Article 6
The appraised value of a real estate should be in correspondence with its value on the date of value opinion. The types of value include market value, specific market value, specified market value and special value. The types of rent include market rent and specific rent.
The type of value should be specified in an appraisal report. When appraising the specified market value, the appraisal conditions should be stated, and the market value also be appraised.
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Article 12
A real estate appraiser should collect comparable properties according to the principles as follows:
1. The value of comparable properties conforms to the definition of market value, or could be adjusted to market value, or falls into the same type of value as the subject property.
2. The comparable properties are located in the neighborhood area or similar area within the same primary market area as the subject property.
3. With the same or similar use purpose or use control with the subject property.
4. Date of the formation of value is close to the date of value opinion.
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Article 13
The following matters should be investigated on-site to verify conditions of the subject property:
1. Verification of the basic data and legal status of the subject property.
2. Investigation of current use conditions of the subject property and comparable properties.
3. Verification of individual data affecting property value.
4. Taking records and photographing necessary pictures in a film or electronic form.
It needs to be stated in the appraisal report if the client does not guide the appraiser to the appraised subject and that leads to the boundary of the subject property being unsure or being unable to enter the subject property.
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Article 15
A real estate appraiser should undertake a comprehensive comparison between the indicated values obtained through different approaches, and examine those indicated values that are significantly different from others. The appraiser also needs to reconcile different values and determine the final value of the subject property, based on data reliability, differences in conditions of appraisal types and objectives, and the degree of similarity in formation of values, and specifies the reasons for reaching the final value.
When contract rent is adopted as the basis for distributing trust interest in securities of real estate securitization, income value through discounted cash flow method shall, based on the above criterion, be given a greater weight. An exception is applicable to a property under real estate securitization for the purpose of liquidation.
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Article 16
A real estate appraiser should produce an appraisal report and submit it to the client, after putting a signature or seal.
The matters which should be specified in an appraisal report are as follows:
1. The client(s).
2. Basic data of the subject property.
3. Date of value opinion and date of property inspection.
4. Type of value.
5. Conditions of appraisal.
6. Purpose of appraisal.
7. Appraised value of the subject property.
8. Ownership of and other rights and interests associated with the subject property.
9. Current use of the subject property.
10. Zoning or other regulations imposed on the subject property.
11. Analysis of principal factors affecting property value.
12. Appraisal approaches and appraisal process employed, and reasons for value determination.
13. Conditions required to be specified in accordance with this regulation.
14. Other essential matters relevant to appraisal.
15. Name and certificate number of the real estate appraiser.
Pictures and other data required attaching to the appraisal report.
The required format, attached pictures and other data of an appraisal report for the purposes of administrative enforcement or compulsory enforcement shall be in compliance with relevant regulations and are not subject to the requirement of the above paragraphs 2 and 3.
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Article 22
The following matters in respect of the collected comparable properties should be investigated and verified:
1. Sale price and how the expenses are paid.
2. Sales conditions; if there exist unusual payment methods, and how.
3. Situations in respect of the comparable properties.
4. Sales date.
Matters prescribed in the preceding paragraph that are difficult to investigate and verify should be specified in an appraisal report.
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Article 23
Appropriate adjustments should be made in advance if the following conditions occur in the comparable properties, the comparable properties should not be admitted if the conditions affecting the sale prices could not be effectively taken into consideration and quantitatively adjusted:
1. Rushed buying or selling, or rushed letting out or renting.
2. Transaction affected by anticipation.
3. Transactions affected by debt.
4. Transactions among relatives.
5. Transactions of fragmented land or land to be assembled with others.
6. Transactions with dispute over the improvement upon land.
7. Auctions.
8. Auctions or sales to interested persons of public land.
9. Transactions affected by superstition.
10. Transactions including land for public facilities.
11. Contrived transactions.
12. Transactions with uses against the laws.
13. Other unusual transactions.
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Article 24
When implementing value adjustments for the value differences between the subject property and the comparable properties to account for the differences in local and individual factors, the percentage adjustment method should the principal method. The dollar adjustment method could also be applied, and reasons for employing this method should be specified in the appraisal report.
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Article 25
In the process of calculating adjustments to obtain the indicated value, the comparable properties should be judged to differ too much from the subject property and not to be admitted if either the local factor adjustments or individual factor adjustments, or one of the items of local factor adjustments or individual factor adjustments is over 15%, or the combined adjustments to condition, date, local and individual factors is over 30%. The above restrictions do not apply when the subject property is with special conditions or on a special location, thus with scarcity of relevant market sales information, and these are detailed in the appraisal report.
