Examples of calculating accumulated depreciation of real estate. External (economic) wear and tear of property complexes of industrial enterprises. Calculation methods (2). Methods for calculating external wear

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Methods for calculating physical wear and tear

Several methods can be used to assess accumulated physical wear and tear, which

are the most common.

2. Determination of wear and tear using the lifespan method of an object and its elements.

4. Determination of wear and tear by the volume of repair work required to restore worn structural elements and devices.

5. Expert method.

6. Probabilistic method.

1. Inspection of the actual state of the object as a whole, its structural elements and engineering equipment (standard method).

Using standard calculation method physical wear and tear is calculated in proportion to the ratio of the actual and standard service life of the property as a whole or for its structures and elements separately. The actual service life of structures and elements is determined from the date of commissioning of the assessed object or from the date of repair (replacement). Standard service life can be taken into account for two types of structures and elements: long-lived and short-lived.

Long-lived elements include building structures that form the load-bearing frame of a building. Their standard service life coincides with the standard service life of the building as a whole. Short-lived elements include building structures that must (or can) be replaced repeatedly over the life of the property.

This method involves the use of various regulatory instructions at the intersectoral or departmental level. For example, “Rules for assessing the physical deterioration of buildings” departmental construction standards of the VSN. These instructions (rules) are widely used in BTI for the purpose of assessing the physical deterioration of residential buildings. These rules describe the physical wear and tear of various structural elements of buildings and their assessment.

Identification of physical wear and tear of structural elements and engineering systems is carried out through a visual and instrumental full-scale inspection of the building and is assessed by comparing the identified signs of physical wear and tear with their quantitative values, which are given in the VSN.

2. Determination of physical wear and tear using the lifespan method.

For this method, there is a certain conceptual apparatus: physical life span, economic life span, effective age, standard life span.

Effective age Tef is the age shown by the condition and usefulness of the building. The effective age may be less than the actual age if the building was maintained at a high level or was reconstructed. Conversely, if a building has been poorly maintained, its effective age may be greater than its actual age. The effective age is established based on a visual inspection of the subject property and is based on the experience and judgment of the expert appraiser.

Standard service life T norms – the normatively established duration of operation of the building and its elements, subject to the rules and terms of maintenance and repair.

The amount of wear is expressed by the formula:

This method has a number of disadvantages:

Differences in the economic life of the building as a whole and the physical life of short-lived elements are not taken into account;

Determining the effective life and economic life is subjective on the part of the appraiser.

3. Determination of wear by dividing it into types of wear.

When applying this method, one should consider removable and irreparable physical wear of short-lived and long-lived elements of the building.

Separate calculations are made for the wear of short-lived and long-lived elements, followed by summation.

To apply the breakdown method when determining accumulated wear and tear, it is necessary to have data on the cost of new construction, broken down by structural elements, as a calculation base.

Removable physical wear Usually attributed to poor maintenance, it is therefore also called deferred repairs. The typical buyer is expected to make immediate repairs to restore the structure to normal performance (cosmetic repairs, restoring areas of leaking roofing, repairing utility equipment, etc.), and it is assumed that the items are restored to new or nearly new condition. The amount of correctable physical deterioration is equal to the cost of restoring the building element to a state of normal operation.

Unrecoverable physical wear and tear corresponds to positions the correction of which is currently practically impossible or economically impractical. The amount of this type of wear and tear is determined based on the difference between the total replacement or replacement cost and the amount of removable physical wear and tear.

For the purpose of calculating wear, elements of a structure that have irreparable physical wear are divided into long-lived and short-lived.

For long-lived elements, the expected residual life coincides with the residual economic life of the entire structure. Short-lived elements have less residual economic life than the entire structure.

To estimate irreparable physical wear in short-lived elements, the difference between the total replacement or replacement cost of the element and the amount of correctable wear of the element is multiplied by the ratio of the actual age to the total physical life of the element.

In this case, the overall physical life of the element is determined from reference data, taking into account periodic repairs and maintenance of normal operational characteristics.

After determining the values of removable physical deterioration and the sum of the replacement cost of short-lived elements with irreparable physical deterioration, it is necessary to subtract these values from the total replacement or replacement cost to determine the basis for calculating irreparable physical deterioration in long-lived elements.

Cost of permanent physical wear and tear in long-lived elements is calculated as the ratio of the actual age of the building to the total physical life of the building, multiplied by the residual replacement or replacement cost of the long-lived elements (previously determined base).

The overall physical life of a building is determined depending on the type of main structural elements for different categories of buildings according to durability.

4. Determination of physical wear and tear based on the volume of repair work.

This method is also called the cost method. Its essence lies in determining the costs of recreating building elements. Briefly this can be expressed as a formula:

where C str is the full replacement cost of the building elements being repaired, determined by the estimate for construction and installation work or according to the installation and installation work plan;

With repair - the cost of repairs, determined by the repair estimate.

This method is quite labor-intensive.

5. Expert method.

Main difference expert method from the normative is that withThe service life (percentage of wear) of elements and the building as a whole is assigned based on expert data.

6. Probabilistic method.

Probabilistic method calculation allows you to find the parameters of physical wear and tear under conditions of uncertainty in the initial data. The computational algorithm models certain input parameters as random variables on each implementation. The choice of the number of implementations depends on the required accuracy of the results.

The following can be selected as simulated random variables:

Service life of short-lived elements;

Overall service life of the building;

Element wear percentage.

Determination of functional wear

Signs functional wear in the building being assessed, as a rule, there is a discrepancy between its space-planning and structural solutions to modern standards, including the equipment necessary for the operation of the building (structure). Functional wear is divided into removable and irreparable.

The main methods used in assessing functional wear:

– breakdown method;

– capitalization of rental losses;

– capitalization of excess operating costs necessary to maintain the building in proper order.

