Property valuation

Property Valuation or Property Appraisal is a process of determining the value, whether market value, investment value, insurance value, or other types of value, of a property on a certain valuation date. Determination of the value of a property according to the American Institute of Real Estate Appraiser (1987: 63) and Eckert et al. (1991: 151) can be done through three approaches, namely the market data comparison approach, the cost approach, and the income capitalization approach.

In relation to the inventory and valuation of the lands and buildings standing on it, three approaches will be used, namely the market data comparison approach, the cost approach, and the income approach.

Property appraisal (property valuation) is usually carried out using a comparative approach to determine the property value that is representative or reflects market value conditions. In this comparative analysis, the property value of an object is determined by the property value of comparable objects located in an adjacent location (neighborhood), has the same physical characteristics and uses, and has a transaction date that is not much different from the valuation date.

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To get the property value of the object being assessed, adjustments are made to the comparison factors by comparing the object being assessed with the object of comparison.

In the assessment, the value referred to is always the market value, which is the value formed from the strength of demand and supply in the free market, without any intervention from anyone in normal market conditions (not in the midst of a recession or a booming market). By accommodating IAS 98, the concept of fair value as a substitute for cost is also used in the valuation world. But this fair value is not always synonymous with market value.

The implementation of the appraisal must also accommodate the type of property being assessed. Property that generates income should be assessed using the income approach, but which approach? Is the income approach in property valuation or business valuation? Now here's what's interesting.

In property valuation/appraisal, what is assessed is real property, namely the legal rights that underlie physical control over the land and everything attached to it above and below the land, whether buildings or trees, or other constructions, but does not include mines or minerals in the ground and air. on.

The 2014 Indonesian Valuation Standard (SPI) which refers to the international standard (International Valuation Standard / IVS) in PPPI 15, Property Valuation with Special Businesses answers this question. Properties with Special Businesses (SPBU) -Trade-Related Property (TRP) are individual properties such as hotels, restaurants, public fuel stations (SPBU), which can transfer ownership while operating.

This property includes not only land and buildings but also furniture and equipment and business components that are formed by intangible assets, including transferable goodwill. This PPPI 15 provides guidance on the valuation of PBB as an operating property and the allocation of value from the PBB into its main components. So, in assessing the PBB, the technology used must be a business appraisal, not property valuation, except for the type of income-producing property that is not PBB.