Land appraisal services are performed for:
-purchase and sale,
-securing a bank loan,
– mergers and acquisitions of companies and other types of investment, and
– financial statements and financial reporting.
The value of the land plots depend on use:
for individual housing,
land for agricultural use,
land for the construction of multi-apartment housing estates, and commercial facilities: business centers, banks, administrative, logistics, shopping and entertainment centers, as well as warehouse and industrial facilities.
IRE and Thomas & Simonova evaluate land properties taking into account their Highest and Best Use (HBU), in accordance with IVS-2020 and NVS-2 by analyzing the real estate market, its development prospects, and functionality.
The cost of an assessment depends on its complexity. For example, household plots for individual housing on 6-12 sotka’s can be determined for 200 USD, whereas the assessment of larger-scale land plots for developing a complex of apartment or office buildings may cost 5.0 K USD or more.
Why such a difference?
The cost of any estimate depends on the amount of work that needs to be done. At the same time, a prerequisite for almost all assessments is photographing the subject of assessment, as well as thoroughly analyzing the neighborhood. Everyone probably understands that a land plot in an industrial zone will not be as valuable as a plot for a residential building, where neighboring plots are also used residential. In this case, the ‘Comparative or Market Approach’ is used to value land.
What does the Comparative Approach consist of?
In accordance with the requirements of the comparative approach, it is necessary to select similar land plots, analyze the difference in the location of these land plots, and differences in parameters such as shape, relief i.e. location on a slope or on a horizontal surface, is it adjoining the “red line” of the main street or does it have good access. Appraisers should always take photographs of similar land parcels, especially those used to justify the results.
The appraiser adjusts comparable properties to reflect its characteristics as compared to the Subject of Appraisal based on the pair-comparison method, and then makes a conclusion about the market value of land. The appraiser provides all information and explanations for adjustments and derived values in a comprehensive Appraisal Report, which is provided to the Client.
<h3> What does an appraisal report have to include in Ukraine? </h3>
In accordance with the requirements of the legislation in Ukraine, the property appraisal report includes:
-characteristic of the object of assessment and its photographic recording;
– analysis of applicable approaches and justification;
– copies of information of objects of comparison – for example, print-screens of analogs, their description and photos;
– reconciliation of results;
Land plots for the construction of large facilities
A comparative approach is also used to value large land tracts if there are a sufficient number of comparable properties. For commercial developments the primary appraisal method is the income approach, which is based on models taking into account market data and, as noted above, taking into account its Highest and Best Use (HBU).
The concept of HBU applies to developed land as well as vacant and undeveloped land. HBU analyses are meant to answer three inter-related questions: is the current or projected new use of land (1) economically viable, (2) technically feasible and (3) legally permissible. HUB analyses incorporate the cost of compliance with all regulatory requirements such as building density, building height, residential or commercial use designation, utilities infrastructure, and so on. Most importantly prices, revenues and profitability of each HBU option are determined and ranked by economic profitability for each current or projected use.
The appraiser must calculate construction costs, taxes and other costs that arise during the construction of the facility. The appraiser must construct cash flows and discount them against the value of money over time. The difference between positive and negative cash flow is usually attributed to the value of the land. In the valuation, this is called the land residual method.
Thus, the amount of work on the assessment by the comparative approach and the profitable one differs significantly and, as a result, the cost of performing such assessments differs. We conduct market analysis of relevant assets and trends and include all information in the appraisal reports. We have extensive experience, and delivery high quality, reliable, and timely appraisal reports. Give us a call or send us your email and we will be sure to contact you to start your assessment today