On November 18, in the showroom of Bene at 16 Strastnoy Boulevard, the RICS professional valuation group held a round table on the topic “FSO №7 and international practice of real estate valuation”. The main reason for organizing the discussion of the professional community was the approval on September 25, 2014 by the order of the Ministry of Economic Development of the Russian Federation of the Federal Appraisal Standard "Real Estate Appraisal" (FSO No. 7).
The discussion was attended by: Yuri Deryabin MRICS, Baker Tilly Rusaudit LLC, Nikolay Volovich, professor, vice president of the CIAO Partnership, member of the Council of the National Council for Appraisal Activities, Galina Bulycheva MRICS, Ph. D., Chairman of the Expert Council of the CIAO Partnership, Olga Kochetova МRICS, Director of the Russia and CIS Valuation Department, Knight Frank.
The speakers talked about the difficult process of preparing and agreeing on the Federal Standard, how FSO No. 7 complements the current valuation standards in Russia and how it relates to international real estate valuation standards. The speakers also touched upon the issues that the developers could not solve, and shared their experience in the application of professional standards for assessing RICS in the conditions of Russian reality.
The development of standards began back in 2003, then it was suspended, and at the end of 2013 - early 2014, work resumed already within the framework of the working groups created under the expert advisory council under the Ministry of Economic Development. Initially, the work on the standard was complicated by the lack of a single concept. Most specialists understand the shortcomings of the basic standards (FSO 1-2-3), as well as the standard for determining the cadastral value (FSO 4), which at that time were not subject to revision, and they wanted to correct and supplement their individual provisions within a single document.
Among the controversial issues concerning the discussed FSO 7, experts noted a provision that actually prescribes the mandatory analysis of NEI (most effective use) in the valuation of real estate. During the assessment process to establish the cadastral value, including when challenging the results of the cadastral valuation, NEI analysis may not be carried out, and the type of use of a built-up land plot or capital construction facilities should be considered based on actual use. In this case, the built-up land plot is assessed as undeveloped, intended for use in accordance with the type of its actual use.
The second point to which the specialists drew attention is clause 30 of the FSO-7, which speaks of the need to bring the final value of the value, indicating the judgment about the boundaries of the interval in which, in the opinion of the appraiser, this value may be. However, this must be done in the event that the assignment for the assessment does not indicate that the appraiser gives only the value of the cost as a single value without specifying the interval.
The meaning laid down by the developers of the standard in this paragraph is both to inform the customer about the possible size of the market range, errors associated with the final result, and to protect the interests of the evaluators. International standards, in particular the RICS Valuation Standards (Red Book), state that in the event of significant valuation uncertainties, the valuer must characterize them, identify and determine their impact on the results.
The participants of the round table concluded that the idea laid down in FSO-7 is good, but for its practical implementation it is necessary either to refine the standard itself, or to develop appropriate methodological recommendations that disclose these provisions. In general, the adoption of the FSO for real estate appraisal, of course, is a big step forward in terms of normative regulation of appraisal activity in Russia, its standardization, but we see that a number of issues, even at the most basic level, remained outside the scope of the standard, and, accordingly, there are over than work. Undoubtedly, the RICS members are involved in this work and will try to bring the most relevant international experience into domestic practice in terms of the performance of the bodies that regulate the assessment.
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