TO removable functional wear includeloss of value as a result of non-compliance of the project, materials, construction standards, and design quality with modern market requirements for these items. Similar to repairable physical wear and tear, repairable functional wear and tear is measured by the cost of correcting it.

Removable functional wear is caused by:

Disadvantages that require adding elements;

Disadvantages requiring replacement or modernization of elements;

- “super-improvements.”

Disadvantages that require addition include items that are not present in the existing structure, and without which the structure cannot meet modern standards. A quantitative measure of reversible functional deterioration due to deficiencies requiring addition is the difference between the cost of making the required additions at the time of the appraisal and the cost of making the same additions if they had been made during construction of the appraised property.

Deficiencies that require replacement or modernization of elements include items that still perform their functions, but no longer meet modern market standards. Reversible functional wear due to items requiring replacement or modernization is measured as the cost of existing items, taking into account their physical wear, minus the cost of returning materials, plus the cost of dismantling existing items, and plus the cost of installing new items. In this case, the cost of returning materials is defined as the cost of dismantled materials and equipment when used at other facilities.

Towards “ultimate improvements” include positions and elements of the structure, the availability of which is currently inadequate to modern requirements of market standards. Reversible functional wear and tear due to “over-improvement” is measured as the current replacement cost of the over-improvement item, minus physical wear and tear, plus the cost of dismantling and minus the return of materials, if any.

The concept of “over-improvement” is closely associated with a segment of the real estate market, where the same improvements can be considered both appropriate for a specific segment and excessive from the point of view of a typical user.

The economic inexpediency of spending on eliminating the shortcomings of space-planning and design solutions allows us to judge the signirreparable functional wear.

is determined by the replacement cost of missing, obsolete or redundant elements, on the one hand, and losses from them, on the other. A loss refers to either a net loss of income or additional operating costs.

Unrecoverable functional wearcalled:

Disadvantages due to items not included in the cost of new construction, but which should be;

Disadvantages due to items included in the cost of new construction, but which should not exist;

- “super-improvements.”

Unrecoverable functional depreciation due to items not included in the cost of new construction is measured as the net income attributable to that deficiency capitalized at the capitalization rate for buildings, minus the cost of the items if they had been included in the cost of new construction.

The calculation of irreparable functional wear and tear due to deficiencies does not depend on whether replacement or replacement cost is taken as a basis.

Unrecoverable functional depreciation due to items that are not included in the cost of new construction, but which should not be, is measured as the present cost of new, minus attributable physical depreciation, minus the cost of what was added (that is, the present value of the additional costs associated with having the item).

Functional obsolescence in its extreme form can significantly affect the value of the property being appraised.

Determination of external (economic) wear and tear

Economic (external) obsolescence or environmental obsolescence , is caused by factors external to the property and is always considered unavoidable because the magnitude of the potential costs makes it unsustainable to purchase surrounding properties and remove associated harmful elements just to increase the value of one affected property.

Economic wear and tear determines the decrease in the utility of a property as a result of changes in external factors. Such factors could be congested streets or an industrial plant located in a residential area or nearby. This could also be the location of the object. Economic obsolescence is irremovable, since the cost of it is many times greater than the increase in value after eliminating external factors. But economic wear and tear can also be temporary, for example, a decline in activity in the real estate market.

External wear and tear is unique to real estate due to its fixed location. The impact of a property's surroundings on its value can be measured through the valuer's intuition through the effective age of the building. But the most reliable result of the amount of economic depreciation can be provided by a direct measurement of the market reaction to changes in the property itself and its environment. To assess economic wear and tear, the following methods can be used:

Rent loss capitalization method

The application of this method requires the availability of data on rent (annual rent) for comparable properties. The sequence of analysis is as follows.

1. The amount of rental losses is determined as the difference in rent under stable and changed external conditions.

2. From the resulting value, the share of rental losses attributable to the building is isolated. What is meant here is that part of the rent is paid on the land plot.

3. The allocated share of rental losses is capitalized (divided by the capitalization coefficient), based on the established capitalization rate for similar buildings.

Comparative sales method

The comparative sales method is based on the analysis of available price information on recently sold similar properties (paired sales).

The algorithm for applying the comparative sales method is as follows.

1. Comparable objects to the object being assessed are determined.

2. Differences in objects are corrected, excluding external factors.

3. The difference in market values after adjustment is attributed to economic depreciation.

In some cases, the method of comparative sales analysis makes it possible to determine the total accumulated depreciation, as a rule, of a typical valuation object. In practice, this method is used only if reliable information is available.

Lifetime method

This method can be used if there is a tendency for a sharp reduction in the remaining economic (physical) life of the property due to demolition. An example would be the demolition of real estate for the construction of a bridge, highway, or redevelopment. When calculating the total accumulated depreciation, a predominant share is given to economic depreciation caused by external factors. The share of other types of wear will be small, so there is every reason to interpret the total accumulated wear as economic wear.

Calculation of depreciation of a property

Depreciation in valuation is defined as the loss of the usefulness of an object, and therefore its value, for any reason. Depreciation allows adjustments to be made between the value of a specially selected new building and the actual value of the property being assessed.

The most widely used methods for calculating the total depreciation of a property are:

Splitting method

There are 3 types of wear and tear: physical, functional and external.

Physical wear and tear refers to any physical aging of a building, up to the destruction of structures. In assessment practice, two types of physical wear and tear are considered: removable and irreparable.

Removable physical wear and tear - assumes that the costs of its elimination do not exceed the potential benefits (increase in the value of the object) for the investor. Removable physical wear and tear includes routine repairs.

Irremovable physical wear and tear is characterized by an increase in the costs of repairing objects over the added value of the object being assessed.

