REAL ESTATE VALUE: AN INDICATOR OF PROGRESS, GROWTH, AND DEVELOPMENT

Finance Secretary Cesar Purisima and the negative collection growth rates of real property tax.

Finance Secretary Cesar Purisima and the negative collection growth rates of real property tax.

In order to boost the collection of real property tax, Finance Secretary Cesar Purisima urged local government assessors to update the schedule of market values (SMVs).

Purisima explained this because real estate property tax at the city, municipal and provincial levels have registered negative collection growth rates from 2009-2010. Records from 2011 are not yet updated but Purisima believes it continued the upward trend from 2010.

Many LGUs have not updated their SMVs in years, leading to inaccurate prices. The Asian Development Bank also estimated that the SMVs market values by 200% to 500%.

He cited the example of the land prices in Quezon City which is much cheaper than those in Naga City.

When it comes to real estate taxes, the Bureau of Internal Revenue, which is headed by Commissioner Kim Henares, is mandated by law to assess and collect all national internal revenue taxes, fees and charges, and to enforce all forfeitures, penalties and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.

When it comes to real estate taxes, the Bureau of Internal Revenue, which is headed by Commissioner Kim Henares, is mandated by law to assess and collect all national internal revenue taxes, fees and charges, and to enforce all forfeitures, penalties and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.

Based on the property tax records, the Department of Finance data showed that provincial collections moved from P4.75 billion in 2009 to P4.52 billion in 2011 with 82 percent of provinces reporting, city collections went from P21.1 billion in 2009 to P19 billion in 2011 with 78 percent of cities reporting, and municipality collections recorded P3.86 billion in 2011 with 55 percent of municipalities reporting, compared to P5.35 billion in 2009.

DOF said that as of 2011, 21 of 122 cities, 631 of 1,512 municipalities, and 51 of 80 provinces derived over 80% of their revenue from IRA.

SMV is the basis for real property taxation, which is decided by assessments of land value according to the SMVs. That’s why assessing SMVs is important because an improvement in the collection of real property tax will have a great potential to significantly boost revenues. This will be good for the businesses, real estate sectors, and economy.

“It is not only for the interest of our professional real estate practitioners but for the good of our economy, society and nation. For the wealth of our country is measured by true, single, fair market valuation, rendered by the Filipino professional real estate appraiser that is globally competitive and with competence of International Standards,” Mr. Ramon CF Cuervo III, a Professional Real Estate Appraiser, said.

Real estate valuation is vital as it allows you to determine the value of a particular interest in a property on a certain occasion for a specific purpose.

The value usually sought is the property’s Market Value.  It is described as the projected amount for a property which should be exchanged on the date of valuation between two willing parties, namely the buyer and the seller, in an arm’s length transaction after proper marketing, with proficient, cautious action and not under pressure. In this transaction, both parties do not have a special relationship with each other which might affect the determination of the property’s price.

Appraisals, which is the process of valuing real estate properties, are needed because compared to, say, corporate stock, real estate transactions occur very infrequently.

Not only that, but every property is different from the next, a factor that doesn’t affect assets like corporate stock. Furthermore, all properties differ from each other in their location – which is an important factor in their value.

“Real Estate Appraisal is a very important job of real estate services because no two or more properties are alike. Due to its importance, the Real Estate Appraiser should be a professional, as required by the Philippine law, in tendering written report and advice on the value of a property,” Mr. Cuervo said.

The PRBREAS Board is responsible in looking into the competence and quality of the government appraisers and assessors.

The PRBREAS Board is responsible in looking into the competence and quality of the government appraisers and assessors.

The Republic Act 9646, sec. 3 (a) defines that “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.”

Also, in Section 3 of the Real Estate Service Act Law (RESA Law), it states that “The act of rendering an opinion of value is the person who shall be licensed under the Professional Regulation Commission and the Professional Board of Real Estate Service.”

As further defined on sec. 3 (g) Real Estate Practitioners shall refer to and consist of the following:

Real Estate 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.

Real Estate Appraiser- a duly registered and licensed natural person who, for a Professional fee compensation or other valuable consideration, performs or renders, or offers to perform services in estimating and arriving at an opinion of or acts as an expert on real estate values, such services of which shall be finally rendered by the preparation of the report in acceptable written form.

Therefore, in land valuation, an individual should be a professional assessor. Like real estate appraisers, real estate assessors focus on the value of property. While appraisers usually perform their services on behalf of individuals, assessors typically work for local governments and use their calculations to determine appropriate property tax amounts for residential and commercial property owners in their locales. The job requires real estate knowledge, but also an understanding of the demographics, neighborhoods, and tax policies of the area in which assessors work. A licensed real estate assessor is also a must for the Land Administration and Management Project of the government.

