The principle of usefulness of land valuation. See pages where the term principle of utility is mentioned What is the essence of the principle of utility

An objective view of utility goes back to the tradition of utilitarianism, and above all I. Bentham. Under his influence, the formation of the first theories of economic well-being took place. In the classical utilitarian interpretation of the XIX century. utility was recognized as the only moral good and ultimate goal, and therefore the main ethical value (Bentham, 1998; Mill, 2013). According to Bentham, utility expresses an individual feeling of pleasure, that is, it is a mental concept.

Therefore, one could assume that it has a subjective nature, like any sensation. Nevertheless, in an extensive classification of types of pleasure, Bentham singles out those directed not only inside a person, but also outside (pleasure of favor or sympathy). Based on this, he summarizes the essence of the principle of utility as “the requirement of the most extensive and enlightened (that is, well-considered) benevolence” (Bentham, 1998, pp. 147-148). The principle of utility, therefore, in addition to selfish actions, includes individual actions in the name of the common good or happiness.

Claiming the only desire for individual pleasure, Bentham suggests that such a socially significant good as trust always has highest value for the individual among other types of pleasure. Therefore, the transgression of the law is impossible within the framework of its theoretical system, which is regulated by the rationality of the individual or his "enlightened benevolence" (Bentham, 1998, pp. 147-148). Thus, formally advocating consistent individualism, Bentham, as it were, “projects” individual goals “from above”. From the height of the position of the legislator, he gives individual utility, as originally a subjective sensation, an objective, socially conditioned character and imposes appropriate restrictions on it. These restrictions are related to the implementation of the legislative design - the so-called "paradox of the legislator" Bentham, which was expressed in the desire to reconcile principled individualism with a legally stable social system (Seago, 2016; Russell, 1993).

A formal consequence of the objective nature of individual utility in Bentham was the assertion of its quantitative measurability and comparability - both within one individual and on an interpersonal plane. With this premise, Bentham formulated the goal of politics (and the overall ethical goal) as the maximum of social utility, understood as the sum of individual utilities. With this approach, the issues of inequality and general conflict of interest remained in the background (Sen, 2016; Beaujar, 2016).

Source: Sushentsova M. The Ethical Dilemma of Normative Economic Theory // Issues of Economics, No. 3, March 2017, pp. 103-119 Subjective Approach to Utility: Neo-Austrian School Criterion of Justice: Rawls and Sen

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Principles based on the user's perceptions of the usefulness of an object

Principles based on user perceptions include: the principles of utility, substitution, and expectation (Figure 3.2).

Rice. 3.2. Principles based on user perceptions

Common to all auxiliary principles is their explicit or implicit influence on the degree of utility and productivity of the property in question. Therefore, it can be argued that the utility of the property expresses the total effect of all market factors that affect the value of the object of assessment.

Utility is the ability of an object of property to satisfy the needs of the user in this place and during this period of time.

Real estate has different utility for residents, owner and tenant. Personally owned residential real estate satisfies the owner's need for residential space with varying degrees of convenience. The quality of the amenities affects the usefulness of the property to the owner or tenant. In this case, utility takes the form of real estate-generated cash flows. The impact of utility on value depends on the consumer characteristics of real estate, which include area, location, quality of repairs and other utility properties that significantly affect the value of real estate.

The principle of utility is that any property has value only if it is useful to some investor and can be used to implement certain functions or personal needs, for example, the use of real estate as an industrial enterprise, hotel, cafe, office, museum, etc. In cases of income-generating real estate, meeting the needs of the user,
ultimately can be expressed as a stream of income.

The principle of utility is based on the fact that a real estate object, along with greater utility for the user, also has a greater value in the market. Yes, apartment sales prices
in brick houses it is higher than in panel houses, since they have higher sound and heat insulation, and the walls "breathe".

The utility of real estate for income generation is expressed as a stream of income. Income can be received as a result of using the object as a store, warehouse, parking lot, etc.

Professional Appraisers widely use this principle in their practical work.

For example, evaluating the right of limited use of someone else's land plot, the appraiser must study what the easement consists of by analyzing the right of limited use in the area (in kind) and studying the relevant documents in which this is or will be reflected, what is his need.

Methodical principles and approaches in the evaluation of machines, equipment.

The current view is that value in a broad economic sense is the monetary expression of the value of an object and the property rights related to it at a particular point in time. Thus, value or utility is the property that determines the value of an object. This means that in order to assess the value of an object, it is necessary first of all to evaluate its usefulness and analyze the needs of all counterparties that are at least somewhat interested in the results of the object's functioning.