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Article 26
The comparatively higher or lower indicated values of the subject property should be reexamined. Only the ones, which are examined and believed to be reasonable, could be used as the base for determining the sales comparison value. Those indicated values, after due consideration, whose figures still differ from others by over 20 percents shall be excluded from further application.
The difference of above-mentioned over 20 percents refers to the situation that the ratio of difference between the high and low values to the averaged figure of the high and low values is over 20 percents.
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Article 27
A real estate appraiser should adopt at least three comparable properties, and through the process of estimation and review stated in the preceding Article, to arrive at the indicated values of the subject property. The reliability of collected data for comparable properties, and the degree of similarity in formation of values between the comparable properties and the subject property are then taken into account to determine the sales comparison value of the subject property. In addition, details of all adjustments undertaken need to be stated.
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Article 28
Income approach refers to those methods such as direct capitalization method and discounted cash flow method. The value estimated according to this approach in the previous paragraph is income value.
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Article 31
Discounted cash flow method refers to the method that sums up the discounted net operating incomes over the future periods of analyzing cash flow and the property value at the end of the analysis periods using appropriate discounted rates to estimate the value for the subject property.
Discounted cash flow method mentioned in the preceding paragraph is applicable to real estate investment appraisal for investment purpose.
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Article 32
The equation of discounted cash flow method reads as follows:
(the formula see the attached file)
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Article 33
Estimation and calculation of the objective net operating income of the subject property should be based on its highest and best use, and should take into account the income of neighboring similar properties based on their highest and best uses.
When discounted cash flow method is adopted as the appraisal method for the purpose of real estate securitization, contract rent shall be taken to represent the net operating income over analysis periods for the subject property. This restriction does not apply if special conditions exist thus contract rent is deemed inappropriate and the conditions are detailed in the appraisal report.
When the above contract rent is unknown, the market economic rent shall be used to estimate the objective operating income.
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Article 38
When estimating total expenses of the subject property, including land value tax or land rent, house tax, insurance premium, management fee, repair costs and etc, the estimation should be based on the expenses or number in accounting reports from identical or similar properties. The total expenses should include operating expenditures for revenue-generating properties.
When appraisal purpose is for real estate securitization, the total expenses in the discounted cash flow method shall be estimated based upon the trust plan.
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Article 41
The future recapture rate as of the date of value opinion for a building can be inferred through the following formula:
1. Equal depreciation type:(the formula see the attached file)
2. Sinking fund type:(the formula see the attached file)
The above depreciation rate is estimated according to relevant rules specified in cost approach.
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Article 43
A capitalization rate or discount rate should be determined from a comprehensive review of the following methods:
1. Risk premium method: The fixed deposit interest rate, government bonds rate, real estate investment risk, money supply-demand variation, the trend of real estate value and etc. should be taken into consideration to decide the likely rate of return on the most common investment as a basis in order to derive the capitalization rate or discount rate. The differences of individual characteristics between the above most common investment and the subject property should be compared in terms of their liquidity, risk, appreciation, and management.
2. Market extraction method: Selecting several comparable properties, which are identical with or similar to the subject property, followed by dividing their respective net operating income price and comparing the resulting to determine quotients the capitalization rate.
3. Weighted average capital cost method: The formula based upon weighted average capital cost is as follows:(the formula see attached file)
4. Debt coverage ratio method: The formula based upon debt coverage ratio is as follows:
Capitalization rate or discount rate = debt coverage ratio x mortgage constant x the ratio of mortgaged capital to property price
5. Effective gross income multiplier method: The formula based upon the due net operating income rate that is derived as the ratio of annual net operating income to annual effective total income for similar properties in the market, and based upon effective gross income multiplier that is derived as reasonable price divided by annual effective gross income is as follows:
Capitalization rate or discount rate = net operating income rate / effective gross income multiplier
Relevant details are required to be stated in the appraisal report shall a need arise to employ other methods than those specified in this Article to determine capitalization rate or discount rate.
