Lately, I have been getting quite a few requests to give valuations on Istanbul properties from foreigners who have bought property in Istanbul over past years and who are considering cashing in. In all cases, the goal is to give as clear a picture as possible on the current fair market value on the property in Istanbul. This is often easier said than done.
We must consider that the fluctuations in the TL can add additional complexity for the owner. What was worth 200 thousand dollars six months ago may not equal that today, given the currency has depreciated over ten percent. Naturally, foriegn owners looking to sell up their real estate in istanbul are interested in what they will take away in terms of dollars, euros, and so on. However, when doing a valuation, it is crucial to do it in TL terms, as it is in the end an asset in Turkey, and issues such as affordability and rental incomes on properties are gauged in TL. Once we have a TL valuation we can then convert to the owners desired currency but this should not influence the valuation.
What is the thought process and what are the main points when giving a valuation?
1-The first step must be to identify comparable properties which have been sold in the same area in the past six months. Finding a perfect comparable is not always possible, as the property types are so variable, as well as street by street differences. Additionally it is exceptional difficult to assess concrete property sales data in Turkey, cadastral records (land registry) can also be consulted, but are not usually so accurate.. However, if we can find properties that can be said to be reasonably equal, this is a strong basis for getting a working figure for a valuation.
2-Once property comparables have been found, then a differentiation process can begin. Which property has a better view, more light, is in better condition generally, has a higher rental income, is located on a street where the nearby properties are maintained better? For example, if property A was sold at 500,000 TL six months ago, but it has a better view, though not in such good nick internally, what is the value relation of these multiple factors. It is not an exact science, for sure, but having intimate knowledge of neighborhoods, street by street, is essentail in coming up with an as accurate as possible assessment and dealing with what are sometimes fuzzy distinctions. Of course, this does not apply with large compounds where you have maybe hundreds of almost identical properties. These types of valuations are simpler, as the variation decreases and the comparative data is usually much greater.
3- General market trends. This often can also be a good starting point, particularly if the owner divulges the price they purchased the property for. For example, if the owner says they bought for 200,000 TL three years ago, and the data signifies that the particular neighborhood has been appreciating at 10% yearly during that period, İt will be up to the assessor to disprove a similar trajectory for the property in question, and to provide rationale for the exception.
4- Always involve the owner. Home owners often are keenly aware of neighborhood developments and often know quite well the price that Mr. Jones, the neighbor, sold their property for last year. It is important to ask the owner what their expectations are for the price and also why they feel that way. They may be reluctant to tell you, but if there is trust, they should and often will. If it is unrealistic, reasons must be given.
5- Allow for ten percent error either way. It is best to give the valuation with the caveat that there is an error factor of ten percent either way, which can largely be attributed to market factors that change rapidly. Also, without feedback from live, breathing clients, it is impossible to get ultimate precision.
On the lighter side. After one particulary vehement objection to a property assessment I once gave years back on a 140 square meter apartment in the depths of Tarlabasi, I was bold enough to ask the owner the grounds for so vigorously disagreeing with my assessment. After brushing aside the methodology I explained I had used, he waved his arms in frustration and exclaimed that he had to buy new apartments in Umraniye (a new suburb on the Asian Side) for his three brothers who all jointly held a share in the current property, as that was the condition for agreeing to sell this apartment. Now, thats’s the job for an alchemist, I thought.
Six months later, he called me back and agreed that I had, indeed, given an accurate valuation.