Valuation theory as a scientific discipline is closely related to many other economic disciplines. To assess the market value of a product, it is necessary to analyze the state of the market, its nature, capacity, segments and trends. It is clear that in solving this problem it is impossible to do without methods and provisions scientific marketing. When studying the behavior of investors, determining the future income of the owner of the property, it is necessary to involve the methods of investment analysis.

The appraiser actively uses market information about prices in his activities, i.e. he uses the results of the pricing process. When applying individual methods, the appraiser tries to model the likely pricing process.

The purpose of the assessment is formed by its customer. In this case, the valuation customer may be the owner of the property, its potential buyer, as well as a third party interested in determining the market or special value of the property.

The appraiser is obliged to draw up a detailed appraisal report and justify the results obtained to the customer. He must bring and document his calculations. Therefore, in assessing the leading role belongs to the ability of a specialist to find the source information, analyze it and, using generally recognized methods, calculate the desired value. Thus, the appraiser cannot refer to intuition and his subjective feelings in the report.

Valuation as a science is based on a number of fundamental provisions of economic theory and other related sciences. These provisions in the form of certain postulates, which must be taken into account when estimating the value, are called general economic principles of valuation. One of the first these principles were formulated by American real estate appraisers J. Friedman and N. Ordway. The general economic principles of valuation in their substantive aspect are the same for all types of property, but at the same time in relation to machinery, equipment and vehicles their practical interpretation varies somewhat in contrast to, for example, real estate.

It is recommended that machinery and equipment be assessed in accordance with generally accepted concepts and principles. Contained, in particular, in international and domestic evaluation standards. These principles consider interests in the acquisition and possession of property as a commodity, in the evaluation of which the relevant provisions of economic theory are applied and the following principles of evaluation are formulated:

1. The principle of supply and demand;

2. The principle of change;

3. The principle of competition;

4. The principle of substitution;

5. The principle of contribution;

6. The principle of marginal utility;

7. The principle of the most effective use;

8. The principle of conformity;

9. The principle of expectation;

10. The principle of value formation under the influence of production factors;

Evaluation principles can be divided into the following three groups:

- principles based on the views of the owner of the property;

- principles determined by the factors of the functioning of the object and its interaction with other objects of property;

- principles related to the market environment.

First group includes principles based on the views of the owner of the property.

The principle of utility lies in the fact that the key criterion for the value of an object is its usefulness, i.e. the ability to meet the needs of people. To investigate the usefulness of the object being valued means to determine for whom, for what purposes and by virtue of what properties this object is of interest, who in principle can be its possible buyer (investor), how the usefulness of the object can change in the future and under the influence of what reasons.

substitution principle proceeds from the fact that the price of an object that a potential buyer can offer will not exceed the prices prevailing on the market for similar purposes and consumer properties objects. On the basis of this principle, methods of a comparative approach, widely used in valuation practice, are constructed, when the cost is determined by comparison with market prices for similar objects.

Waiting Principle emphasizes the willingness of the buyer (investor) to invest in the acquisition or production of an object at the present time, expecting to receive income (benefits) from owning this object in the future. This principle makes it possible to determine the value of an object at the current moment of time based on the forecast of future income during the operation of the object and an acceptable rate of return on invested capital for the buyer (investor). Thus, a methodological basis is laid for the implementation of the income approach in valuation.

Second group includes principles determined by the factors of the object's functioning and its interaction with other objects of property.

The principle of value formation under the influence of production factors is as follows. The estimated machine complex, with the help of which any product is produced or any work is performed, is considered as a subsystem in the production system of the enterprise, the profitability of which, as follows from economic theory, is determined by four factors: land, labor, capital and management. Net income is the result of the action of all four factors, and therefore, based on the assessment of income, the value of the entire production system. To estimate the cost of a machine complex, one must either establish its share (contribution) in the formation of the income of the entire system, or apply the residual method, i.e. the required value of the complex is obtained by subtracting the value of other assets (real estate, land, intangible assets and goodwill) from the value of the entire system.

Contribution principle in relation to machines and equipment is that equipping an object with additional devices that expand its functionality does not lead to an increase market value object by a value greater than the cost of acquiring and installing these devices. The contribution of additional devices to the increase in the value of the object is determined by how much the profitability of the object increases from the use of these devices. For example, if a technological machine is equipped with a robot to automate auxiliary operations, then the cost of the received technological complex will be determined by the performance, reliability, cost-effectiveness of the entire complex. Thus, any additional elements to the machine are justified only when the resulting increase in the cost of the machine exceeds the cost of acquiring these elements.

