The real estate valuation report you receive may be a technical document of dozens of pages. For those reading a report for the first time, knowing what each section means, which figure should be trusted and why, and which terms are commonly used in the market is of vital importance. This guide explains the structure of a standard report prepared by an SPK-licensed appraiser and the basic terms it contains.
Summary: SPK-licensed valuation reports consist of the property identity, encumbrance and zoning information, physical features, sales comparison analysis, three valuation methods and the final value opinion. For the person reading the report, it is enough first to look at the summary page, then at the comparable table and the rationale for the final value; the remaining sections are technical documentation supporting this result.
1. Cover and Summary Information
The first pages of the report contain the property’s address, title information (block, parcel, sheet), the purpose of the valuation (sale, mortgage, sale to a foreigner, etc.) and the identity of the appraiser who prepared the report. This page also contains the valuation date and the final value summary. Many readers learn the result by looking directly at this page; however, to understand the analysis on which this value is based, the report must be evaluated in its entirety.
2. Property Identity and Title Record
This section conveys the property’s records in the land registry: its owner, surface area, character (such as land, field, garden, building), share status. The appraiser reflects this information in the report by verifying it from the records of the TKGM (General Directorate of Land Registry and Cadastre). If there is a discrepancy between the information shown in the title record and the actual situation, this too is separately stated in the relevant section of the report.
3. Encumbrances and Annotations
Encumbrances refer to every kind of right and obligation on the title. Frequently encountered types of encumbrance are:
- Mortgage: The property being shown as collateral against a debt. The mortgage placed for a bank loan is the most common example.
- Attachment: A seizure annotation placed in favour of a creditor by a court or enforcement decision.
- Easement: Use rights granted in favour of a neighbouring parcel, such as a right of way or a right to a water source.
- Annotation: Records such as a pre-emption right, a lease annotation or a family residence annotation.
The appraiser identifies the encumbrances and lists them in the report. The final value generally reflects the property’s market value independently of the encumbrances; however, whether the encumbrance significantly affects the value is also explained with reasons.
4. Location and Surroundings Analysis
This is one of the most subjective sections of the appraisal. The appraiser assesses the neighbourhood the property is in, the surrounding uses (residential, commercial, industrial), transport options, infrastructure services and planned or completed projects nearby. In tourist areas such as Bodrum, the sea view, the distance to a grove/forest and the conservation regime in the area are among the critical components of the location analysis. For this information you can examine the article titled the effect of zoning status and conservation areas on value in Bodrum.
5. Zoning Status
The property’s use type and development conditions in the zoning plan are set out in this section. The zoning status document the appraiser obtains from the municipality/relevant authority is added to the report. The main concepts to note:
- TAKS (Floor Area Ratio): The ratio of the area the building rests on at ground level to the parcel. If TAKS is 0.20, a building can rest on twenty per cent of the parcel.
- KAKS / Building Coefficient: The ratio of the total construction area to the parcel. If the coefficient is 0.40, a total of 400 m² of enclosed construction can be built on a 1,000 m² parcel.
- h max: The maximum permitted building height. In the conservation areas and natural conservation belts of Bodrum, this value is mostly restricted.
Zoning status directly determines the property’s development potential; if two parcels in the same location have different building coefficient values, their values can diverge significantly.
6. Building and Physical Features
For properties with a building on them, the appraiser documents the current condition of the building by carrying out an on-site inspection. This section contains:
- Gross area / net area: The gross area is the total building area including wall thicknesses; the net area is the actual usable area. Note which one is used in comparable comparisons.
- Building class and character: The building type and quality, such as reinforced concrete, masonry or timber.
- Physical depreciation: The value decline determined according to the building’s age and maintenance condition. A depreciation rate is applied in calculations using the cost method.
- Photographs and inspection notes: The appraiser documents what was seen on site with photographs; if there are problems requiring repair, they are stated in this section of the report.
7. Sales Comparison Analysis
In this section, which forms the basis of the market value approach, the appraiser presents in a table recent sale or offer information for properties with features similar to the property being valued. Adjustment coefficients are applied to each comparable: factors such as the superiority or weakness of the location, area difference, building age, fittings and view are shown as a plus or minus percentage. The average or weighted average of the adjusted comparable values is taken as the basis in the appraisal.
When reading the comparable table, checking the reasons for the adjustments and that the comparables are taken from the real market is the best way to understand the quality of the report. For the difference between the comparable-finding methods of bank appraisal reports and SPK valuation reports, you can refer to a separate source.
8. The Three Valuation Methods
In reports compliant with SPK regulations, three basic methods are applied; the result of each is reported separately:
- Sales Comparison Method: Value is reached on the basis of the market prices of similar properties. It is the primary method in residential and land appraisals.
