PropertyDevelopment

exhibit A: Property Valuation

if we sell pelaez for P25m before the amnesty expires, we actually sold it for P81.5m because we saved P56.5m in estate taxes. if the money is used for a life saving medical emergency, then we sold pelaez at one hundred trillion, because life is priceless. P25m is just a number. the actual value depends on the usefulness to the seller and buyer.

one of my houses in vegas was appraised 2 years ago for $215k. so i put it up on the market for $215k and after a year i never got any offers. i lowered it to $180k and after 6 months still no offers. i lowered it to $160k and for the next 6 months got some inquiries but the buyers were only willing to pay $140k. i finally sold it for $140k last january as you can see in my fb posts. so it's really easy to sell a property. simply have it appraised and every 6 months keep lowering the price until you get some offers.

THE REAL VALUE OF A PROPERTY IS HOW MUCH BUYERS ARE WILLING TO PAY FOR IT. the appraisal value does not take into account the market forces. example if the zonal value is P40k/sqm, but because of the covid pandemic the economy collapses, the real value of the property could easily dive down to P10k/sqm.

did i lose $215k - $140k = $75k? the answer is no. in fact i gained $105k because i bought it only for $35k in 2012 (from my share of our house in ruus lane hayward). actually i gained $160k if i include my income from rental for the past 8 years. my point is to look at the bright side. to reduce our stress in deciding how much to sell our properties, we must be aware that, as what tita georgia told me, we all paid zero because it was lola and lolo who worked hard to acquire the properties.

it's also important to know the time value of money. many smart people are not aware of this. even my father who has 2 masters degree in economics was not aware of this until i lectured them about it (including tikay who is an architect and has been involved in property development all her life).

let's say you dream of taking your 10 year old child to hong kong disneland. the memories of that trip would be priceless, or it would be worth hundreds of millions or even billions because we are all going to grow old and die someday anyway and you can't take money with you to heaven. let's say you are trying to sell a property appraised at P30 million but after a year on the market buyers are only offering P20 million. so you wait and after 5 years, finally you get an offer of P30 million. you finally have money to go to hong kong disneland but unfortunately your child is now 15 years old and is not interested in micky mouse anymore and just wants to be with his girlfriend. you basically traded P10 million for hundreds of millions worth of precious memories which you could never take back. you can't rewind time so that your child will be 10 years old again.

someone might buy my vegas house for the appraised value of P215k 3 years from now, but what if 6 months from now i get diagnosed with cancer? can i still enjoy all my millions? of course not. that's called the time value of money.

there's also the OPPORTUNITY COST. i may have sold my house very low compared to the appraised value but 2 months later the pandemic happened which crashed the market. as you can see in my facebook posts, i was buying zoom, tesla and the vaccine stocks which all quadrupled since the crash and i made $80k. luckily real estate wasn't affected but if it was, i would have been protected because i got to sell one of my properties before the crash.

it's possible the philippines can experience a real estate crash. not even the smartest person can predict what will happen. the only thing we can do is sell some properties to lock in some of our gains and avoid the pain. the recent rise in property values in the philippines was buoyed by tourism and OFWs buying properties. that is gone now because of the pandemic. nobody knows how long the pandemic will last and if the vaccines would actually work. keep in mind we already have flu vaccines yet 750 thousand people still die each year from the flu. the properties can easily be cut in half overnight once the economy starts to unravel.

my point is that if we get an offer for any of our big properties that is around 30% below the appraised value, we should take it. just 1 property. after that we can afford to wait 5 years or even 10 years to sell the other properties. time is now on our side.

example if pelaez is appraised at P25m and we get an offer for P20m we should just take it. by doing that you gain billions in terms of less stress and worries on beating the estate tax amnesty deadline. some heirs gain billions in terms of being able to live more comfortably and fullfill their dreams. we also never know it might save their life because now they have money for medical emergencies.

besides we've been approached by many brokers interested in pelaez but their buyers will always back out when we offer P25 million. remember i sold my vegas property at 34% below the appraised value even if america is suppose to be more standardized and more systematic in determining property values. this means we should not be too dependent on the appraisal value especially in the philippines which has less standardized appraisal systems.

however if mamabaling gets sold first, then there is no need to sell pelaez at lower than the appraised value. we need to relax our price on just 1 property. i'm not saying we should do this on all our properties. it's just common sense.