Valuation of Condominium

Comprehensive Real Estate Appraisal Seminar & Training (CREASAT) 2012

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 Republic Act No. 4726 June 18, 1966
CONDOMINIUM ACT- AN ACT TO DEFINE
CONDOMINIUM, ESTABLISH REQUIREMENTS FOR ITS
CREATION, AND GOVERN ITS INCIDENTS.
• A condominium is an interest in real property
consisting of separate interest in a unit in a
residential, industrial or commercial building and an
undivided interest in common, directly or indirectly, in
the land on which it is located and in other common
areas of the building.

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 Republic Act No. 4726 June 18, 1966
CONDOMINIUM ACT- AN ACT TO DEFINE CONDOMINIUM,
ESTABLISH REQUIREMENTS FOR ITS CREATION, AND GOVERN
ITS INCIDENTS.
• Title to the common areas, including the land, or the
appurtenant interests in such areas, may be held by a
corporation specially formed for the purpose (hereinafter
known as the "condominium corporation") in which the
holders of separate interest shall automatically be members or
shareholders, to the exclusion of others, in proportion to the
appurtenant interest of their respective units in the common
areas.

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 Definition of Terms

 "Condominium" means a condominium as defined in

the preceding and following sections.
 "Unit" means a part of the condominium project
intended for any type of independent use or
ownership, including one or more rooms or spaces
located in one or more floors (or part or parts of
floors) in a building or buildings and such accessories
as may be appended thereto.

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 Definition of Terms

• “Common areas" means the entire project excepting

all units separately granted or held or reserved.
• "To divide" real property means to divide the
ownership thereof or other interest therein by
conveying one or more condominiums therein but
less than the whole thereof.

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 What is a condominium

• A condominium project can be defined as a vertical

subdivision on a parcel of land and a multi-storey
building structure erected thereon.
• A condominium project can be a residential,
commercial or industrial project.
• The unit-owners enjoys a fee simple ownership on the
unit and enjoys a common ownership (with the other
unit-owners) on the land and the common elements
of the building.

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 Major documents associated with a
condominium project
• Condominium Certificate of Title (CCT).
• Master Deed and Declaration of Restrictions.
• Articles of Incorporation and By-Laws of the
Condominium Association or Corporation.
• House Rules and Regulations.
• Deed of Sale and/or Contract to Sell

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 Contents of the Condominium Master
Deed and Declaration of Restrictions
• Description of the land or lot.
• Description of the building structure.
• Description of the condominium units.
• Statement of the nature and interest required in the
units and common areas and whether title to the
common areas is to be held by the condominium
corporation.
• Purpose for which the building and condominium
units are intended.
• Survey plan of the land.

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 Contents of the Condominium Master
Deed and Declaration of Restrictions

• Diagrammatic floor plans of the building and units

and their relative locations and approximate
dimensions.
• Any reasonable restrictions in the rights of the unit
owners and the condominium corporation not
contrary to law, morals or public policy.

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 Additional Factors Affecting Values of
Condominium Project or Units
• Location – relative location to center of activity,
relative location of the unit within the project
• Classification – residential, commercial, industrial
• Type of Unit – regular, corner, single level, with loft
• Size – floor area is ideal to its utility or highest and
best use
• Layout – floor plan lay-out
• Highest and Best Use – maximum potential of
property is realized
• Design – architectural, floor lay-out, building features
• Depreciation – condition, physical wear and tear 10
 Valuation Methods

• Whether the appraiser’s assignment involves the

valuation of a condominium unit or several
condominium units, or the entire condominium
project be applied.

• The three approaches to value –

– Sales Comparison or Market Data Approach
– Cost Approach
– Income Approach

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 Valuation of a Condominium Project

Market Value (in

Property Particulars Area (in sqm) Php/sqm) Market Value (in Php)
Land 900 60,000.00 54,000,000.00
Building 7,560.00 24,000.00 181,440,000.00
Building Machinery & Equipment 7,560.00 6,000.00 45,360,000.00
Swimming Pool 6,000,000.00
Spa & Gym 5,000,000.00
Total Development Cost 291,800,000.00
Plus:
Admin Cost 3% of dev cost 8,754,000.00
Selling expenses 5% of dev cost 14,590,000.00
Cost of Borrowed Money 60% of 12% for 2 years 42,019,200.00
Developer’s Profit 30% 87,540,000.00
Total Cost 444,703,200.00
Say 444,703,000.00