To determine irreparable physical wear and tear, structural elements are divided into:

Long-term (engineering systems, foundations, plumbing, electrical systems, frames, walls)

Wear items (roofing, gutters, trim)

Before assigning a building element to one or another group indicated above, it should be taken into account that:

The service life depends on the building materials used and the technology used to perform the work;
The structural elements of the building are technically interconnected.

Wear-out elements include those that are replaced many times during the life of the facility.

An engineering method can be used to determine irreparable physical wear and tear.

After determining the depreciation of short-term assets, the costs of acquiring short-term assets should be subtracted from the total cost of reproduction of the object.

Functional wear arises if some functions of the property do not meet modern standards.

If repairable wear is associated with an obsolete element, then wear is measured by the cost of replacing it.

Irremovable functional wear and tear is associated with a decrease in the value of an object due to a lack or excess of certain quality characteristics (poor layout, too dense buildings, inconvenient location of the building, lack of access to the building)

Calculation of irreparable functional wear and tear can be carried out using the method of capitalizing rental losses.

External (economic) wear and tear arises under the influence of factors external to the property.

The most typical factors include:

Nearest natural sites
Condition of the surrounding area
Neighboring property
Competition in the real estate market
Social situation
Distance from places of work
Infrastructure development

The economic depreciation of a property can be measured by a decrease in rents relative to similar properties.

Economic depreciation can also be determined by the paired sales method. Real estate objects should be compared, one of which was influenced by an external factor, and the other was not affected by environmental factors.

Lifetime method

The economic life of a property is the period of time during which improvements contribute to the value of the site.

The physical life span is the period of time during which the structure actually exists and is suitable for habitation or work in it.

The effective age of a structure is based on an assessment of the appearance, physical condition and economic factors of its surroundings.

The remaining economic life of a structure is the period of time from the date of valuation to the end of the economic life of the structure.

I/VS = EV/TS,

Where I is wear, %;

EV – effective age, years

VS – replacement cost, %

TS – typical economic life, years

I = EV/(EV+OS),

Where OS is the remaining economic life, years.

Market sampling method

This method is based on comparable sales information. The wear and tear of the assessed object is determined in the following sequence:

1. Collection of analytical information about recently sold similar properties

2. Determination of the cost of a plot of land for each analogue object

3. Determining the cost of improvements by subtracting the cost of land plots from the price of sold analogues

4. Determination of the replacement cost without taking into account the depreciation of each analogue object as of the valuation date.

5. Determination of depreciation by subtracting from the replacement cost (stage 4) the cost of real estate (stage 3)

6. Determination of the effective age of analogue objects

7. Determination of the average annual wear by dividing the resulting wear (step 5) by the effective age of the corresponding object

8. Determination of the average annual percentage of depreciation by dividing the average annual depreciation by the replacement cost of improvements.

This process should be repeated several times depending on the number of analogs selected

The total amount of wear can be divided into physical, functional and economic wear. Physical and functional wear and tear are determined by inspection of the building, and their values are subtracted from the total wear and tear. The result is the value of economic depreciation.

Stage 3.

Depreciation is a decrease in the value of a property due to various reasons.

The concept of “wear and tear” used in valuation activities must be distinguished from the concept of “depreciation” used in accounting. “Depreciation” in accounting is the process of distributing the initial costs associated with the acquisition of an object over its entire service life, without determining its current value; in valuation activities, “wear and tear” is considered as the main factor for determining the current value, regardless of its original actual cost.

In addition to this distinction, it is also necessary to distinguish between the term "depreciation" used in the cost approach to real estate valuation and the "decline in property value" used by Ellwood in mortgage-investment capitalization.

With the cost approach, depreciation is determined in dollars at the current exchange rate in comparison with the current cost of reproduction of the object, and for Ellwood, with its subsequent resale. Ellwood also makes no attempt to distribute the amount of decline in the value of an object among its individual components.

In the cost approach, depreciation is used to account for differences in the characteristics of the new property and the actual property being valued. Accounting for the depreciation of an object is a kind of adjustment to the cost of a newly reproduced building (reproduced using the cost approach) in order to determine the value of the assessed object.

There are three types of wear and tear: physical, functional (or moral) and external (or economic).

Physical deterioration reflects changes in the physical properties of a property over time. For example, defects in structural elements.

Physical wear is of two types: the first occurs under the influence of operational factors, the second type - under the influence of natural and natural factors.

Physical wear and tear is taken into account in depreciation rates. In case of deviations in the normal operating conditions of the facility (earthquake, flood, etc.), correction factors are used, determined by experts.

There are four methods for calculating the physical depreciation of buildings: expert, cost, regulatory (or accounting) and the method of calculating the life of the building.

The percentage of physical wear and tear, for example, of a residential property, assessed by an expert method, is determined on the basis of the “Rules for assessing the physical wear and tear of residential buildings VSN - 53-86 Gosgrazhdan-Stroy”.

The service life of buildings as a whole depends on the durability of its components. Physical wear and tear of building elements is calculated using the formula:

Specific gravity of structural element i x% element wear i

The physical wear and tear of the entire building is determined as the weighted average of all elements of the building (see Table 3).

Table 3

Calculation of physical deterioration of a building

Based on the age of the building and its condition, the physical deterioration of the building amounted to A% of its replacement cost.

This method of determining the physical deterioration of a building can be called “expert”. It is usually used when taking inventory of real estate.

The appraiser also needs to be aware that there is reparable physical wear and tear and irreparable physical deterioration.

Removable physical deterioration assumes that the cost of ongoing repairs is less than the added value of the object.

Unrecoverable physical deterioration is considered when the cost of correcting the defect exceeds the value that would be added to the object. Any defect of an object can be corrected, but if the costs of correction exceed the benefits received, then the wear and tear is considered irreparable.

