Real Estate Appraisal, Valuation Standards, and Law Vocabulary

Comprehensive vocabulary flashcard set covering Real Estate Appraisal, CPD Act of 2016 (RA 10912), RESA Law (RA 9646), RPVARA (RA 12001), IVS, PVS, MRPAAO, property tax assessment, and economic principles of appraisal.

Republic Act No. 10912

Also known as the Continuing Professional Development Act of 2016; an act mandating and strengthening the CPD program for all regulated professions in the Philippines as a requirement for PIC renewal. It lapsed into law on July 21, 2016, and took effect on August 16, 2016.

Continuing Professional Development (CPD)

The inculcation of advanced knowledge, skills, and ethical values in post-licensure specialization or in an inter- or multidisciplinary field of study, for assimilation into professional practice, self-directed research, and/or lifelong learning.

Accreditation

Formal or official approval granted to a person, a program, or an organization upon meeting essential requirements of achievement standards, usually for a particular period of time, as defined by an accrediting agency.

Certificate of Registration (COR)

The document issued by the PRC signifying that the person named therein has complied with all legal procedural requirements to practice a profession.

Competence

An ability that extends beyond the possession of knowledge and skills, which includes cognitive, functional, personal, and ethical competence.

Competency

The capability to apply or use a set of knowledge, skills, and abilities required to successfully perform and implement critical work functions or tasks in a defined work setting.

CPD Council

A body created under the supervision of the Professional Regulatory Board to promote and ensure the continuous improvement of professionals, composed of a Chairperson from the Board, a member from the AIPO, and a member from the academe.

Appraisal

The process of estimating or making an unbiased professional opinion on the market value of an adequately described property as of a specified date, for a specific purpose, using available pertinent data.

Assessment

The process of determining the taxable value of property, including its discovery, listing, classification, and appraisal, conducted by a Real Estate Assessor for taxation purposes.

Assessed Value

The value assigned to a property by the local government assessor for taxation purposes, calculated as $\text{Assessed Value} = \text{Fair Market Value} \times \text{Assessment Level}$.

Real Estate Appraiser

A duly registered and licensed natural person who, for a professional fee or compensation, performs services in estimating and arriving at an opinion of real estate values.

Real Estate Assessor

A duly registered and licensed natural person who works in a local government unit and performs appraisal and assessment of real properties, plants, equipment, and machineries primarily for taxation purposes.

Appraisal Review

The process or act of critically studying an appraisal report prepared by another appraiser to form an opinion regarding the adequacy and relevance of its data, analysis, and conclusions.

Appraisal Consulting

The act or process of developing an analysis, recommendation, or opinion to solve a problem (such as marketability, land-use, or investment analysis) where an opinion of value is a component of the assignment result.

Immobility

A physical characteristic of land stating that a parcel of land is fixed in place and cannot be moved.

Indestructibility

A physical characteristic of land stating that land is durable, does not wear out, and is normally not subject to depreciation.

Non-homogeneity

A physical characteristic of land stating that no two parcels of land are identical or occupy the same geographic space, making land non-fungible.

Scarcity

An economic characteristic of land and factor of value referring to the condition where the total supply of land is fixed and limited in relation to demand.

Improvement

Any permanent addition or structural change to land or a building that affects property value; classified as 'improvements on the land' (private nature, e.g., homes, fences) or 'improvements to the land' (public nature, e.g., sidewalks, sewer systems).

Situs

An economic characteristic of land referring to area preference, location choices, and tastes of people regarding a given location based on convenience, reputation, and history.

Real Estate (RA 9646 Section 3c)

The physical, tangible entity comprising land and all structures or items permanently attached to it, whether natural or artificial, above or below the ground.

Real Property (RA 9646 Section 3f)

The combination of physical real estate along with all the inherent rights, interests, and benefits related to its ownership (Real Estate + Bundle of Rights).

Fee Simple

The most complete and absolute form of ownership one can possess in real property, giving full control subject only to government powers and private restrictions.

