The recent Bilyonaryo News Channel (BNC) report featuring Cuervo Appraisers President Jose Maria Fernandez-Cuervo raises important concerns about the reliability of property transaction records in the Philippines, particularly the alleged understatement of selling prices in deeds of absolute sale and the absence of a comprehensive Multiple Listing Service (MLS).
These concerns are relevant to professional valuation practice. However, I believe the discussion should extend beyond the availability and accuracy of recorded selling prices to the broader economic foundations of property valuation.
First, price and market value are not necessarily the same.
Price refers to the amount asked, offered, or actually paid for a property. Market value, on the other hand, is an estimate of the amount for which a property should exchange under defined market conditions, involving knowledgeable and willing parties acting without compulsion.
Even if every deed of absolute sale accurately reflected the consideration paid, the recorded prices would not automatically represent market value. Appraisers must still examine the circumstances surrounding each transaction, including whether it was conducted at arm’s length and under normal market conditions.
Second, the absence of an MLS should not be confused with the absence of reliable valuation methodology.
An MLS primarily facilitates the sharing of property information among real estate professionals. Some systems also record completed transactions, but an MLS does not necessarily provide independently verified selling prices.
While a comprehensive MLS or verified sales database would improve market transparency, neither is an absolute prerequisite for developing a credible opinion of market value.
Third, sales transactions constitute only one source of market evidence, and the Sales Comparison Approach is only one of the recognized valuation approaches.
Professional valuation also recognizes the Income Approach and Cost Approach. The applicability of these approaches depends on the nature of the property, the valuation objective, and the quality of available evidence.
More importantly, property valuation requires an understanding of the economic factors influencing value, including supply and demand, accessibility, location, land-use regulations, highest and best use, income-generating potential, development costs, and prevailing market conditions.
These factors help explain why properties command different prices and how market participants assess their economic benefits.
Fourth, incomplete or unreliable transaction information requires broader market investigation, not simply numerical adjustments.
Adjustments to comparable sales are legitimate valuation tools when supported by market evidence. However, adjustments alone cannot establish market value, particularly when the underlying transaction information is unreliable.
Appraisers must investigate the available evidence, evaluate its relevance, examine the economic characteristics of the property, and reconcile the findings using appropriate valuation approaches.
This is where the distinction between collecting prices and undertaking professional valuation becomes particularly important.
Finally, the reported understatement of consideration in deeds of sale is a legitimate concern that deserves further empirical investigation. Even assuming that such practices are widespread, the implications for valuation should be understood within the broader framework of property market economics.
The central challenge is not merely the absence of an MLS or the reliability of recorded selling prices. It is how professional appraisers interpret available market information and translate it into a credible and defensible opinion of market value.
Property valuation is not simply the process of collecting selling prices and adjusting comparable properties. It is an economic analysis of the property, its market, and the factors influencing its exchange value.
Ultimately, price is evidence, market value is the conclusion, and valuation is the economic analysis connecting the two.
Augusto B. Agosto
Economist | Licensed Real Estate Consultant | Real Estate Appraiser