To determine irreparable physical wear and tear, building elements are divided into two categories: long-term and wear-and-tear. The wear of long-term elements, such as foundations, walls, floors, etc., can be calculated in groups by calculating their effective service life and the remaining physical life under real conditions.

Another method for calculating the physical wear and tear of long-term elements is to determine the cost of reproduction of building elements (or the cost method), presented in Table 4.

Table 4

Cost method for determining physical wear and tear"

In this case, through inspection, the percentage of wear of each element of the building is determined, which is then translated into value terms.

A more accurate adjusted cost method for calculating physical depreciation is obtained when the percentage of depreciation of building elements is determined as a weighted average.

The second category, the category of rapidly wearing elements of a building, includes those elements whose service life is shorter than the estimated economic life of the building. These include roofing, decorative finishing, painting, etc., i.e. those elements that can be repaired (restored) through routine repairs.

Methods for calculating physical deterioration for this category of building elements are similar to those used above for assessing physical wear.

There is also a regulatory (or accounting) method for determining the physical deterioration of buildings. It involves the use of uniform depreciation rates for the complete restoration of fixed assets in the Russian Federation, approved by Resolution of the Council of Ministers of the USSR of October 29, 1990 No. 1072.

Functional wear and tear of the object.

Functional obsolescence is when an object does not meet modern standards in terms of its functional usefulness. Functional obsolescence can manifest itself in the outdated architecture of a building, in the convenience of its layout, volume, engineering support, etc. Functional obsolescence is due to the influence of scientific and technological progress in the field of architecture and construction. Functional wear and tear in domestic practice is called obsolescence.

Functional wear, as well as physical wear, can be removable and irreparable. Removable functional wear can include the restoration of built-in cabinets, water and gas meters, plumbing equipment, floor coverings, etc. The criterion for whether wear is removable or not is a comparison of the amount of repair costs with the amount of additional cost received. If the additionally received cost exceeds the cost of restoration, then functional wear is removable.

The amount of removable wear and tear is determined as the difference between the potential value of the building at the time of its assessment with updated elements and its value at the date of assessment without updated elements.

Irremovable functional wear and tear refers to a decrease in the value of a building due to factors related to the quality characteristics of the building. Moreover, there may be either an excess or a lack of quality characteristics. For example, in the rental market two-room apartments are in great demand compared to one-room apartments. The amount of this type of depreciation is calculated as the amount of losses from rent when renting out these apartments, multiplied by the multiplier of the gross monthly rent typical for this type of apartment (see Table 5). Thus, the amount of irreparable functional wear and tear is determined by capitalizing rental losses.

Table 5

Calculation of irreparable functional wear

This example illustrates a case where there was a lack of quality characteristics, i.e. One room was missing to generate more income than from renting out a one-room apartment.

An example of functional wear and tear, when there are excessive consumer qualities, can be the presence of so-called “excess elements”, when the residents of the house, adapting it “for themselves,” made some changes for their own convenience. For example, the creation of intercom or air conditioning systems. The cost of installing these elements totaled $30,000. And when appraising the house, these elements added only $25,000 to the house’s value. Thus, the loss from installing these elements amounted to $5,000. This loss will amount to the amount of irreparable functional wear and tear associated with excessive consumer qualities of the house.

To approximate the functional deterioration of an object, you can determine an adjustment factor to the replacement cost of the building.

The correction factor is the ratio of the architectural, design and operational parameters of the object being evaluated to the same parameter of a modern analogue. In the absence of an analogue, the correction factor is determined based on the lifespan of the object.

External (or economic) wear and tear.

External (or economic) wear and tear or external wear is a decrease in the value of a building due to a negative change in its external environment, caused by either economic or political factors. The reasons for external wear and tear are the general decline of the area in which the property is located, the actions of the government or local administration in the field of taxation, insurance and other changes in the market for employment, recreation, education, etc.

Significant factors influencing the amount of external wear and tear are close proximity to “unattractive” natural or artificial objects: swamps, wastewater treatment plants, restaurants, dance floors, gas stations, railway stations, hospitals, schools, enterprises, etc.

If physical and, to a certain extent, functional wear and tear can be eliminated by reconstructing or modernizing a building, then wear and tear caused by external influences cannot be eliminated in most cases.

A way to measure external wear and tear is to analyze paired sales, when two comparable objects are sold on the real estate market, one of which has signs of external wear and tear, the other does not.

The difference in prices will allow us to draw a conclusion about the amount of wear and tear from the external influence of the building under evaluation (see Table 6)

Table 6

Calculating External Wear Using Paired Sales Analysis

Another way to measure external wear and tear is to compare the rental income of two properties similar to the property being assessed , one of which is negatively affected. Capitalization of income losses from comparing these two objects will characterize the amount of wear and tear from external influences. Capitalization is carried out using the gross rental multiplier as it is done in table 5.9.

Determining the physical wear and tear of an object by calculating its lifespan.

Economic life is the period of time during which an object can be used for profit. During this period, improvements contribute to the value of the property; The economic life of a property ends when improvements made do not contribute to the value of the property due to its general obsolescence.

The physical life of an object is the period of time during which the building exists and one can live or work in it. The physical life span ends when the object is demolished.

Effective age is based on an assessment of the appearance, technical condition, and economic factors affecting the value of the object. Effective age is the age that corresponds to the physical condition of the property and takes into account the possibility of its sale. If, after a major renovation, a brick house that is 80 years old looks as if it were 15 years old, then the effective age of that house will be 15 years.

Chronological age is the period that has passed since the date the object was put into operation.

The remaining economic life of a building is the period from appraisal to the end of the economic life of the property. This period is usually used by the appraiser for valuation. Renovating and upgrading a property increases its remaining economic life. Changes in living standards can significantly reduce the economic life of a property. This phenomenon can be partially observed with “Khrushchev’s” five-story buildings.