- Cost Method: Calculated by deducting physical depreciation from the land value plus the rebuilding cost of the building. It comes to the fore particularly when no comparable can be found for distinctive or rare buildings.
- Income Capitalisation Method: Value is reached by applying a capitalisation rate to the rental income the property will generate. It is frequently used for commercial real estate, hotels and properties with a rental yield.
9. Final Value Opinion
The appraiser evaluates the results obtained from the three methods and, according to the nature of the property, the depth of the market and the reliability of each method, determines a final value. The report explains which method was taken as the basis and why, or how the methods were weighted. This reasoned paragraph is the most important section of the report; it reflects the appraiser’s market knowledge and professional judgement.
The final value is expressed in Turkish lira and is specific to the valuation date. In reports in a foreign currency, the parity is also stated. In high-value properties such as villa appraisal processes, it is standard practice to use all three methods and to compare them with reasons.
10. Appendices: Documents and Photographs
At the end of the report are a copy of the title deed, the zoning status document, the documents taken as the basis for the declared value, on-site inspection photographs and, where necessary, a map/sketch. These appendices ensure the verifiability of the appraisal; in reports submitted to the land registry office or the bank, they are expected to be complete.
Glossary of Key Terms
- Building coefficient (“emsal”): This refers both to similar properties (the sale comparable used for comparison) and is used in the sense of KAKS (the construction coefficient). Note the sense in which it is used according to the context.
- Encumbrance: All restrictions on the title, such as a mortgage, attachment or annotation.
- Depreciation: The loss of value due to the ageing and wear of the building. In the cost method it is deducted from the rebuilding cost.
- Final value: The final market value the appraiser determines by evaluating the three methods.
- h max: The maximum building height determined by the municipality or the relevant authority.
- Gross/net area: Respectively, the total area including walls and the usable interior area.
- TAKS/KAKS: The ground floor-area ratio and the total construction coefficient.
What Should You Pay Attention to When Reading the Report?
- Check the valuation date: if the report is old, market conditions may have changed. Reports submitted to the land registry office for a sale to a foreigner are valid for 3 months.
- Verify the appraiser’s licence information and the seal of the SPK-licensed organisation.
- Check that the adjustments in the comparable table are not left without reasons and that each row is explained.
- If the difference between the final value and the results of the three methods is large, read the rationale paragraph carefully.
- If you see a mortgage or attachment in the encumbrance section, ask your legal advisor or your appraiser how this affects your purchase process.
- Check whether the photographs reflect the inspection date and the property’s current condition.
For more information on these matters you can examine the article on the difference between a bank appraisal report and an SPK valuation report.
Frequently Asked Questions
How is the final value determined in a valuation report?
The appraiser makes the final value opinion by weighting the results obtained from the sales comparison, cost and income capitalisation methods according to the nature of the property. In the report the result of each method is shown separately, after which the appraiser, with a reasoned preference, either takes a single method as the basis or goes to a weighted average.
What does “encumbrance” mean and how does it affect value?
An encumbrance refers to all restrictive records shown in the title record, such as a mortgage, attachment, easement or annotation. The appraiser identifies these records and states them in the report; however, it is clearly expressed whether the value is cleared of encumbrances (encumbrance-free) or whether the restrictions have been taken into account.
What criteria are used in the sales comparison analysis?
The appraiser collects sale or offer information for properties with a similar location, size, building type and zoning status to the property being valued. Plus or minus adjustments for factors such as location, area, age and fittings are applied to each comparable. These adjustments are presented in the table with reasons.
What do TAKS, KAKS and h max mean in the report?
TAKS (Floor Area Ratio) shows the ratio of the area the building rests on at ground level to the parcel; KAKS (Floor Area Coefficient, the building coefficient) the ratio of the total construction area to the parcel; and h max the maximum permitted building height. These data determine the property’s zoning permit and therefore its construction potential, and directly affect the appraisal.
What is the difference between gross area and net area?
The gross area covers the total building area including walls and may include a share of the common areas. The net (usable) area is the living area remaining after the external wall thicknesses and the common areas have been deducted. Valuation reports show both figures; in comparable comparisons the same type of area is generally used.
How many days is a valuation report valid?
Reports submitted to the land registry office for foreign buyers are valid for 3 months from the date of preparation. In bank mortgage processes the institution sets the period according to its own policy; the report is generally expected to be used within 3 to 6 months. Reports prepared in accordance with SPK regulations are generally considered valid for 1 year.
Related Pages
- Bank Appraisal Report — how valuation works in the bank loan process
- Villa Appraisal Bodrum — the methods used in luxury home appraisal
- The Difference Between a Bank Appraisal and an SPK Report — the basic distinctions between the two report types
- The Effect of Zoning and Conservation Areas on Value in Bodrum — how zoning restrictions are reflected in the appraisal
For an appraisal request and a quote, you can reach us via the contact page.