The principle of balance (proportionality) in relation to machines and equipment, it should be understood that all objects included in the machine complex must be coordinated with each other in terms of throughput and other characteristics. If this principle is not observed, the addition of one or more objects to the complex does not give adequate growth. production capacity, and, consequently, the cost of the machine complex.

The principle of best and most efficient use - the most efficient use is defined as the most probable use of the property that is physically possible, reasonably justified, legally financial point vision and as a result of which the value of the property being valued will be the maximum

According to this principle, any machine must be evaluated, assuming that it is used for its intended purpose, the machine is fully loaded in time and power, the rules are observed Maintenance and repair, the normal mode of operation is maintained, the working personnel has the appropriate qualifications. Difficulties in complying with this principle arise when objects that have multifunctionality or several areas of application are evaluated. For example, a tractor can also be used on construction site, and in agricultural work, and at an industrial enterprise. The profitability of a tractor in each area of ​​​​application is different, and the estimated cost will be different accordingly. The appraiser will choose as the base application area for the evaluation of the tractor the one in which the functionality of this machine is most fully realized.

To the third group includes principles directly related to the market environment.

The principle of supply and demand the same object is valued differently by different categories of buyers (investors). For example, comfortable a car highly valued in the city, the same car is of little value to a rural resident, especially in off-road conditions. If there are many industrial enterprises in a certain region, then there will be an increased demand for machine tools, presses and other technological machines in the local regional market, respectively, and the prices for this equipment will not be low. By virtue of this principle, an obligatory element of the valuation procedure should be a market analysis, establishing the compliance of the object being valued with market demands. It is known from the theory of pricing that in a normally functioning market, prices are stable and tend to an equilibrium level at which there is a correspondence between supply and demand. Equilibrium prices can also be called agreed, fair prices, equally beneficial to both sellers and buyers. The value calculated at these prices also becomes fair value.

The principle of taking into account the nature of competition is that commodity markets can differ significantly in the nature and state of competition and, accordingly, the degree of their monopolization. The nature of competition is reflected in the pricing process. Thus, in a monopolized market, prices are usually distorted in favor of the monopolist and contain an increased share of his profits. In the conditions of free competitive market there is an equalization of the profitability of investments, the profitability of sales in prices is maintained approximately at a stable level. Thanks to competition, the economic structure of prices becomes stable and transparent, which opens up the possibility of using cost and comparative approaches in valuation.

The principle of change (mobility) of value requires taking into account the factor of variability in the cost of the same object over time. General economic inflation in the country, as well as shifts in the structure of individual commodity markets, cause a change in prices and, accordingly, costs. This implies the requirement that each valuation must contain an indication of the date of the valuation, i.e. about the moment of calendar time for which the cost is determined.

The theoretical basis of the assessment process is the system valuation principles. In world practice, it is customary to distinguish four groups of evaluation principles:

1st group: principles based on the ideas of the potential owner;
2nd group: principles related to land, buildings and structures;
3rd group: principles determined by the action of the market environment;
4th group: the principle of the best and most efficient use.
These principles are interrelated. When analyzing and evaluating a particular property, several principles can be simultaneously involved. One principle can be given highest value at the expense of another, which will be determined by the specific situation.

Principles based on the ideas of a potential owner.

The principle of utility means that the more the property is able to satisfy the needs of the owner, the higher its utility and value. Real estate has value only if it is useful to some potential owner and may be needed for the implementation of a certain economic function, for example, for the operation of an industrial enterprise or the cultivation of crops. Non-property can be useful because someone is willing to pay rent for temporary possession of that property. Utility is the ability of a property to meet the needs of a user at a given location and for a given period of time. In the case of income-generating properties, the satisfaction of the user's needs can ultimately be expressed as an income stream.

substitution principle means that in the presence of a certain number of homogeneous (in terms of utility or profitability) real estate objects, the objects with the lowest price will be in the highest demand.
A rational buyer would not pay more for a property minimum price charged for other property of the same utility. Accordingly, it would be unreasonable to pay more for an already existing object if another object of similar utility can be reproduced without undue delay at a lower cost. The principle of substitution states that the maximum value of a property is determined by the lowest price or value at which another property of equivalent utility can be acquired.
Waiting Principle is determined by what income (taking into account the amount and timing of receipt) or what benefits and conveniences from the use of the property, including proceeds from the subsequent resale, the potential owner expects to receive. This principle underlies the valuation of real estate using the income approach and characterizes the potential user's point of view on future income and their current value.