Net Floor Area 6,048.00

Average Selling Price 73,528.94
Say 73,500.00
Based on market research, going prices of similar projects in the area ranges from Php70,000 to Php75,000 per sqm
Therefore, project is feasible

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 Valuation of a Condominium Unit using
Sales Comparison/Market Data Approach
Subject
Value Factors Property Comparable 1 Comparable 2 Comparable 3
Price (in Php) 8,234,000.00 7,600,000.00 8,900,000.00
Size (in sqm) 124 132 128 125
Floor/Level 20th 18th 19th 12th
Finishes Good Good Good Good
Floor Layout Good Better Good Good
Amenities Good Good Poor Better
ADJUSTMENTS:
Size 5% 0% 0%
Floor/Level 3% 0% 5%
Finishes 0% 0% 0%
Floor Layout -5% 0% 0%
Amenities 0% 10% -10%
Total adjustments (in %) 3% 10% -5%
Total adjustments (in Php) 247,020.00 760,000.00 (445,000.00)
Adjusted Price (in Php) 8,481,020.00 8,360,000.00 8,455,000.00
Market Value (in Php) 8,432,006.67
Say 8,432,000.00

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 Valuation of a Condominium Unit using
Income Approach
The value of a condominium unit is the present worth of the rental income plus the
reversion value of the unit at the end of lease contract.

per sqm per

Rental income per year 124 sqm 350 month 520,800.00
Present Worth Factor as annuity for
5 years at 10% 3.79079 1,974,243.43
Plus: Reversion Value of
Condominium Unit
Value of unit at end of contract x
Present Worth Factor 0.62092
(124 sqm @Php60,000 per sqm) 7,440,000.00 4,619,644.80
Indicated value (in Php) 6,593,888.23
Say 6,594,000.00

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 Comparison in the Process and
Procedures
Assessor Private Appraiser
Appraisal & assessment based on Based on accepted appraisal
specific provisions of law RA 7160 standards
Definite schedule of unit base value Unit value determine at time of
for each class of property (land) and appraisal either for land or building
type of building.

Collect and stratify appraisal data for Gather limited data to support
mass appraisal purposes singular appraisal or sometimes
several appraisals may also occurs.

All three approaches to value are All three approaches also used
applied in the preparation of the in the appraisal process.
Schedule of Base Unit Value

Appraisal/assessment for taxation Appraisal for service and fee

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Assessors’ Procedure in Arriving at Market
Value for a Condominium Project
1 Land Data 1,000 square meter
2 Building (Project) Area 800 square meter
3 Number of Storey (Floors) 5
4 Building Type (Building Code) Type V
Number of units 2nd to 4th 24 each
5 Floors
Net Area of Ground Floor, 700 sq.m.
6 (commercial)
7 Alloted Common Areas: 100 sq.m
Ground Floor 240sq.m.
2nd to 4th Floors 10% each fl. 240sq.m.
One Level Basement Parking
Schedule of Base Unit Value – Php10,000.00/sq.m.
8 Land
Schedule of Base Unit Value – Php30,000.00/sq.m.
9 Building
10 Range of Area of Unit 30-35 sq. meter
(Note: Each unit covered by enabling or Master Deed)

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 Assessors’ Procedure in Arriving at Market
Value for a Condominium Project
Land 1,000 sqm Php10,000.00 /sqm = Php10,000,000.00
Building (Project) Area sqm Php30,000.00 /sqm
Assuming Basic SBUV is applied
Alloted common areas
Ground Floor 100 sqm Php30,000.00 /sqm = Php3,000,000.00
2nd to 4th Floors (240 sqm x 3) 720 Php30,000.00
sqm /sqm = Php21,600,000.00
Basement 240 Php20,000.00
sqm /sqm = Php4,800,000.00
Php29,400,000.00
Area and Estimated Market Value of
Each Floor
Ground Floor 700 sqm Php30,000.00 /sqm = Php21,000,000.00
2nd Floor 560 sqm Php20,000.00 /sqm = Php11,200,000.00
3rd Floor 560 sqm Php15,000.00 /sqm = Php8,400,000.00
4th Floor 560 sqm Php10,000.00 /sqm = Php5,600,000.00
Php46,200,000.00

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 Valuation Methods

Note:
• The common areas with the corresponding market
value and ASSESSED VALUE together with pertinent
property data shall be covered by Tax Declarations in
the name of the developer Corporation or the
Condominium Association.
• The corresponding tax declaration for each unit
representing the aggregate area for the ground floor,
2nd, 3rd and 4th floor shall also have separate tax
declaration bearing individual Market Value and
Assessed Value.
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END OF PRESENTATION

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