In valuation practice, there are sometimes situations where the value that determines the appraiser, to some extent does not coincide with the client’s expectations. Let’s consider the most frequent cases of such “misunderstandings” and discuss how to deal with them. Before dealing with such situations, for a better understanding we recommend reading the article “What is market value”.
When can the market value differ significantly from the real price?
Example 1 – Garage valuation. Since the start of the crisis in 2013, the real estate market has shown a clear downward trend in dollar equivalent prices. The sellers were not prepared to significantly reduce the prices that were used to exhibit in dollars. And buyers who in the absolute majority have earnings in hryvnia, respectively, do not want or can not pay for the property at a multiplied rate. In this way, the market is frozen and shows a constant, but pretty slow decline in dollar prices. At the same time, such movement in different market segments is uneven, the fastest price reduction is in the market of apartments in sleeping areas, where a large number of sellers is fiercely competitive for single buyers. But the slowest decline is observed in the old garages in garage cooperatives. Most sellers, as if conspiring, do not lower the prices of offers, and the bargaining in real transactions can reach 50%. Since the method of real estate valuation obliges the appraiser to rely on the prices of offers of such property, when determining the value of garages often the result is inadequate and inflated. We have enough experience in evaluating garages, so we try to level out such situations, but such cases still can happen.
Example 2 – Vehicle evaluation. It should be noted at the outset that the valuation of vehicles for tax purposes is in most cases based on average vehicle prices. Such prices are quoted in the “Bulletin of the Automaker” used by car appraisers and forensic experts. Unfortunately, there are sometimes errors in this directory, especially in the prices of old cars. In addition, you need to understand that appraisers do not have the opportunity to conduct a full-fledged auto-merchandise examination to take into account all or at least part of the car malfunctions. The evaluation takes into account the average cost of such vehicles, so if the vehicle being evaluated is in poor condition, its estimated value may be overpriced.
Estimated value is lower than market value
If the estimated value is lower than the transaction price, there is no problem at all. The notary carries out the calculation of taxes with higher value, so you in the contract of sale indicate the actual market value of the sale, and with this amount will be withheld tax.
Estimated value is higher than market value
If the estimated value is higher than the transaction price, you will have to pay taxes from the estimated value, although in the contract you can specify the real amount of the transaction. Here on the one hand you need to understand that you can sell the property cheaply or even donate it (that is, get no income at all), but taxes are paid with an estimated value, that is, from average prices that have accumulated on the market of this property. On the other hand, if the estimated value is obtained significantly above the real transaction price, you can ask the appraiser to check whether there is an mistakes in the calculation.