Real Estate Appraiser's Guidance: Valuation of Unfinished Projects

In our work, we often encounter projects that have been stopped for a long time for various reasons but have not been completed or have been completed but have not been completed and accepted. We call it unfinished project (unfinished building). How to correctly reflect the value of these unfinished projects has always been a difficult point in our work. In the normal work process, we often evaluate it as a project under construction.

Characteristics of unfinished projects

It is generally believed that the unfinished project only includes the value spent on the project, that is, the value of various consumption reflected in the progress and image of the project. It is quite different from the evaluation of completed real estate, pure land and materials prepared for the project.

Compared with the completed property, the characteristics of the unfinished project are: although the plot has been developed and the contents and standards of the construction property have been stipulated, the real estate has not been completed, so there are uncertain factors such as cost, construction period and project quality. Different from simple land evaluation, there are no uncertain factors of land use in the projects under construction, and the construction cost has been basically determined. Compared with materials simply prepared for engineering, it is not only the cost of building materials, but also the value of artificial input and potential market value. So it can be said that it is a real estate type between the three.

Two methods for evaluating unfinished projects

In view of the characteristics of unfinished projects, there are two methods to evaluate their market value. One is to evaluate the price according to the market value, which we call the image progress method, that is, to use the market comparison method to calculate the market price of the completed property, and then subtract the uninvested construction and development costs, and consider the uncertain factors; The other is based on the cost evaluation of the actual completion of unfinished projects, which we call cost method, that is, using market comparison method, residual method or replacement cost method, we can get the land price plus the input construction and development cost. Specifically, is the unfinished project evaluated according to the actual completion cost or the market price of finished products according to the percentage of completion progress? Let's take a look at the operation process of these two methods first.

1, pricing by market value-image progress method. That is, collect enough comparable sales data and evaluate the project image progress according to the market price of finished products.

The basic formula is:

Total price of unfinished projects = percentage of image progress × market unit price × total construction area ×( 1- tax preferential rate)

The interest rate includes marketing expenses and profits.

The above calculation formula seems simple, but to be truly accurate, we should pay attention to many problems.

(1) Accurately estimate the market unit price:

Because the uncompleted residential flats have stipulated the content and standard of housing property rights, in order to accurately estimate the market unit price, it is necessary to inspect the detailed information of future built houses from the existing uncompleted residential flats. We think we can start from the following aspects:

Understand the legality and basic information of property development, such as parcel area, building area, building use, etc.

Understand the qualification, financial status, project payment and supervision of real estate developers;

Understand the building specifications and sub-standards of decoration documents of the property;

Understand the possibility of realizing engineering standards: from the aspects of construction team qualification, similar projects, management personnel quality, workers' salary payment, etc.

Understand the situation of the construction site: from the project image progress, time limit for a project plan, the quality of the built project.