Standard service life (or typical physical life) is the service life of buildings and structures determined by regulations.

The relationship between depreciation, replacement cost, effective age and typical economic life is expressed by the following relationship:

I/S- EV/TS E. Zh,

Where AND-wear;

Sun- replacement cost;

EV- effective age;

Tz Zh - typical economic life span.

This formula can be written as follows:

percentage of depreciation from replacement cost = EV/TC EZh.

Sometimes, for approximate calculations of wear and tear, appraisers can use the ratio of the chronological age to the standard service life of the building, expressed as a percentage.

The total (cumulative) wear and tear of an object is determined by summing up all three types of wear: physical, functional and external wear.

Depreciation is characterized by a decrease in the usefulness of a property, its consumer attractiveness from the point of view of a potential investor and is expressed in a decrease in value (depreciation) under the influence of various factors over time.

As the facility is used, the parameters characterizing the structural reliability of buildings and structures, as well as their functional compliance with current and, especially, future use associated with human life, gradually deteriorate. In addition, the value of real estate is no less influenced by external factors caused by changes in the market environment, the imposition of restrictions on certain uses of buildings, etc.

Depreciation (I) is usually measured as a percentage, and the monetary expression of depreciation is depreciation (O).

Depending on the reasons causing the depreciation of a property, the following types of wear and tear are distinguished: physical, functional and external.

Classification of depreciation of real estate objects:

Each type of wear is characterized by its division: removable and irremovable.

Removable wear- wear, the elimination of which is physically possible and economically feasible. At the same time, economic feasibility lies in the fact that the costs incurred to eliminate one or another type of wear and tear should help increase the value of the object as a whole.

Fatal wear– wear and tear that is either physically impossible or economically impractical.

When all designated types of wear are identified, they speak of the total accumulated wear and tear of the property. In monetary terms, total depreciation is the difference between the replacement cost and the market price of the valued object.
Based on the essence of these definitions, it can be argued that the total accumulated wear and tear is, first of all, a function of the lifetime of the object. Taking this circumstance into account, let us consider the essence of the main evaluative concepts characterizing this indicator:

Physical life building ( VF ) - determined by the period of operation of the building, during which the condition of the load-bearing structural elements of the building meets certain criteria (structural reliability, physical durability, etc.). The physical life of an object is laid down during construction and depends on the capital group of the buildings. Physical life ends when the object is demolished.

Chronological age(HV)- this is the period of time that has passed from the date the facility was put into operation until the date of assessment.

Economic Life (EJ) - determined by the operating time during which the object generates income. During this period, improvements made contribute to the value of the property. The economic life of an object ends when the operation of the object cannot generate the income indicated by the corresponding rate for comparable objects in this segment of the real estate market. In this case, the improvements made no longer contribute to the value of the object due to its general wear and tear.

Effective age (EV)) - determined on the basis of the chronological age of the building, taking into account its technical condition and the economic factors prevailing on the valuation date that influence the value of the assessed object. Depending on the operating characteristics of the building, the effective age may differ from the chronological age up or down. In the case of normal (typical) operation of a building, the effective age is usually equal to the chronological age.

Remaining economic life (REL)) of a building is the period of time from the date of valuation until the end of its economic life.

Wear calculation methods:

1. Physical deterioration - represents a gradual loss of the technical and operational qualities of an object originally laid down during construction under the influence of natural and climatic factors, as well as human activity.

The following methods for calculating the physical deterioration of buildings are distinguished:

Standard (for residential buildings);

Cost;

Lifetime method.

Standard method for calculating physical wear and tear

The normative method for calculating physical wear and tear involves the use of various normative instructions at the interindustry or departmental level. An example of such instructions is the “Rules for assessing the physical deterioration of residential buildings” VSN 53-86 of Gosgrazhdanstroy (State Committee for Civil Construction and Architecture under GOSSTROE of the USSR. Moscow 1990), used by the Bureau of Technical Inventory for the purpose of assessing the physical deterioration of residential buildings during technical inventory , planning major repairs of the housing stock, regardless of its departmental affiliation.

These rules describe the physical wear and tear of various structural elements of buildings and their assessment.

The physical wear and tear of a building should be determined using the formula:

Fф =

where Ff is the physical wear and tear of the building, (%);

Fi - physical wear i-ro of the structural element (%);

Li is the coefficient corresponding to the share of the replacement cost of the i-ro structural element in the total replacement cost of the building;
n is the number of structural elements in the building.

The shares of the replacement cost of individual structures, elements and systems in the total replacement cost of the building (in%) are usually taken according to the aggregated indicators of the replacement cost of residential buildings approved in the prescribed manner, and for structures, elements and systems that do not have approved indicators - according to their estimate cost.

Cost method for determining physical wear and tear

Physical wear and tear at the time of its assessment is expressed by the ratio of the cost of objectively necessary repair measures to eliminate damage to structures, an element, a system or a building as a whole, and their replacement cost.

The essence of the cost method for determining physical depreciation is to determine the costs of recreating building elements.

The described methodology allows you to calculate the wear and tear of elements and the building as a whole immediately in cost terms, which is more preferable than other methods for calculating physical wear and tear. In addition, since the impairment calculation is based on the reasonable actual cost of bringing worn-out items to “substantially new condition,” the result of this approach can be considered fairly accurate. Among the disadvantages inherent in this method, it is necessary to note the mandatory detail and accuracy of calculating the costs of repairing worn-out elements of the building.

Determination of physical deterioration of buildings using the lifespan method

Based on the essence of the previously discussed basic evaluative concepts characterizing the total accumulated wear and tear of a building from the point of view of its operation time, it can be argued that physical wear and tear, effective age and economic life are in a certain ratio. This relationship can be expressed by the following formula (1):

where: I(%) - wear as a percentage;

EV - effective age, determined by an expert based on the technical condition of the elements or the building as a whole;

VF - typical period of physical life;

RSFZ - the remaining period of physical life.

