The valuation of a property goes through a difficult process. Without professional help, property owners may be just as prone to under-price their property as they are to over-price it. So how is an accurate property price estimated and what methods are used to reach that assessment? Factors like the overall economic activity in the country, the volume of commercial activity in a particular area, location, the area's demographics, and amenities all play a role in determining the price.

FIVE METHODS OF VALUATION
When available, comparison - in other words, current market value - is the easiest way to have a clear idea of how much a property is worth. It works for plots of land as much as it does for apartments, shops, warehouses, or buildings. Real estate experts say they base their estimate on recent transactions concluded in the same area. Although this is the most widely used method of appraisal, it's not always possible as no two buildings have exactly the same features. There is also the rule of demand and supply. A second approach to valuation is the investment method. To obtain for the investor a return in the form of a specified net income, an appraiser may adopt a simple mathematical formula. For example, an investor who requires an annual return of 15 percent on his capital may consider putting $300,000 into a shop. To meet his requirements, the net income should be $45,000 (15 percent of $300,000). The appraiser factors the likelihood of receiving this rent when valuing the property.

RESIDUAL, PROFIT, AND THE REST
Another method of valuation is the residual approach, which is also based on a simple equation: The sale price of a completed building is equal to the cost of development plus a profit allowance. However, this method may not be as straightforward as it seems. To appraise the value of a plot of land, the appraiser gives an expert estimate of the value of the project that would be built on the plot; the appraiser then estimates the construction costs. The difference between the two figures is the residual for purchasing the land. A fourth approach is the business profit method. For example, if the owner of a gas station decides to move or open another gas station, and these two gas stations have the same traffic, the same number of gas pumps, etc., then similar sales should generate similar profits. The appraisal price - to the buyer - of the new site is set from this profit figure. Lastly, there is the cost-of-replacement approach. Where a piece of land has been dedicated for a specific purpose, such as a town hall, church, school or police station, the cost of providing the equivalent structure or service at a new location, should it become necessary to move, must be figured into the appraisal price. When available, statistics and known costs are used in any appraisal, otherwise it is based on market assessments and appraiser's assumptions.

A SWORN EXPERT IS NEEDED
A real estate appraiser is a sworn expert, or khabeer muhallaf, appointed by a Ministry of Justice decree who works on assignments allotted by a judge. This term khabeer muhallaf involves much more than pure real estate valuation. Courts often require the services and technical expertise of a sworn expert to help them reach appropriate and informed decisions when ruling in real estate cases. The job of sworn experts is not only to put a price on property but also to explain to the court the process that led to their conclusion. At the same time, sworn experts are free to market their services to the public.

AN EXPERT AT WORK
An appraiser's first task is to study the assignment and collect the necessary information about the property in question. The expert must obtain the property's real estate certificate or ifadah akariah, and a document on its urban planning and exploitation status, or irtifaq wa takhteet. The next step is to visit the site, examine the location, the size, land, and the project. The appraiser also examines adjacent locations and collects other information about the property and its neighborhood from the municipality or the mukhtar. The expert must prepare a field report and based on that report, a subsequent final report. The concluding report must include a preface that contains the objective of the assignment, a main section with all the collected and analyzed data, and a conclusion that sets forth the recommendation and estimates based on that analysis.

FEES: FROM $13 UPWARD
The judge who requests the services of an appraiser defines in the ruling a lump sum for the expert's services. This fee ranges from around LL250,000 ($166) to LL3 million ($2,000) based on an estimate of the amount of work and hours involved. The government had a rate of around LL20,000 ($13), given by the Ministry of Public Works for example, for each real estate appraisal. In such cases the fee is low because the number of assignments is usually high. Developers usually pay a lump sum based on the expert's experience and the difficulty of the assignment. For example, Healey & Baker, international real estate consultants, charge a minimum of $2,500, or 0.25 percent of the amount of their own appraisal. According to Patrimoine Consulting Firm, a lump sum of $300 to $700 is generally paid for the appraisal of an apartment or lot, provided no legal problems are associated with it. In other cases, where a legal study must be pursued due to seizure, renters' rights, landfill etc, the fee could climb to $3,000.