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Article 44
Land income value is estimated according to the following calculations:
1. With no building on land:
Land income value = land net operating income / land capitalization rate
2. With buildings on land:
Land income value = (built-up property net operating income-building net operating income) / land capitalization rate Building net operating income is estimated according to the following calculations:
1. With deduction of recapture allowance from net operating income:
Building net operating income = building cost value x building capitalization rate
2. Without deduction of recapture allowance from net operating income:
Building net operating income prior to recapture allowance = building cost value x (building capitalization rate + the future recapture rate based upon the value on the date of value opinion)
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Article 45
Building income value is estimated according to the following calculations:
1. With deduction of recapture allowance from net operating income:
Building income value = building net operating income / building capitalization rate
Building income value = (built-up property net operating income-land net operating income) / building capitalization rate
2. Without deduction of recapture allowance from net operating income:
Building income value = building net operating income prior to recapture deduction / (building capitalization rate + the future recapture rate based upon the value on the date of value opinion)
Building income value = (built-up property net operating income prior to recapture allowance－land net operating income) / (building capitalization rate or discount rate+ the future recapture rate based upon the value on the date of value opinion)
Land net operating income stated in the above paragraph may be calculated by estimation of land value through sales comparison approach multiplied by land capitalization rate.
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Article 46
Built-up property income value is estimated according to the following calculations:
Built-up property income value = built-up property net operating income / built-up property capitalization rate
Built-up property capitalization rate could be estimated, in addition to specification in Article 43, according to the following formula:
1. With deduction of recapture allowance from net operating income:
Built-up property capitalization rate = land capitalization rate x land value ratio + building capitalization rate or discount rate x building value ratio
2. Without deduction of recapture allowance from net operating income:
Built-up property capitalization rate = land capitalization rate x land value ratio + (building capitalization rate+ the future recapture rate based upon the value on the date of value opinion) x building value ratio
Determination of land value ratio and building value ratio mentioned in the preceding paragraph should take into consideration the analysis of data collected from the local property market or the result of other appraisal approaches.
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Article 61
Advertisement fee, sales fee, management fee and tax should be determined as the total costs multiplied by respective tariffs of various fees. The respective tariffs for various fees shall be regularly announced by the National Association.
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Article 67
The ratio of salvage value of a building should be announced by the National Association, and this ratio shall in principle not exceed 10%.
If there is no salvage value on a building at the end of its life; the salvage value will not be taken into account while estimating depreciation.
The ratio of salvage value stated in paragraph 1 refers to the ratio of the sales value of the residual structure and internal equipments of a building in the market to the total building cost, on the date when the economic life of this building expires.
When determining the salvage value of a building based on the ratio of salvage value stated in paragraph 1, the clearance costs involved when the building has reached the end of its life shall be taken into consideration.
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Article 68
The calculation of accrued depreciation for a building shall take account of features of the building and market conditions, so as to determine the appropriate method of depreciation among the straight-line depreciation, convex-type depreciation or concave-type depreciation.
As for estimation of accrued property depreciation amount, in addition to consideration of physical and functional factors, component parts of individual buildings and their uses shall be considered from the economic perspective, and the maintenance and renovation of buildings be observed, to estimate the remaining economic life of the building. The above remaining economic life is then added to the passed years to arrive at the economic life of the building, and the calculation should be detailed in the
appraisal report.
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Article 69
The calculation formula of cost value is as follows:
1. Land value = land total cost.
2. Building cost value = building total cost－building accrued depreciation.
3. Built-up property total cost = Land value + building cost value The land value stated in the previous paragraph may be estimated by sales comparison approach or income approach if land value is difficult to ascertain, and the details should be specified in the appraisal report. When sales comparison approach or income approach is employed to estimate the land value, the rationality of advertisement fee, sales fee, management fee, tax, capital interest and profits associated with land needs to be considered.
When the formula in paragraph 1 is applied to estimate land value, the value diminution of capital invested on land may be taken into account and deducted from land total cost.
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Article 70
The method of land development analysis is estimate the land development analysis value prior to development or construction, by deducting the direct cost, indirect cost, capital interest and profit during the development period, from total sales price of properties after completion of development or construction. This analysis acknowledges the changes in utility of land through development or improvement in accordance with legal use and density of the land.
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Article 71
The procedures for the method of land development analysis are as follows:
1. Identifying the content of land development and estimating the duration of development needed.
2. Investigating individual cost and related expenses, and collecting current market prices and etc.
3. On-site survey and investigating and analyzing the degree of development in the local environment.
4. Estimating the marketable area of land or building after construction or building.
5. Estimating the total sales price of properties after completion of completion of construction or building.
6. Estimating individual cost and related expenses.
7. Deciding an appropriate rate of return and an overall capital interest rate.
8. Calculating land development analysis value.
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Article 72
Besides collection of data stated in Article 11, the following information should be gathered where necessary for undertaking the method of land development analysis.