Or according to formula (2):

where: And (%) - wear as a percentage;

VF is a typical period of physical life.

The percentage of depreciation of elements or the building as a whole calculated in this way can be translated into monetary terms (depreciation):

O= BC *(I/100);

where: And - wear as a percentage; BC - replacement cost.

2. Functional wear

Signs of functional wear and tear in the building being assessed, as a rule, are the non-compliance of its space-planning and/or design solutions with modern standards, including various equipment necessary for the normal operation of the structure in accordance with its current or intended use.

Depending on the physical possibility and economic feasibility of eliminating the causes that caused functional wear, it is divided into removable and irreparable. The cost expression of functional wear is the difference between the cost of reproduction and the cost of replacement, since the calculation of the latter, based on its definition, obviously excludes functional wear from consideration.

· Removable functional wear

Removable functional wear and tear is usually determined by the cost of necessary reconstruction to facilitate more efficient operation of the property.

Reversible functional wear is considered to be caused by:

Disadvantages that require adding elements,

Disadvantages requiring replacement or modernization of elements,

Super improvements.

Disadvantages that need to be added, refer to elements of a building and equipment that are not present in the existing environment and without which it cannot meet modern operating standards. Depreciation due to these items is measured by the cost of adding these items, including their installation.

Disadvantages requiring replacement or modernization of elements, include positions that still perform their functions, but no longer meet modern standards (water and gas meters, etc.). Depreciation for these items is measured as the cost of existing elements, taking into account their physical wear, minus the cost of returning materials, plus the cost of dismantling existing ones and plus the cost of installing new elements. In this case, the cost of returning materials is defined as the cost of dismantled materials and equipment when used at other facilities (revisable residual value).

Towards super improvements include positions and elements of the structure, the availability of which is currently inadequate to modern requirements of market standards. Removable functional wear and tear in this case is measured as the current replacement cost of the “over-improvement” items minus physical wear and tear, plus the cost of dismantling and minus the salvage value of the dismantled elements.

An example of over-improvement would be a situation where the owner of a house, adapting it for himself, made some changes for his own convenience (investment value) that were not adequate from the point of view of a typical user. These include, for example, the redevelopment of the usable area of premises for a specific use, determined by the owner’s hobbies or his occupation. Removable functional wear in such a situation is determined by the current cost of bringing the changed elements to their original state. In addition, the concept of over-improvement is closely related to the segment of the real estate market, where the same improvements can be considered both appropriate for a specific segment and excessive from the point of view of a typical user.

· Unrecoverable functional wear

Irremovable functional wear and tear is usually caused by outdated space-planning and/or structural characteristics of the buildings being assessed relative to modern construction standards. First of all, the economic inexpediency of spending on eliminating these shortcomings allows us to judge the sign of irreparable functional wear. In addition, it is necessary to take into account the market conditions prevailing on the date of assessment in order for the building to adequately match its architectural purpose to its purpose.

3. External (economic) wear and tear

External depreciation is the depreciation of an object due to the negative influence of the external environment in relation to the object of assessment: the market situation, easements imposed on a certain use of real estate, changes in the surrounding infrastructure, legislative decisions in the field of taxation, etc. External wear and tear of real estate, depending on the reasons that caused it, in most cases is irreparable due to the unchanged location, but in some cases it can “remove itself” due to a positive change in the surrounding market environment.

Depending on the purpose of the assessment and, as a consequence, the underlying accuracy of the calculation procedures, there are several ways to determine the replacement cost:

Comparative unit method.

Component breakdown method.

Quantitative survey method.

Comparative unit method . The value of the appraised property is determined by multiplying the number of selected units of measurement (units of measurement can be 1 m3, 1 m2, 1 km, 1 pc., etc.) of the appraised object by the cost of one unit of measurement on the valuation date. The costs of units of measurement of standard objects are known and are contained in special information and analytical collections (Bulletin "KO - INVEST" and Collections of integrated indicators of replacement cost - UPVS).

An important step when using this method is the selection of a typical object (analogue). When selecting an analogue, it is necessary to take into account a single functional purpose, similarity of physical characteristics (class of structural systems), comparable chronological age of the objects being compared and other characteristics. Since in most cases the basis for comparison is the cost of a comparative unit not of an identical object, but of a close analogue, the cost of an object calculated using the comparative unit method will be considered replacement cost.

Component breakdown method . The difference between this method and the previous one is that the cost of the entire building is calculated as the sum of the costs of its individual building components - foundations, walls, floors, etc. The cost of each component is obtained based on the sum of direct and indirect costs required to construct a unit of volume. The cost of the entire building is calculated using the formula:

Szd =

where Сзд is the cost of construction of the building as a whole;

Vj is the volume of the j-ro component;

Cj - cost per unit volume;

n is the number of allocated building components;

Kn - coefficient taking into account the existing differences between the assessed object and the selected typical structure (for an identical object Kn-1);

Quantitative survey method . This method is based on a detailed quantitative and cost calculation of the costs of installation of individual components, equipment and construction of the building as a whole. In addition to calculating direct costs, it is necessary to take into account overhead costs and other costs. In other words, a complete estimate for the reconstruction of the assessed object is drawn up.

The quantitative survey method is the basis for applying the above methods for calculating replacement cost and shows the most accurate results in comparison with them, however, it is the most labor-intensive and requires the appraiser to have in-depth theoretical training and significant practical experience.

Determining the wear and tear of a property

Depreciation (I) is usually measured as a percentage, and the monetary expression of depreciation is depreciation (O).

Depending on the reasons causing the depreciation of a property, the following types of wear and tear are distinguished: physical, functional and external.

