or site, upon which an historic property stands, may be

subject to constraints upon its use. In turn, any such constraints will
affect land and overall property value.

❖ Historic, or heritage assets, for which there is no reliable or relevant

sales evidence, which have no potential for generating income, and
which would or could not be replaced may be incapable of reliable
valuation.

❖ Legal measures to safeguard historic properties may limit or restrict

the use, intensity of use or alteration of an historic property.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 42

PVS GN 600 Consideration of Hazardous and Toxic Substances in Valuation:

❖ The objective of this Guidance Note (GN) is to assist Valuers in preparing valuations when
specific hazardous or toxic substances may influence property values.

❖ Hazardous and toxic substances are included among a number of possible environmental
factors that, when appropriate, are specifically considered by Valuers. This GN is limited to
consideration of hazardous and toxic substances because other environmental factors that
may be encountered in valuations typically have less involvement with scientific and
associated technical issues, including related law.

❖ This GN addresses general concepts, principles, and considerations that guide Valuers in
preparing valuations when hazardous or toxic materials that may influence property values
are present. It also discusses concepts that must be understood by accountants, regulatory
authorities, and other users of valuation services.

❖ Valuers rarely have special qualifications in legal, scientific, or other technical areas that
involve evaluating risks associated with hazardous or toxic substances. When considering the
market effects of such risks in property valuations, Valuers commonly rely upon other
experts ‘advice.

❖ The costs to restore and maintain historic properties may be

considerable and these costs, in turn, affect the value of properties.

Scope ❖ The assessment of the highest and best use of historic properties will
depend on the specific restrictions that apply to them. In some
situations, the use of historic properties is limited to restoration for
non-commercial use whilst in others, adaptation to some other use,
including commercial use is permissible.

Hazardous or toxic substances within the context of this GN involve

specific materials that, by their presence or proximity, may have adverse
effect on property value because of their potential to cause harm to
lifeforms. Such materials may be incorporated into improvements to or on
the site, or they may be found in or on the land. They may also be offsite, but
nearby. In some instances, they may be airborne.
Definition
Hazardous substance within the context of a valuation is any material
within, around, or near the property being valued that has sufficient form,
quantity, and bio-availability to create a negative impact on the property ‘s
Market Value.

Toxic describes the status of a material, whether gas, liquid, or solid, that
in its form, quantity, and location at the date of valuation has capacity to
cause harm to life-forms. Toxicity refers to the degree or extent of such
capacity.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 43

In dealing with a client or prospective client in matters pertaining to

the valuation of property when known or reasonably discoverable
environmental conditions that may have adverse influence on the property
values are present, the Valuer should disclose to the client the extent of his
or her knowledge, experience, and competency to deal with the situation.

If the environmental factors are known or are suspected to exist at the time
Guidance the Valuer and prospective client are discussing the potential engagement,
the Valuer should satisfy himself or herself that the client understands the
Valuer ‘s competency and disclosure obligations and that undertaking the
engagement will in no way compromise these obligations.

If the environmental factors are discovered after commencing the

engagement, the Valuer should make known to the client the knowledge,
experience, and competency disclosures specified by this Guidance, and
should then comply with all other IVSs disclosure requirements.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 44

PVS 700 Valuation of Trade Related Property:

❖ Trade Related Properties (TRPs) are individual properties, such as hotels, fuel stations, and
restaurants that usually change hands in the marketplace while remaining operational. These
assets include not only land and buildings, but also fixtures and fittings (furniture, fixtures
and equipment) and a business component made up of intangible assets, including
transferable goodwill.

❖ This Guidance Note provides direction on the valuation of TRPs as operating assets as well as
the allocation of TRP value into its main components.

❖ Component values are usually required for depreciation and tax purposes.

This Guidance Note focuses on TRP valuation. For further insight into the
application of valuation principles, the following IVS Asset Standards should
be consulted:
Scope
❖ IVS 200 Business and Business Interests;
❖ IVS 210 Intangible Assets;
❖ IVS 300 Plant and Equipment;
❖ IVS 400 Real Property Interests;
❖ IVS 410 Development Property; and
❖ IVS 500 Financial Instruments.

Capitalization: At a given date the conversion into the equivalent capital

value of net income or a series of net receipts, actual or estimated, over a
period.

Discounted Cash Flow: A financial modeling technique based on explicit

assumptions regarding the prospective cash flow to a property or business.
The most widely used applications of DCF analysis are the Internal Rate of
Return (IRR) and Net Present Value (NPV).