Bundle of Rights

The set of legal ownership rights inherent in real property, summarized as P-U-D-E-V-A: Right to possess (Jus-Possidendi), use (Jus-Utendi), dispose (Jus-Disponendi), enjoy fruits (Jus-Fruendi), recover (Jus-Vindicandi), and abuse (Jus-Abutendi).

Personal Property

Movable items of property that are not permanently affixed to or part of real estate and do not carry real property ownership rights.

Trade Fixture

An article installed by a tenant on leased commercial or industrial premises for business or trade purposes; remains personal property regardless of attachment and can be removed prior to lease expiration.

Accession

The legal acquisition of title to personal property (such as trade fixtures) by the landlord when a tenant fails to remove it prior to lease termination.

Fixture

An item that was originally personal property but has been permanently attached or integrated into real estate such that it becomes part of the real property.

Annexation

The process of permanently attaching personal property to real estate, converting it into a fixture.

Severance

The legal process of detaching or separating an item from real estate, converting real property into personal property.

Cost

The total financial expenditure required to create, produce, acquire, or build a property or asset, including direct costs (materials, labor) and indirect costs (overhead).

Price

The actual monetary consideration asked, offered, or paid for a good or service in a market transaction.

Value

The worth or desirability of a property or asset, representing the present worth of future benefits arising from ownership.

Objective Value

A concept of value based on the cost of creation or production as its measure, without personal or emotional attachment.

Subjective Value

A concept of value that exists in the mind of an individual buyer or user based on personal perception, preference, and emotional attachment.

DUST

An acronym representing the four essential economic factors that create value in real estate: Desirability/Demand, Utility, Scarcity, and Transferability.

PEPS / PEGS

An acronym representing the four major forces that affect real estate values: Physical/Environmental, Economic, Political/Governmental, and Social.

International Valuation Standards (IVS)

Universally recognized guidelines and principles set by the International Valuation Standards Council (IVSC), based in London, to establish global consistency, transparency, and confidence in valuation.

Philippine Valuation Standards (PVS)

Localized valuation guidelines promulgated by the Department of Finance / BLGF that adapt International Valuation Standards (IVS) to Philippine statutory, legal, and taxation frameworks.

Real Property Valuation and Assessment Reform Act (RPVARA)

Republic Act No. 12001, signed into law on June 13, 2024, which overhauls real estate appraisal and taxation in the Philippines by establishing a single, uniform Schedule of Market Values (SMV).

Schedule of Market Values (SMV)

A comprehensive scheme or table of unit base market values prepared by local assessors for different classes of real property, serving as the single uniform valuation base under RPVARA.

Manual on Real Property Appraisal and Assessment Operations (MRPAAO)

The operational manual issued by the Bureau of Local Government Finance (BLGF) providing standard procedures, workflows, and rules for local assessors conducting tax mapping, appraisal, and assessment.

Stripping Method

An assessment valuation method prescribed by the MRPAAO for deep commercial or urban land parcels, where unit value decreases in percentage intervals (e.g., 100%, 80%, 60%) the farther the land extends back from the street frontage.

Local Board of Assessment Appeals (LBAA)

The initial quasi-judicial body at the provincial or city level that hears taxpayer appeals regarding disputed real property assessment notices within 60 days of receipt; chaired by the Register of Deeds with the Prosecutor and Engineer as members.

Central Board of Assessment Appeals (CBAA)

The appellate body that reviews and decides administrative appeals filed by taxpayers or assessors within 30 days from receipt of an LBAA decision.

Market Value

The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's-length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.

Arm's-Length Transaction

A property transaction between independent, unrelated parties acting in their own self-interest without special relationships influencing the agreed price.

Non-Market Value

Any type of value that does not reflect the fair value achievable in an open and competitive free market, occurring when values are set by statute, contract, special purchaser benefits, or intercompany agreements.

Use Value

The value of a property based strictly on its current specific use without considering alternative higher and better uses.

Value in Use

A quantitative financial measure representing the present value of estimated future cash flows expected to be derived from an asset or cash-generating unit in its current operational state.