Classification of depreciation of real estate objects:

Each type of wear is characterized by its division: removable and irremovable.

Fatal wear– wear and tear that is either physically impossible or economically impractical.

When all designated types of wear are identified, they speak of the total accumulated wear and tear of the property. In monetary terms, total depreciation is the difference between the replacement cost and the market price of the valued object. Based on the essence of these definitions, it can be argued that the total accumulated wear and tear is, first of all, a function of the lifetime of the object. Taking this circumstance into account, let us consider the essence of the main evaluative concepts characterizing this indicator:

Chronological age (HV)- this is the period of time that has passed from the date the facility was put into operation until the date of assessment.

Effective age (EV) ) - determined on the basis of the chronological age of the building, taking into account its technical condition and the economic factors prevailing on the valuation date that influence the value of the assessed object. Depending on the operating characteristics of the building, the effective age may differ from the chronological age up or down. In the case of normal (typical) operation of a building, the effective age is usually equal to the chronological age.

Remaining economic life (REL) ) of a building is the period of time from the date of valuation until the end of its economic life.

Wear calculation methods:

1. Physical deterioration - represents a gradual loss of the technical and operational qualities of an object originally laid down during construction under the influence of natural and climatic factors, as well as human activity.

The following methods for calculating the physical deterioration of buildings are distinguished:

Standard (for residential buildings);

Cost;

Lifetime method.

Standard method for calculating physical wear and tear

These rules describe the physical wear and tear of various structural elements of buildings and their assessment.

The physical wear and tear of a building should be determined using the formula:

Fф =

where Ff is the physical wear and tear of the building, (%);

Fi - physical wear i-ro of the structural element (%);

Li is the coefficient corresponding to the share of the replacement cost of the i-ro structural element in the total replacement cost of the building; n is the number of structural elements in the building.

Cost method for determining physical wear and tear

The essence of the cost method for determining physical depreciation is to determine the costs of recreating building elements.

Determination of physical deterioration of buildings using the lifespan method

where: I(%) - wear as a percentage;

EV - effective age, determined by an expert based on the technical condition of the elements or the building as a whole;

VF - typical period of physical life;

RSFZ - the remaining period of physical life.

Or according to formula (2):

where: And (%) - wear as a percentage;

VF is a typical period of physical life.

The percentage of depreciation of elements or the building as a whole calculated in this way can be translated into monetary terms (depreciation):

O= BC *(I/100);

where: And - wear as a percentage; BC - replacement cost.

2 .

Removable functional wear

Removable functional wear and tear is usually determined by the cost of necessary reconstruction to facilitate more efficient operation of the property.

Reversible functional wear is considered to be caused by:

Disadvantages that require adding elements,

Disadvantages requiring replacement or modernization of elements,

Super improvements.

Unrecoverable functional wear

3. External (economic) wear and tear

Comparative approach to real estate valuation

The comparative approach to real estate valuation is based on information about recent transactions with similar properties on the market and comparison of the property being valued with analogues. Next, amendments are made to take into account the differences between the evaluated object and its analogues. This allows you to determine the selling price of each analogue as if it had the same basic characteristics as the property being valued.

Considering that this approach to real estate valuation is based on a comparison of sales, it is called comparative. Due to the fact that the approach under consideration uses data on transactions on the market, it is also called market-based.

The fundamental principle of the comparative approach to real estate valuation is the principle of substitution.

The following main ones can be identified assessment stages real estate using a comparative approach:

1. At the first stage, the state and development trends of the real estate market and especially the segment to which the property belongs are studied. Properties that are most comparable to the property being valued and that have recently been sold are identified.

2. At the second stage, information on analogue objects is collected and verified; the collected information is analyzed and each analogue object is compared with the one being assessed.

3. At the third stage, amendments are made to the sales prices of comparable objects.

4. At the fourth stage, adjusted prices of analogous objects are agreed upon and the final value of the market value of the property is derived based on a comparative approach.

At the first stage of real estate valuation, a comparative approach is used to study the state of the real estate market and its development trends, segment it and determine which market segment the property being valued belongs to. Further, in this segment, according to certain criteria, objects that are most comparable to the one under study are identified (analogue objects).

Market segmentation is the process of dividing the market into sectors (segments). The division occurs into sectors that have similar objects and subjects.

Objects must be similar in purpose of use, quality, transferred rights, and location.

Subjects must be similar in solvency, financing capabilities, and investment motivation.

Comparable properties must belong to the same segment of the real estate market as the one being valued; transactions with them must be carried out on conditions typical for this segment.

Exposure period- this is the time that an object must be on the market in order to be sold. The exposure period differs for different market segments.

So, in Moscow for residential apartments it is approximately one month, for office buildings - from one and a half to three months. If the object was sold for a period of time much shorter than the standard exhibition period, this most likely indicates that the price was underestimated. Conversely, if an item has been on the market significantly longer than the standard exposure period, the price is likely to be overpriced. In both cases, the transaction is not typical for the market segment and should not be considered comparable.

The main criteria when choosing comparable objects (analogues) are:

1) Ownership rights to real estate.

2) Financing terms.

3) Terms and time of sale.

4) Location.

5) Physical characteristics.

1. Property rights

Basically, real estate transactions involve the purchase of transferable rights to own and dispose of property. Full ownership is determined by market rent and current financing available. The title adjustment is nothing more than the difference between the market rent and the contract rent.

2. Terms of financing the transaction

If the conditions for financing a purchase-sale transaction of a real estate property are atypical (for example, in the case of full financing of a purchase-sale transaction), then in this case a thorough analysis is required, as a result of which an appropriate amendment is made to the price of this transaction.

3. Terms of sale and time of sale

The same can be said in relation to the conditions of sales themselves. Since it is difficult to calculate adjustments for financing and tax conditions, as well as for transferred legal rights and restrictions, conditions of sale, it is better, if possible, not to consider similar transactions for analysis and comparison. Otherwise, adjustments for these characteristics are made first.