1. Proposal of a development project.
2. Design blueprint or land plan layout.
3. Application or permit of construction.
4. Construction or building costs.
5. Expenses for planning, design, advertisement, sales, management, tax, and etc.
6. Capital interest rate
7. Rate of return for construction or building.
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Article 73
On-site survey and investigation and analysis of the development degree in local environment include the following matters:
1. Investigating factors affecting total sales amount, cost, expense, and etc.
2. Ascertaining the progress of project, and construction on the subject property and the environmental conditions, and taking necessary photos or making electronic films.
3. Gathering and investigating transaction data in the market.
4. Development degree of land and buildings and public facilities in the surrounding environment.
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Article 77
Advertisement fee, marketing fee, management fee and tax payment shall be calculated as total sales price multiplied by respective tariffs.
The respective tariffs shall be regularly announced by the National Association.
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Article 78
Calculation of planning and design fee and the rate of return for the method of land development analysis shall follow the of Articles 57 and 60.
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Article 79
Estimation of capital annual interest in respect of the overall capital interest rate for the method of land development analysis shall be based upon the Articles 58 and 59, and makes reference to the following formulae:
Overall capital interest rate = capital annual interest rate x (land value ratio + building value ratio x 1/2 ) x development years.
For those subject properties that bear unusual capital interest, or whose construction of buildings does not start immediately after acquisition of land, their overall capital interest rate can be further adjusted on the part of 1/2 specified in the above paragraph, and be detailed in the appraisal report.
Building value for the building value ratio in paragraph 1 can be estimated based upon the sum of construction costs and planning and design fee.
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Article 81
The calculation formula for the method of land development analysis value is as follows:
V = S ÷(1 + R) ÷(1 + i)－(C + M)
where
V: land development analysis value.
S: the expected total sales price after completion of construction or building.
R: the appropriate rate of return.
C: the direct cost for construction or building.
M: the indirect cost for construction or building.
i: the overall capital interest rate for the total costs of construction or building.
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Article 86
The influence on land value caused by the building upon the land should be considered when this parcel of land is appraised. This rule does not apply when the appraised subject is assumed to be vacant land and the assumption is stated in the appraisal report.
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Article 87
The method of land development analysis may be applied in appraising the value of land assumed to be soon developed. The value thus derived should be compared with the sales comparison value or income value to decide the final appraised value.
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Article 95
The appraisal of pond, swamp or graveyard should in principle apply sales comparison approach. In the case that there is no previous sales data, the value could be estimated based on the value of land parcels in the neighborhood, and by comparison of the location, shape, and land use between the neighborhoods land parcels and the subject pond to arrive at the final appraised value.
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Article 114
The valuation of interests consists of valuation of superficies, dien, yungtien, easement, agricultural right, servitude of real property, cultivation, mortgage, lease, urban land readjustment, transferable development right and exchange of right.
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Article 119
The valuation of servitude of real property should consider factors such as conditions of use on the properties that provides and demands the rights respectively, duration of right, nature of servitudes, social conventions and etc.
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Article 124
For the valuation of rights exchange in an urban renewal scheme, the items examined shall be based upon Urban Renewal Act and Regulation on Implementation of Rights Exchange for Urban Renewal and other relevant legislations.
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Article 125
For the subject property that is a condominium unit prior to rights exchange scheme, the respective value of each unit for its share of rights on the site shall be estimated by means of the site value ratio of the whole property following the rules as below:
The value for share of rights on site of individual condominium unit = the value of individual condominium x site value ratio Formula for calculating site value ratio stated in the preceding paragraph is as follows:
Site value ratio = unit value of land as if vacant x site size / unit value of land as if vacant x site size +【unit construction cost x (1-accrued depreciation rate) x size of the whole building】
Should the estimated value for share of rights on site based on the rule of the above paragraph be apparently unfair due to unusual conditions of the subject condominium, its value can be further adjusted in reference to the value estimated based on Article 126-2.
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Article 126
In the case that prior to rights exchange scheme the present value of the site where condominium units stand is lower than the value of the site as if vacant, the values of share of rights on sites associated with respective condominium units are calculated as follows:
1. Following the rules set up in the preceding Article to derive site value ratio.
2. Value for the share of right on site associated with respective condominium units = respective values of condominium units x site value ratio.
3. Ratio of value for the share of right on site associated with respective condominium units = value for the share of right on site associated with respective condominium units / Σ value for the share of right on site associated with respective condominium units.
4. Adjusted value for the share of right on site associated with respective condominium units = value of site as if vacant where condominiums stand x ratio of value for the share of right on site associated with respective condominium units.
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