A recent report by Bilyonaryo News Channel quoted Cuervo Appraisers President Jose Maria Fernandez-Cuervo expressing concern about the reliability of property transaction records in the Philippines. According to the report, selling prices declared in deeds of absolute sale are frequently understated, partly because of incentives to reduce tax liabilities. He also pointed to the absence of a comprehensive Multiple Listing Service (MLS), which makes gathering reliable property sales information difficult for professional appraisers.
These observations raise legitimate concerns about transparency and the quality of property market information. However, they also invite a more fundamental discussion about the economic foundations of real estate valuation.
The central issue is not simply whether recorded selling prices are accurate, but whether those prices constitute reliable evidence of market value.
Even if every deed of absolute sale reflected the actual consideration paid, the challenge of estimating market value would remain. An actual transaction price is not necessarily equivalent to market value, and the Sales Comparison Approach is only one of the recognized approaches to property valuation.
This distinction is particularly important in the Philippine property market, where incomplete transaction records, speculative landholding, varying development potential, and differences in market accessibility complicate the valuation process.
1. Price and Market Value Are Different Economic Concepts
In ordinary market transactions, price refers to the amount asked, offered, or paid for a property. Market value, however, is an estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller, in an arm’s-length transaction, after proper marketing, with both parties acting knowledgeably, prudently, and without compulsion.
The distinction is fundamental.
A transaction price is an observed outcome of a particular exchange. Market value is an estimate developed under defined assumptions about market behavior.
A property may sell below its estimated market value because the seller faces financial pressure, the transaction involves related parties, or the property was not adequately exposed to the market. Conversely, a buyer may pay more than the prevailing market value because of special motivations, strategic advantages, or other circumstances.
Thus, even a genuine and accurately recorded transaction does not automatically establish market value.
This is why professional valuation requires investigation of the circumstances surrounding a transaction rather than merely accepting the amount appearing in a deed of sale.
2. The Problem of Understated Selling Prices
The reported practice of declaring consideration below the amount actually paid presents a genuine concern for market transparency.
When recorded consideration differs from the actual transaction price, the information available to appraisers and other market participants becomes less reliable.
From an economic perspective, this is a problem of information asymmetry. The buyer and seller possess information about the actual exchange that may not be accurately reflected in documents accessible to third parties.
However, even assuming that understatement is widespread, the solution is not simply to correct the recorded prices or apply percentage adjustments.
The more important question is how appraisers evaluate available evidence and determine whether it reflects the economic conditions governing the property’s market.
Moreover, the assertion that understatement is the norm is itself an empirical proposition. Establishing its prevalence and magnitude would require systematic investigation of actual and declared consideration across a representative sample of transactions.
Professional observations can identify a potential problem, but empirical research is needed to measure its extent.
3. An MLS Is Not the Same as a Verified Sales Database
The absence of a comprehensive Multiple Listing Service is another concern raised in the report.
An MLS generally facilitates the exchange of property listing information among participating real estate professionals. Depending on its design, it may include asking prices, property characteristics, listing histories, and completed transaction information.
However, an MLS should not be confused with a verified database of actual property sales.
An MLS containing predominantly asking prices may improve access to available properties without necessarily revealing the prices at which transactions are completed.
This distinction matters because asking prices represent sellers’ expectations, not necessarily actual market outcomes.
In the Philippine setting, where some landowners retain properties for speculative appreciation or long-term investment, asking prices may reflect reservation prices substantially different from what prospective buyers are willing and able to pay.
A verified transaction database would provide stronger evidence of completed exchanges, although appraisers would still need to examine the circumstances of those transactions.
An MLS improves the availability of market information. A verified transaction database improves the evidence of actual exchanges. Neither, by itself, determines market value.
4. Sales Transactions Are Only One Source of Market Evidence
Property valuation is sometimes discussed as though the availability of comparable sales determines whether a credible market value estimate can be developed.
This view is incomplete.
Sales transactions provide important evidence of market behavior, but they are only one component of the valuation process.
Property values are influenced by numerous economic and physical factors, including location, accessibility, infrastructure, land-use regulations, development intensity, highest and best use, supply and demand, income-generating capacity, construction costs, and broader economic conditions.
These factors influence how market participants perceive the benefits, limitations, and economic opportunities associated with a property.
For example, two parcels of land may have similar areas and zoning classifications but substantially different economic potential because of accessibility, topography, infrastructure availability, development costs, or market demand.
Simply comparing their recorded selling prices may fail to capture these differences.
The appraiser must therefore understand not only the prices observed in the market but also the economic forces producing those prices.
This broader analysis is especially relevant in developing property markets where transaction information may be incomplete and land-use patterns are changing.
5. Sales Comparison Is Only One Valuation Approach
Professional property valuation recognizes three principal approaches: the Sales Comparison Approach, the Income Approach, and the Cost Approach.
