Land valuation is one of the most important things when a seller wants to determine the value of that land. There are many ways to value a piece of land. So about the matter“Regulations on land valuation of banks in Vietnam” Let’s find out with LSX in the article below.
Legal grounds
- Land Law 2013
What does land price mean?
According to Clause 19, Article 3 of the 2013 Land Law, the land price is defined as follows:
“Land price is the value of land use rights per unit area of land”
What are the principles and methods of land valuation?
In Article 112 of the 2013 Land Law; stipulate the principles and methods of land valuation as follows:
“1. The land valuation must ensure the following principles:
a) According to the lawful land use purpose at the time of valuation;
b) According to the land use term;
c) In accordance with the common land price on the market for the transferred land with the same use purpose, the winning price at auction of land use rights for places where there is an auction of land use rights or income from the use of land. land use;
d) At the same time, adjacent land plots with the same use purpose, profitability and income from similar land use will have the same price.
2. The Government shall prescribe land valuation methods.”
It can be seen that the determination of land prices must be adequate and consistent with the four criteria mentioned above. This principle helps to determine the land price close to reality, avoiding the occurrence of many land prices in the market, so if only one of the above criteria is missing or does not satisfy the provisions of the land law, it will not can be done. At the same time, the common methods of determining land prices are clearly specified in Article 4 of Decree 44/2014/ND-CP, contributing to more accurate land valuation than before.
“1. The direct comparison method is a method of land valuation through analyzing the prices of similar vacant land plots in terms of land use purposes, location, profitability, and infrastructure conditions. , area, shape, legality of land use rights (hereinafter referred to as comparable land parcels) that have been transferred on the market, won at auction of land use rights to compare and determine the price of the required land plot. pricing.
2. The subtraction method is a method of valuing land for a land parcel with assets attached to land by subtracting the value of assets attached to land from the total value of real property (including land value. and the value of assets attached to land).
3. Income method is a method of valuing land calculated by the quotient between the average net income earned per year per unit of land area and the average annual savings deposit interest rate up to the time of year. land valuation of 12-month-term VND deposits at state-owned commercial banks with the highest interest rates on savings deposits in the province.
4. The residual method is a method of valuing land for a land plot with potential for development according to the land use planning, construction planning or permitted to change the land use purpose for the highest and best use by a way of subtracting the estimated total cost from the total hypothesized development revenue of the property.
5. Land price adjustment coefficient method is a method of land price valuation by multiplying (x) the land price adjustment coefficient by the land price in the land price list issued by the People’s Committees of the provinces and centrally run cities. (hereinafter referred to as the People’s Committee of the province) promulgated.”
Regulations on land valuation of banks in Vietnam
With any valuation method, the first thing to do is to determine the process or steps that need to be taken to achieve the best results. Avoid rambling valuations, without a clear basis and not aiming for the right end. Especially in the real estate market, volatility is always hidden and not wrapped up in a specific range. It will be very difficult to value real estate accurately if the process and principles are not established from the beginning.
The bank, with a team of experienced appraisers in valuing land and strictly following the standards in real estate valuation, certainly cannot lack the implementation process.
Here are 6 steps that banks usually apply.
Step 1: Assess the current status of the property in terms of area, location, age, design, red book, certificates of ownership and land use or other relevant legal documents. After verifying the legitimacy of the property will go into valuation. This step is considered an important step to ensure the rights and interests of the bank in accordance with the law.
Step 2: Search for information about real estate properties from many different sources, in the same area or having similarities with each other and have had a recent purchase and sale transaction.
Step 3: Build a housing value framework suitable to the property being valued. Includes minimum, maximum, and average rates commensurate with the original rating.
Step 4: Select a number of properties that have the closest relationship to the property to be valued. Compare them with each other and proceed to adjust the price bracket again. In this step, the fluctuation of the asset’s price will be gradually narrowed. Because the comparison process has passed, the previous price bracket is only based on an overview.
Step 5: Analyze the actual market, the selling price of some places, as well as the strengths and weaknesses of the current real estate. The appraiser draws conclusions and adjusts the price bracket one more time. In this step, emphasis will be placed on which specific prices are most appropriate before making a final decision.
Step 6: Estimate the potential to increase or decrease the value of this property in the future. Synthesize information sources together to base the final decision.
Are the bank’s land valuation results close to the actual price?
There are many different ways of valuing real estate today, but are the final results when these methods are implemented independently and are the same and true to reality?
According to many experts, the real estate valuation of banks will usually be 10-20% lower than the actual value. The reason for this result is not because the bank does not have professional expertise, but it comes from the problem of risk. Banks must carefully calculate arising problems that may affect their interests. Therefore, you can take the results of the bank plus 10-20% of the property value to know the actual price.
However, the bank’s valuation results are still highly appreciated because of its accuracy. The bank not only gives you valuation advice, but also creates more trust and peace of mind. You can see this as a useful information channel in real estate transactions. If you do not need to mortgage your property at the bank, after surveying the information from here, you can agree with your partner to adjust the price accordingly.
Property valuation banks are likened to a unit that provides real estate appraisal services in the market. Help you save more time and effort than other valuation methods. Or when you use the appraisal service, you have to spend a small corresponding fee. In general, with each method has different advantages and disadvantages, the choice of which method to use depends on the needs and purposes of the person who needs to be assessed.
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Please see more
- Mortgage of agricultural land in Vietnam for bank loans
- Contents of the three-party contract with the bank by the laws of Vietnam
- Land valuation income method in Vietnam
Frequently asked questions
Rights of organizations with the function of consulting on land price determination:
a) Provide consultancy on land price determination in accordance with this Law, the Law on Prices and other relevant laws;
b) Request the consulting hirer to provide information and documents related to the consultancy on land price determination; receive service fees as agreed in the contract;
c) Unilaterally terminate or cancel the contract of consultancy on land price determination when the consulting hirer violates the conditions agreed upon by the two parties in the contract or as prescribed by law;
d) Other rights as prescribed by law.
Information on land prices transferred on the market, land prices won at auctions of land use rights, land prices in the land database, land prices on real estate trading floors, and land prices determined from expenses and income of the land plot must be objective and truthful.
If there is not enough information in the land valuation area, it is possible to collect information in the vicinity of the area with the land plot to be valued.
Determining land prices plays a very important role in the State’s land management. Because administrative management of the land plot is only managing the “body” of the land, while managing the value of the land plot is managing the “soul” of the land. Land pricing that accurately reflects the market value will have a great effect on ensuring revenue for the State and ensuring social justice. At the same time, the correct valuation of real estate, in particular land, will motivate the allocation of land – as a social resource – in a reasonable and efficient way.
In addition, the State often generates demand for land use for economic and social development investment projects, so land acquisition often takes place. In this case, the land valuation is extremely necessary to determine the compensation and support for the people whose land is recovered.
Conclusion: So the above is Regulations on land valuation of banks in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
