Not so long ago, the public space was filled with high-profile scandals related to the registration of real estate purchase and sale transactions. At that time, intermediaries who offered real estate valuations and registration of valuation reports in the Unified Database of the State Property Fund of Ukraine (hereinafter referred to as the Fund) earned UAH 1 million per day. Since then, the Fund responsible for this assessment determines the market value of the property automatically using an electronic module. But the state of Ukraine not only does not have a real estate cadastre, it does not even know the real prices at which transactions are carried out. The result is new schemes and new “appraisers”, who again reached into the pocket of the state.
Unfortunately, the Fund does not make public the results of estimates obtained using an electronic algorithm, but what market participants say is simply amazing. The results of a modular assessment are sometimes ten times less than the market value, and sometimes, on the contrary, ten times higher. At the same time, entering the same data does not guarantee the same result, and entering data with a difference of half an hour also gives completely different results. Anyone can add data to the database - no one is responsible for entering false information.
Due to manipulations with the location, construction date, type of house and even the area of the apartment, you can get a price much lower than the market value. But that's not all. The main thing is that it is legally permitted to register in the Unified Valuation Database a value that is 25% lower or higher than the automatically determined value.
Result: property owners began to turn to so-called appraisers so that they provide a result 25% lower than the value indicated in the certificate (generated by the module). Who suffers from this? Of course, the state budget and conscientious appraisers.
“Reducers” instead of appraisers
Of course, conscientious appraisers can also obtain a value below the reference value, but they must support this value with a reasonable appraisal report. After all, at any moment the Foundation can ask them for this report.
But the “scheme appraisers” don’t even make reports. They understood very well the weak points in the Unified Reporting Database and the Assessment Module and learned how to manipulate them. Instead of apartments, they show dormitories; the rest of their objects are located in ruined buildings from the Khrushchev era and/or outside cities, etc.
The owners and directors of such appraisal companies are usually foreigners from the countries of the former USSR, and all reports are registered under one appraiser. Time passes and the Fund, of course, cancels the qualification certificate of the appraiser or the certificate of the subject of appraisal activity, which gives the right to carry out appraisals.
And by the time it comes to disqualification, the “schemers” manage to register a hundred or more reports a day throughout Ukraine. And when the Fund cancels the certificate of one participant in the scheme, at that time a new company with an appraiser is already ready to replace it.
All these would-be appraisers do is register a valuation that is 25% lower than the certificate without compiling a valuation report and uploading it to the database. At the same time, they manage to take over up to 50% of the appraisal market, taking away work from conscientious appraisers and money from the budget.
said about this : “Based on the results of another busy week of November 3–9, only three appraisal companies (3–5 appraisers) assessed 43.5% of all housing in the country (1,471 reports per three out of 3379). The rest of the market (450 companies) was unlikely to be able to register 1908 reports.
Not only do super appraisers manage to produce almost a hundred reports a day, but they also manage to visit sites in 20+ regions every day. No less than they introduced teleport technology.
And this is only housing (apartments, houses). Each of these appraisers, in their Stakhanovite achievements, does not lag behind in the assessment of land, commercial and administrative real estate. He would also show his labor achievements in transport, but these data are not published.
In such conditions, normal appraisers simply cannot work and are leaving the profession en masse due to dumping and the pliability of the “undervaluers.”
How to fix the situation
Firstly, you need to understand that it is simply impossible to call these falsifiers appraisers, because they do not perform assessments, but only manipulate numbers.
Some suggest limiting the ability to register a certain number of reports, but this could also hurt conscientious appraisers. Another thing is to limit the assessment to a certain region, at the choice of the appraiser. After all, all specialists understand that it is simply impossible to inspect 100 objects within one day in 20 regions. In the United States, an appraiser can be licensed to appraise in one to three states, although it must be obtained separately in each state. Yes, there are states of different sizes and regions are different, but such a requirement would definitely limit would-be appraisers in their scheme.
But an effective solution to the problem would be to combine the Valuation Module with the Land Registry, the latter would at least help in the valuation of undeveloped land plots. And since, according to its managers, it also contains information on buildings and structures, joining the Land Registry to the Valuation Module would make it possible to avoid location fraud. And then Khreshchatyk Street would no longer be able to be in the suburbs of Kyiv.
Manipulations with the type of building can be eliminated if you attach the Urban Planning Cadastre, where information about buildings and structures is collected, to the Assessment Module. But, unfortunately, such a cadastre does not exist in all localities. Therefore, the Fund should abandon the certificate for all cases, and leave it only for assessments where there are many analogues, appraisers say. That is, in fact, leave it only in large cities with an active market. And in small towns and villages with a weak market (with a small number of transactions), do not make calculations for reference, but immediately involve an appraiser. This will make it possible to remove the scheme of underestimating the cost by 25% without running a report.
Also, this scheme will help to stop entering into the certificate the main parameters of cost calculations, that is, links to similar objects used in the calculations that can be checked during review, as well as basic adjustments, etc. And then, without searching for analogues and calculating the cost, it will be impossible to register the assessment.
These are tactical measures, but you can also think about strategic ones, using the experience of developed countries for this.
Useful experience
1. We definitely need a Real Estate Cadastre, which ZN.UA has written . It was proposed above to add at least the Land and Urban Development Cadastres to the Assessment Module. The third component of the Real Estate Cadastre is the Register of Property Rights of the Ministry of Justice. Ukraine has all this, we just need to combine these databases and we will have a real real estate cadastre, which is currently used in all European countries.
2. You can enter the definition of value for taxation not on the current date, but on a fixed date, for example, on December 31. This would greatly simplify the task and help avoid distortion of the results.
3. An effective measure would be to re-evaluate all real estate every three years.
4. Appraisers today use offer prices because we do not have real sales prices publicly available. Many countries have gone through this and realized that no administrative measures can force people to give truthful information. There is only one possibility - stimulation. That is, those who show the real value should have their taxes reduced.
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Some activities will not require legislative changes to avoid (or at least reduce) assessment manipulation, but will require thoughtful consideration of issues related to the Assessment Module and its improvement. Other measures will require fundamental changes in legislation, which will probably become possible only after the end of hostilities. But now it is possible and necessary to introduce anti-manipulation measures within the framework of the orders of the State Property Fund. If only there was political will for this.