The Sales Comparison Approach examines prices and other market evidence relating to comparable properties, with appropriate analysis and adjustments for relevant differences.
The Income Approach estimates value through the income or economic benefits that a property is capable of generating, using appropriate capitalization or discounted cash flow techniques.
The Cost Approach considers the cost of acquiring land and providing an equivalent improvement, with appropriate allowances for depreciation and obsolescence, guided by the principle of substitution.
Each approach examines property value from a different economic perspective.
Their applicability depends on the property type, the basis and purpose of valuation, the quality of available evidence, and the behavior of relevant market participants.
For an income-producing commercial property, the Income Approach may provide important evidence of investment value and market expectations. For specialized improvements, the Cost Approach may offer useful evidence when properly applied. For actively traded residential properties, the Sales Comparison Approach may be particularly relevant.
However, no single approach should be applied mechanically or assumed to be superior in every circumstance.
The objective is not necessarily to apply all three approaches in every assignment, but to select and reconcile those appropriate to the property and supported by sufficient evidence.
6. Valuation Is More Than Adjusting Comparable Sales
In conventional appraisal practice, comparable properties are often analyzed through adjustments for differences in location, size, accessibility, physical characteristics, and other factors.
These adjustments are legitimate valuation tools when supported by market evidence.
However, adjustments should not be confused with the broader process of economic valuation.
An adjustment does not automatically correct unreliable underlying information. Nor does a series of numerical adjustments necessarily produce a credible market value conclusion.
The appraiser must establish why a particular characteristic affects value, whether the market recognizes that difference, and how the available evidence supports the adjustment.
This requires an understanding of market behavior rather than reliance on predetermined percentages.
The principle of substitution provides an important theoretical foundation: a rational buyer generally would not pay more for a property than the cost of obtaining an equally desirable alternative, subject to relevant market conditions.
But substitution must be understood within the broader economics of land and property markets.
Accessibility, development opportunities, effective demand, financing conditions, and the availability of substitutes influence the alternatives facing buyers and sellers.
Consequently, reliable valuation is not simply a mathematical exercise involving comparable prices. It is an economic investigation into how market participants determine the exchange value of property.
7. Implications for Philippine Valuation Practice
The concerns about understated deeds and the absence of an MLS should encourage improvements in property market transparency.
More reliable transaction reporting, better information-sharing systems, and stronger verification procedures would undoubtedly benefit the valuation profession.
The implementation of Republic Act No. 12001, or the Real Property Valuation and Assessment Reform Act, also provides an important opportunity to strengthen valuation standards and institutional practices.
Nevertheless, improving market information should be distinguished from improving valuation methodology.
A complete database of property transactions would not eliminate the need for professional analysis. Likewise, incomplete transaction records do not necessarily make credible valuation impossible.
The essential requirement is that appraisers critically evaluate the available evidence, recognize its limitations, consider the relevant economic characteristics of the property, and apply valuation approaches appropriate to the assignment.
Where evidence is insufficient to support a reliable conclusion, that limitation must be acknowledged rather than concealed through unsupported assumptions or adjustments.
These principles apply broadly to valuation for mortgage lending, taxation, investment, financial reporting, property acquisition, litigation, and other professional purposes.
Conclusion: From Price Collection to Economic Valuation
The discussion about understated selling prices and the absence of an MLS identifies important weaknesses in Philippine property market information.
However, it should not lead to the conclusion that reliable property valuation depends exclusively on obtaining actual selling prices.
Even accurately recorded transactions require interpretation. Asking prices must be distinguished from completed exchanges. Comparable sales must be evaluated in relation to the property’s characteristics and market conditions.
Most importantly, the Sales Comparison Approach represents only one of several recognized approaches to valuation.
The broader responsibility of professional appraisers is to understand the economic forces influencing property value and to develop conclusions supported by relevant evidence and established valuation principles.
Price is evidence of a particular market transaction. Market value is an estimated economic conclusion. Valuation is the analytical process connecting market evidence, economic conditions, and professional judgment.
The future of Philippine property valuation therefore depends not only on improving access to transaction information, but also on strengthening the economic foundations of professional valuation practice.
About the Author
Augusto B. Agosto is an economist, licensed real estate consultant, real estate appraiser, and environmental planner. He is President and CEO of AA+ Appraisal & Consultancy, Inc. and a part-time university professor. His professional and research interests include real estate economics, property valuation, urban development, eminent domain, and the integration of law and economics.
Reference
Bilyonaryo News Channel. (2026). Presyo sa deed of sale, hindi totoo? Cuervo Appraisers chief flags undervalued property sales to cut taxes. https://bnc.bilyonaryo.com/presyo-sa-deed-of-sale-hindi-totoo-cuervo-appraisers-chief-flags-undervalued-property-sales-to-cut-taxes/business/