Definition Goodwill: Future economic benefits arising from assets that are not capable
of being individually identified and separately recognized.

Personal Goodwill: The value of profit generated over and above market
expectations, which would be extinguished upon sale of the trade related
property, together with those financial factors related specifically to the
current operator of the business, such as taxation, depreciation policy,
borrowing costs and the capital invested in the business.

Transferrable Goodwill: That intangible asset that arises as a result of

property-specific name and reputation, customer patronage, location,
products, and similar factors, which generate economic benefits. It is
inherent to the trade related property, and will transfer to a new owner on
sale.
This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 45

Reasonably Efficient Operator, or Average Competent Management: A

market based concept whereby a potential purchaser, and thus the Valuer,
estimates the maintainable level of trade and future profitability that can
be achieved by a competent operator of a business conducted on the
premises, acting in an efficient manner. The concept involves the trading
potential rather than the actual level of trade under the existing ownership
so it excludes personal goodwill.

Trade Related Property: Certain classes of real property, which are

designed for a specific type of business and that are normally bought and
sold in the market, having regard to their trading potential.

The components of TRP entity value are typically:

1. land;
2. building(s);
Guidance 3. fixtures and fittings (furniture, fixtures and equipment), including
software;
4. inventory, which may or may not be included (this should be disclosed);
5. intangible assets, including transferrable goodwill; and
6. any licenses and permits required to trade.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 46

PVS 800 Valuation for Compulsory Acquisition:

Compulsory acquisition is the power of government to acquire private rights in land without the
willing consent of its owner or occupant in order to benefit society. This power is often necessary
for social and economic development and the protection of the natural environment.

Republic Act No. 10752 entitled “An Act Facilitating the Acquisition of Right of-Way, Site or
Location for National Government Infrastructure Projects” or “The Right-of-Way Act” was
enacted on 07 March 2016. Right-of-Way or ROW means a part or the entirety of a property, site or
location, with defined physical boundaries, used or required by a national government project.

As provided in Section 4 of the Act, the following are the regular modes of
ROW acquisition:

Scope a) Donation;
b) Negotiated Sale; and
c) Expropriation.
The other modes of ROW acquisition are the following:
a) Acquisition of Properties under Commonwealth Act (CA) No. 141;
b) Exchange or Barter;
c) Easement of Right of Way;
d) Acquisition of Subsurface Right-of-Way; and
e) Other modes authorized by law.

Implementing Agency or IA – refers to any department, bureau, office,

commission, authority or agency of the national government, including any
government-owned and controlled corporation or state college or university,
authorized by law or its respective charter to undertake national
government projects.

National Government Projects: As defined in Section 3 of the Act, refers to

all national government infrastructure projects and their public service
facilities, engineering works and service contracts, including projects
Definition undertaken by government-owned and controlled corporation, all projects
covered by Republic Act No. 6957, as amended by RA No. 7718, otherwise
known as the “Build-Operate-and-Transfer-Law” and other related laws
including those involving private sector participation and all necessary
activities or projects.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.
 T h e H o w s o f R e a l E s t a t e | # R o a d t o R E A 2 0 2 4 : T h e G e n e r a l R e v i e w | 47

These projects shall include, but not limited to the following:

a. Highways, including expressways, roads, bridges, interchanges,
overpasses, tunnels, viaducts and related facilities;
b. Railways and mass transit facilities;
c. Port infrastructure, like piers, wharves, quays, storage handling and ferry
services;
d. Airports and air navigation facilities;
e. Power generation, transmission and distribution facilities;
f. Radio/television broadcasting and telecommunications infrastructure;
g. Information technology infrastructure;
h. Irrigation, flood control and drainage systems;
i. Water and debris retention structures and dams;
j. Water supply, sanitation, sewerage and waste management facilities;
k. Land reclamation, dredging and development;
l. Industrial and tourism estates;
m. Government school buildings, hospitals, clinics and other buildings and
housing projects;
n. Public markets and slaughterhouses; and
o. Other similar or related infrastructure works and services of the national
government.

This document is the intellectual property of The Hows of Real Estate Review and Training Center®️.
Unauthorized reproduction, distribution, or dissemination of this document, in part or in whole, by any means, including but not limited to reproduction, screenshotting, or
distribution in any form or format, without explicit consent from The Hows of Real Estate Review and Training Center®️ is strictly prohibited.