The Importance of PROPERTY investments

Real estate is one of the reliable and important investment types for individuals and institutions. Desire for the purchase price appraisal of real property has increased with swift development of real property sector and its legal infrastructure in recent years.

The appraisal of real real estate is a primary principle for all those businesses. Land and property are factors of development and the worthiness of the land is dependent on the demand and offer for the product that is produced.

Conducting organized urbanization, choosing settlement areas and estimating their internal or outer transportation costs, enhancing capital market segments transparency and stability need a reliable price valuation of real estate property. Appraisal in real house is also very important to the duty income of the countrywide budget.

Appraisal is, in simplest explanation, the persistence of amount for which the property will transact on a particular date. (France, 2005 ) There is a variety of purposes for appraisals are needed. These range between appraisals for transfer of ownership, funding and credit, litigation, tax concerns, investment counselling, decision making, accounting and etc.

Aim of this thesis is to provide a brief summary of the methods used in real house appraisal relating to international valuation standards, to research the position of appraisal practice in Turkey also to specify which valuation method should be used for analyzing the real value of the real estate property.

For this purpose, a case study is prepared to investigate benefits and drawbacks of valuation approaches for given real estates in a chosen sample area in Ankara.

In reviewed books; there are several definitions of appraisal and appraisal methods that are being used internationally. Sales evaluation method have been looked into by related studies usually because this method is used more than other methods in appraisal practice. But; there is absolutely no detailed study to determine advantages and disadvantages of each methods by checking applications used. The assessment of the valuation techniques to indicate advantages and disadvantages of the other person is the main point where this thesis differs.

Method of the Study

Over days gone by decade there has been a significant development in real real estate appraisal research throughout the world. There are several catalogs, articles, doctoral or master thesis that are discussed real real estate appraisal.

This thesis has been prepared by using the next methods;

Library & resource search,

Research the appraisal practice in a number of countries and Turkey

Interviews with Appraisal Companies and pros in the sector,

Research any organizations and associations about appraisal in world and in Turkey.

This thesis includes five parts. First part of this thesis includes conceptual description and ideas of real estate appraisal. In this particular level; library & source search can be used as a method while data gathering about the appraisal practice in several countries and Turkey. There are lots of organizations and organizations about appraisal all around the globe; such as Appraisal Institute (AI), International Valuation Criteria Committee (IVSC), The Western Band of Valuers (TEGoVA), American Society of Appraiser (ASA), Councelors of PROPERTY (CRE) and etc. Publications of these institutions are rewieved.

Second part of the thesis includes the valuation methods and valuation process step by step. This stage includes library, tool and e-sources research about appraisal such as The Appraisal Journal, Journal of PROPERTY Literature, PROPERTY Review and etc. In addition, publications of the appraisal institutions are rewieved.

Third part of this thesis includes the situation investigation of the true Estate Appraisal in Turkey. For this function, interviews will be made both with appraisal companies and pros in the sector. Interviews will analyse the use of appraisal to specify the issues, anticipations and etc. The goal of interviews is to discover what is currently ongoing in appraisal practice. In this stage, interviews will also include the investigation of any organizations -like Capital Boards of Turkey- and committees for their assignments, purposes in appraisal sector.

Fourth part of this thesis carries a case study. This case study investigates benefits and drawbacks of valuation techniques for specified real estates in a chosen sample area in Ankara. Within this level, each valuation technique is applied and the email address details are compared. The comparison results are being used to define the most suitable technique for each kind of real real estate.

Finally, the final outcome part of the thesis includes a general analysis about "PROPERTY Appraisal and Appraisal Practice in Turkey".

General Strategy and Definitions

Appraisal of Real Estate

Appraisal is a professional appraiser's thoughts and opinions of value. The preparation of an appraisal include research into market areas; examination of information highly relevant to a house; and the data, experience, and professional judgment of the appraiser.

Appraisals may be needed for any type of real property, such as single-family homes, apartment complexes, office buildings, shopping centers, commercial sites, and farms. There are many reasons for doing a genuine property appraisal whenever real property is sold, mortgaged, taxed, covered by insurance, or developed. For example, appraisals are prepared for:

Mortgage lending purposes

Tax assessments and appeals of assessments

Negotiation between buyers and sellers

Government acquisition of private property for general population use

Business mergers or dissolutions

Lease negotiations

Real property appraisal is the task of determining the potential price of a site or building in case of deal and also important for investment decisions, for real estate funds and job developments.

Fisher and Martin described real real estate as an discovered parcel of land, including improvements, if any. In addition, all long lasting building parts (plumbing, electro-mechanical wiring, heating systems, etc. , ) as well as built-in items (cabinets, elevators, etc. ) are usually considered area of the real estate. Fisher and Martin also defined real property as the interests, benefits and protection under the law inherent in the possession of real estate.

Pagourtzi and Assimakopoulos also defined real property as all the pursuits, benefits, rights and encumbrances natural in the ownership of physical real house, where real property is the land together with all improvements that are completely affixed to it.

According to The Uniform Specifications of Professional Appraisal Practice (USPAP), appraisal is

"An analyses, thoughts and opinions or conclusion associated with the type, quality, value or power of specified interests in, or aspects of, identified real house. In this utilization, appraisal covers a variety of tasks, including valuation, consulting and review. "

Appraisal (Valuation) is the provision of the written view, independently and impartially made by a professional appraiser, setting up forth and justifying an judgment regarding the market value (by a specific time) of a property that is the subject of a real estate-related financial deal.