When it comes to real estate taxes, the Bureau of Internal Revenue is mandated by law to assess and collect all national internal revenue taxes, fees and charges, and to enforce all forfeitures, penalties and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.

“My advocacy is the proper recognition, accreditation, acceptance, and due respect given to the privileged professional,” Mr. Cuervo explained. As a member of the PRBREAS Board, Mr. Cuervo is responsible in looking into the competence and quality of the government appraisers and assessors.

He is referring to the Sec. 2 of R.A. 9646, stating that the Declaration of Policy states that the State recognizes the vital role of real estate 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.

The father and son tandem in real estate appraisal and valuing together with their real estate appraisers at Cuervo Appraisers Inc.

The father and son tandem in real estate appraisal and valuing founded the Cuervo Appraisers Inc.

Mr. Cuervo shared the vision of his father, Ramon Cuervo, Jr. who is one of the pillars of the real estate industry in the country. He wants to inspire other real estate professionals, especially the appraisers, to do better in their professions like his father who is a man of integrity, motivated, visionary, trend setter, and pioneer professional rolled into one.

The older Cuervo was the founding father of the Asean Valuers and Appraisers (Philippines). He was also the one responsible in having the Philippines recognized in the prestigious international organization based in Europe known as Federacion International of Real Estate Associations (FIABCI). He was also known to be the first in global marketing and forming international alliances and partnerships.

He was one of the founders of the Philippine Real Estate Board, the father of condominium concept in the Philippines and packaged the first condominium project, and started the first Time Share project.

Mr. Cuervo mentioned that in 1973, his father together with Hermilandro “Dodo” Mandanas and Far East Bank, John Fernandez, formed the first Real Estate Investment Trust, known as the Far East Real Estate Investment Trust. Unfortunately, the REIT Law was never approved by the Senate. And up to this time it is not properly understood or appreciated by the BIR.

In 1980, due to the large demand for property appraisals, the father and son tandem decided to establish a real estate appraisal company, Cuervo Appraisers, Inc. (CAI), with the help of some investors. According to Mr. Cuervo, the CAI was the fruit of his successful Masteral thesis in economics.

CAI has since become the premier and most respected Appraisal Company in the Philippines. It has also been the leading appraisal company in the Philippines in terms of Clientele, Gross Revenues and Market Share since its inception on July 11, 1980. The company is the choice of banks and other financial organizations, local and foreign investors, government, and private institutions for valuation requirements.

Due to political stability and dramatic economic growth in the Philippines in 1993, there was a substantial increase in real estate business opportunities. RFCI and CAI spearheaded the creation of an integrated property services company – Cuervo Far East, Inc (CFEI) to expand services to foreign markets.

CAI conducts its business with a high level of professional standards and has been considered a major proponent of integrity and independence in appraisal practice. Its records show evidence of establishing a rapport with and the development of long-term client relationships.

Upon retirement from Cuervo Far East, Inc. (CFEI) and 26 years of service in Cuervo Appraiser, Inc. where he still serves as the Chairman, Mr. Cuervo established RACuervo, Inc. in 2004. The company was officially registered with the Securities and Exchange Commission (SEC) on August 3, 2004.

There is no doubt that the father and son tandem possessed a brilliant mind and had a vision being skillful in creative concepts and innovations get possessed pragmatically and practical, down to earth solutions to real estate related problems, sales or appraisal.

From left is Mr. Fico Cuervo, the brother of Mr Cuervo and Mr. Miguel Camus, the business partner of Mr. Cuervo. Both are real estate professionals. Below are the logos of RACuervo and CV&A.

From left is Mr. Fico Cuervo, the brother of Mr Cuervo and Mr. Miguel Camus, the business partner of Mr. Cuervo. Both are real estate professionals. Below are the logos of RACuervo and CV&A.

Mr. Cuervo also shared the success of his brother, Federico Cuervo and his business partner, Miguel Camus.

The two brothers are the founder of Cuervo Valuers and Advisory. Both were for many years with CAI wherein Ramon was the founder and Chairman of the Board, and Federico, President and COO. In acknowledgment of its critical role in providing a wide range of asset solutions, CV&A, driven by the demands of its clients, is envisioned to eventually be the country’s most independent comprehensive valuation, advisory and asset solutions provider. The founders have long been working in close collaboration and professional relationship with its network of local and international associates and cooperating partners.

Miguel Camus is setting up his own valuation group and presently working with Mr. Cuervo and Mr. Roque Sorioso in promoting valuation services at the ASEAN region and other parts of Asia as what Section 2 of the RESA Law states “that we ought to be globally competitive using International Standards and Quality.

With sources from: Malaya newspaper and http://EzineArticles.com/4526526, www.eHow.com, www.lawphil.net, Wikipedia

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