Timing of sale is one of the main elements of comparable sales comparison. To adjust for this characteristic in the selling price of an analogue, it is necessary to know the trends in price changes in the real estate market over time.

4. Location

Location is also a very significant element in comparable sales comparisons. Making adjustments to location has a fairly significant effect on the value of the property being assessed.

Physical characteristics

The physical characteristics of the property mean the size, type and quality of materials, condition and degree of deterioration of the property and other characteristics, which are also adjusted.

Units of comparison

Because properties often vary in size and number of units, it can be difficult to compare sold properties with the property being valued; therefore, the available data must be reduced to a common denominator. This common denominator can be either a physical unit (price per sq. m.) or an economic one.

Different units of comparison are used by different segments of the real estate market.

Land comparison units:

Price per 1 ha;

Price per hundred square meters;

Price for 1 frontal meter:

Price per 1 sq. m.

Units for comparison of built-up areas:

Price per l sq. m. total area;

Price per 1 sq. m. net area subject to rent;

Price for 1 cubic meter m.

The gross rental multiplier or the overall capitalization ratio can be used as an economic unit of comparison when evaluating projects based on the ratio of income to sales price.

Classification and essence of amendments

Depending on the method of calculation and making adjustments for differences between the assessed object and a comparable analogue, the amendments are divided into:

1. Interest

2. Cost

Percentage adjustments , as a rule, are entered by multiplying the sales price of an analogous object or its unit of comparison by a coefficient reflecting the degree of differences in the characteristics of the analogous object and the object being valued. The reasoning here boils down to the following: if the valued object is better than a comparable analogue, then an increasing factor is added to the price of the latter. Otherwise, a reduction factor is applied to the price of a comparable analogue.

Percentage adjustments include, for example, adjustments for location, wear and tear, and time of sale.

Cost adjustments

A) Monetary adjustments made to the unit of comparison (1 hectare, density unit, 1 hundred square meters) change the price of the sold analogue object by a certain amount, which is estimated at the difference in the characteristics of the analogue object and the object being valued. A positive adjustment is made if the valued object is better than a comparable analogue. Otherwise, a negative adjustment is applied to the price of the comparable product.

Monetary adjustments made to the unit of comparison include adjustments for physical condition, as well as adjustments calculated by statistical methods.

b) Monetary adjustments made to the price of the sold analogue object as a whole change it by a certain amount, which is estimated at the difference in the characteristics of the analogue object and the object being valued. The reasoning for using positive or negative corrections is similar to the reasoning in point "a".

Monetary adjustments made to the price of the sold analogue object as a whole should include adjustments for the presence or absence of additional improvements (warehouse extensions, parking lots, etc.).

Calculation and amendments

To calculate and make corrections, many different methods are used, among which are the following:

Methods based on the analysis of paired sales;

Expert methods of calculation and amendments;

Statistical methods.

Paired sales method

A paired sale means the sale of two objects, ideally being an exact copy of each other with the exception of one parameter (for example, location), the presence of which explains the difference in price of these objects. This method allows you to calculate the adjustment for the above-mentioned characteristic and apply it to adjust the sales price of an analogue object comparable to the object of evaluation for this parameter.

The limited use of this method is explained by the complexity of selecting objects for paired sales, searching and processing a large amount of information.

Expert methods of calculation and amendments

The basis of expert methods for calculating and making adjustments, usually percentages, is the subjective opinion of an expert appraiser about how much worse or better the valued object is than a comparable analogue.

Let us denote the value of the valuation object as X, and take the selling price of a comparable analogue as equal to 1.0.

In this case, the reasoning boils down to the following: 1. The object is 15% better than the analogue, then the price of the analogue should increase by the same 15%:

X = 1.0 + 15% x 1.0 = 1.0 x (1 + 0.15) = 1.15

2. The appraised object is 15% worse than its analogue, the price of the analogue will decrease:

X = 1.0 - 15% x 1.0 = 1.0 x (1.0 - 0.15) = 0.85.

3. The analogue is 15% better than the evaluated object. The price of the analogue should decrease:

1.0 = X + 15% x X = X(1 + 0.15), X = 1/0.87.

4. The analogue is 15% worse than the object being evaluated. The price of the analogue should increase:

1.0 = X - 15% x X = X x (1.0 - 0.15), X = 1/0.85 = 1.18.

Expert calculation and adjustment methods are usually used when it is not possible to calculate sufficiently accurate dollar adjustments, but there is market information about percentage differences.

Statistical methods for calculating corrections

It must be said that when valuing real estate using the method of comparative sales analysis, in the process of making adjustments for differences between the object being valued and its analogue, it is not always possible to make a relatively accurate calculation of the likely price of the object. If you do not use methods for calculating corrections such as correlation regression analysis, you should introduce as few adjustments as possible for differences in the characteristics of the objects being compared. This primarily concerns corrections for physical differences (in particular scale corrections).

The essence of the method of correlation-regression analysis is the permissible formalization of the relationship between changes in the prices of a real estate object and changes in any of its characteristics.

The final stage The comparative approach to real estate valuation is the analysis of the calculations made in order to obtain the final value of the value of the property being valued. In this case it is necessary:

1. Carefully check the comparable sales data used for the calculation and their adjusted values.

2. Reconcile the adjusted values of comparable sales by calculating the weighted average.

The weighted average value calculated by the appraiser will be the probable sale price of the appraised object, which can be rounded within acceptable limits in each specific case.

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Examples of calculating accumulated depreciation of real estate. External (economic) wear and tear of property complexes of industrial enterprises. Calculation methods (2). Methods for calculating external wear

Determining the wear and tear of a property