Special Value

An amount above Market Value that reflects specific attributes of an asset that hold value only for a particular or Special Purchaser.

Special Purchaser

A buyer to whom a particular asset has Special Value due to advantages arising from ownership that are not available to typical buyers in the general market.

Investment Value

The specific value of a property to a particular investor or class of investors based on their individual investment objectives, criteria, and tax position.

Going Concern Value

The value of an entire business entity transferred as an operational, revenue-generating business, including ongoing operations, brand, customer relationships, and goodwill.

Synergistic Value

An additional element of value created by combining two or more properties or ownership interests, resulting in a combined value greater than the sum of the individual parts.

Liquidation Value

The estimated net amount that would be realized if an asset or business is sold quickly under a forced sale or compressed timeline.

Asset Exchange Value

The value assigned to a physical asset when it is exchanged for other physical assets or financial instruments (such as REIT shares).

Salvage Value

The estimated value of an asset at the end of its useful life, associated with its physical disposal or sale of components.

Residual Value

The estimated value of an asset at the end of its useful life used in financial and depreciation calculations, computed as expected selling price minus disposal costs.

Scrap Value

The estimated amount an asset can be sold for when it is broken down and valued purely for its leftover raw materials (such as metal, wood, or wiring).

Special Design Property

A limited-market property with unique physical design features or construction layout created for a specific user, which restricts utility but allows potential conversion to other uses with renovation.

Special Purpose Property

A property built specifically for one single purpose with very limited or no alternative uses, making adaptation for other functions extremely difficult (e.g., a church).

Tangible Property

An asset that possesses physical substance, comprising real property and personal property.

Intangible Asset

A non-physical asset that grants economic rights and privileges to its owner and generates income, categorized into rights, relationships, grouped intangibles, and intellectual property.

Intellectual Property

A special classification of intangible assets protected by law from unauthorized use, such as brand names, patents, copyrights, trademarks, and trade secrets.

Principle of Supply and Demand

An economic principle stating that property value is determined by the interaction of supply and demand forces in the market as of the valuation date.

Principle of Highest and Best Use

An appraisal principle stating that property value is maximized by that legal, physically possible, financially feasible, and maximally productive use that yields the highest net return over time.

Legally Non-Conforming Use

A property use that was legally established under previous zoning laws but is no longer permitted under current regulations; also described as being 'grandfathered in'.

Principle of Substitution

An economic principle stating that a prudent purchaser will pay no more for a property than the cost of acquiring an equally desirable substitute property of equal utility.

Principle of Contribution

Also known as the principle of marginal productivity; holds that the value of any component of a property depends on how much it adds to the overall property value or detracts from it by its absence.

Principle of Competition

An economic principle stating that profit attracts competition, while excess profit tends to ruin competition by oversaturating the market.

Principle of Increasing and Decreasing Returns

An economic principle holding that adding factors of production increases property income up to a point of maximum returns (increasing returns), after which additional capital yields diminishing returns (decreasing returns / overcapitalization).

Principle of Balance

An economic principle holding that maximum property value is achieved when the factors of production (land, labor, capital, entrepreneurship) and internal/external property elements are in proper proportion.

Principle of Change

An economic principle recognizing the dynamic nature of real estate, holding that property values continuously fluctuate through a four-phase lifespan: Growth, Stability, Decline, and Renewal.

Principle of Anticipation

An economic principle stating that property value is created by the expectation of future benefits and net income to be derived from ownership and use.

Principle of Conformity

An economic principle holding that maximum property value is created and maintained when there is a reasonable degree of architectural and land-use homogeneity and compatibility in a neighborhood.

Progression

A concept under the principle of conformity where the market value of an inferior or lesser property is increased by the presence of superior properties in the surrounding area.

Regression

A concept under the principle of conformity where the market value of a superior property is adversely affected by the presence of inferior or lesser properties in the surrounding area.

Principle of Utility

An economic principle stating that the primary foundation of property value is its utility, or its capacity to satisfy human needs, wants, and desires.