Appraisal Consulting is a report of nature, quality or power of your parcel of real estate or pursuits in real property when a value estimate is not necessarily required.

Appraisal Review is the take action or the process of studying a report prepared by another.

The desk from the 12th model of Appraisal of PROPERTY by Appraisal Institute clarifies the differences of the three conditions.

Table 2. 1. Contrast of the Terms: Appraisal, Consulting, Review



The take action or procedure for developing an view of value.


Appraisal will involve selective research into appropriate market areas, the Assemblage of pertinent data, the use of appropriate analytical techniques, and the application of knowledge, experience, and professional common sense to develop an appropriate treatment for an appraisal problem. The appraiser provides the consumer with an view of real property value that reflects all pertinent market proof.


An view of market value for a charge simple property, leasehold real estate, reservation easement, or other estate (to aid in mortgage loaning decisions, to assist in purchase or sales decisions, etc. )An view of investment value or various other properly identified value of the identified desire for real estate as of a given particular date (for insurance purposes, for relocation purposes, for property duty appeals, etc. )



The function or process of developing an evaluation, recommendation, or view to solve problems, where an thoughts and opinions of value is a component of the examination leading to the project results.


Current market activity and data are studied to form a final result that may not focus on a specific value indication. An appraiser produces a value judgment in an appraisal consulting assignment as part of the process of answering some other question about real property, such as whether a proposed use of confirmed property is economically feasible.


Economic feasibility studies

Marketability or investment factors that relate to proposed or existing developments

Land usage studies

Supply and demand studies

Absorption analyses



The action or process of developing and connecting an judgment about the grade of another appraiser's work.


Appraisal review procedures may be likened to an excellent control or auditing function. An assessment appraiser examines the information of other appraiser to ascertain whether their conclusions are steady with the data reported and other generally known information.


Field review, office review

Source: Appraisal of Real Estate, 12th Release, 2001:12

Real property appraisals conducted for those institutions need to check out valuation solutions that lead to market value estimation that is both provident and rational in relation to the physical and legal characteristics of the house appraised. The sales evaluation, income capitalisation and cost research methods are methods typically used to calculate the market value of real house. Calvin Lin (2007) suggested that real property appraisal methods can be divided into cost, sales contrast and income techniques. In section 2. 4 these appraisal methods will be discussed.

Value and Price

In common life ; there are several use types of the term "value", such as market value, use value, leasehold value, investment value, lively value, taxes value, insurable value and other types of value. Each conditions has another meaning and all of them will be explained in this section.

The Aim and Role of Appraisal

McParland, Adair, and McGreal (2002) discovered, many Europe have their own countrywide valuation specifications. The internationalization of real estate suggests a study of such specifications, because foreign shareholders need to understand the ideas that countrywide appraisers use.

Parker (1996) attempted to identify the main valuation methods adopted internationally, and the relative importance impacting on the capitalization rate. Dorchester and Vella (2000) also resolved the demands due to the globalization of real property activities and the importance of the introduction of the international valuation criteria. It is obvious that real real estate appraisal has converted into an international financial examination from the original assessment of local physical resources.

Calvin Lin (2007) mentioned that real estate appraisal techniques can usually be divided into cost, sales comparison, and income techniques.

The Valuation Methods

Sales Comparison Examination For Appraisal

Kummerow (1997) mentioned that the sales comparison methodology may misrepresent long-term value where there are speculative bubbles and temporary crashes. Tsukamoto (1999) examined the knowledge in Japan where in fact the bubble economy in the late 1980s was mainly caused by the shortcoming of Japanese appraisers and shareholders to properly calculate real estate value. The sales contrast methodology uses similar properties as the foundation for estimation. The merits of this methodology include its potential to reveal the property's market value, and its own relative simplicity. The disadvantages are that the appraised value may be inflated during durations of a bubble overall economy, and the changes are sometimes subjective. (Lin, 2007)

The cost procedure can be applied the reconstruction or substitute costs and the deduction of depreciation as the foundation for valuation. Objectivity is the well-recognized benefit of this technique. The major drawback is that this approach lacks market value and income awareness. The appraised value through this process thus often deviates from market value.

The income strategy discounts all the future net income to provide value. It reflects the fundamental value of the house based on the revenues and costs; therefore, this method targets the estimation of the income stream and the discount rate. The income procedure includes two routes: direct and yield capitalization. Income producing properties will be the major investment objects for Real Estate Opportunities Trusts (REIT), so the income approach seems to be the most appropriate method for REIT valuation.

Gorlow, Parr, and Taylor (1993) mentioned that the final reversion value should be approximated through the development costs of the comparable project. The cost approach can examine the engineering value; however, the appropriate conviction of land value of the final period still requires market or revenue information for evaluation. Hirota (1999) pressured that the income strategy should put more excess weight on the operating income than on the final reversion.

Income Capitalization Research For Appraisal

Cost Research For Appraisal

The Valuation Process

Data Collection

Data Evaluation (Market Research - Highest and Best Use Examination)

Application of the Valuation Methods

Reports of Defined Value

Appraisal of PROPERTY in Turkey

History and Present Situation of Appraisal in Turkey

Capital Markets Board of Turkey and Appraisal

The Methods of Appraisal that are being used in Turkey

The Position of Appraisal Companies in Turkey

Case Study

This research study will check out the negatives and the features of valuation techniques for particular real estates in a chosen test area in Ankara.


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