The value of income-producing properties is determined by the net proceeds from the use of the asset, as well as from its resale, the potential buyer expects. For the investor, the magnitude, quality and duration of the expected future income stream are important. However, income stream expectations can change. For example, people's opinion of a particular property can be influenced by an announcement that a new regional airport or freeway will be built nearby.

Valuation principles related to land, buildings and structures.

These principles include: residual productivity, contribution, progression and regression (increasing and decreasing returns), balance, economic size, and economic separation.

Residual productivity

Land value is based on its residual productivity. Any kind economic activity usually requires the presence of four factors of production. Each factor must be paid for from the net income generated by the activity.
Since the earth is physically immovable, labor, capital and enterprise must be attracted to it. This means that these three factors must first be paid, and only then the rest of the income is paid to the owner of the land as rent. Economic theory states that land has a residual value and any value only when there is a residual after paying for all other factors of production.
Residual productivity is measured as the net income attributed to land after the costs of labor, capital and entrepreneurship have been paid.

Residual productivity may occur because the land allows the user to maximize revenue, minimize costs, meet a need for some convenience, or achieve a combination of the three.

The principle of contribution involves the analysis of how the value of an economic object or the net income from it increases or decreases due to the presence or absence of any additional factor of production.

The contribution is the sum of the increase in the value of an economic object as a result of the introduction of some new factor, and not the actual costs of this factor itself. Some factors increase the value of a property by more than the costs involved, although there are others that actually reduce the value. For example, repainting the exterior of a house can improve its appearance and make it more attractive. However, if the paint color is not up to market standards, the value of the house may decrease.

If we consider the action of this principle in dynamics, in relation to an expanding object, then the value of each subsequent contribution may not correspond to the specific costs of creating the component in question, since the total cost of real estate is not always a simple sum of the costs of individual constituent elements. For example, a $100,000 underground parking cost could add $250,000 to the cost of a high-rise apartment building.
The contribution principle is often used to identify redundant or missing improvements in best and most efficient use analysis.

The principle of progression and regression, or the principle of increasing and decreasing income, states that as resources are added to the main factors of production, net income will increase at an increasing rate until the point at which total income, although increasing, is already slowing down. This slowdown occurs until the incremental cost becomes less than the cost of the added resources.

Usually landowners have to answer the question of how intensively the land they own should be developed. For example, company X owns 0.3 hectares of land. Below is the calculation of profit for development of different densities:

If the company builds one house, it will make a profit of $10,000. As more houses are built on the lot, the cost of land per house will decrease, but the market price of each house will decrease with increasing density due to reduction in the size of the area of ​​land that falls on it. When building up to two houses, profits increase at an accelerating rate due to economies of scale. Then, although the profit per house decreases, as the building density increases up to 4 or 5 houses, the total profit of the developer company increases. However, as soon as the company builds the sixth house, it begins to lose overall profits.

The principle of balance: any type of land use corresponds to the optimal amounts of various factors of production, the combination of which achieves the maximum value of the land.

If too few factors of production are applied to the land, then it is underdeveloped. If too much - overloaded with buildings. In both cases, the land is used inefficiently, and in accordance with the principle of residual productivity, its value is reduced. All factors of production must be in proper proportion to one another in order to maximize the total income from land.

In the example above, Company X has found that the highest income can be generated by building four or five houses on its land. In both cases, the profit is $40,000. However, if building four houses will bring the same profit, but with less risk, than building five houses, then the principle of balance dictates that four houses will give the optimal building density. When building a site with four houses, the risk is lower, since the number of transactions required to obtain the same amount of profit is less.

The principle of balance also applies to the region. To achieve a balance between the private and public sectors, there must be reasonable cooperation, as well as competent planning, thoughtful application of zoning regulations.

The principle of economic size provides for the existence of a certain amount of land necessary to achieve the optimal scale of land use in accordance with market conditions at this location.

The optimal scale of land development is determined by the conditions of market competition and the needs of users. A well-located plot of land, which is however too small or too large for potential users, may lose value in the market. For example, a lot at a crossroads could be an ideal location for petrol station. But if it is too small, then there will be problems with access, there will be a shortage of space for maintenance and storage. If it is too large, then the excess land will not bring additional revenue to the operating station. The principle of economic size is the same principle of balance, although considered in a different plane.

An example of the application of the principle of magnitude is the incremental value of a single piece of land. It occurs when a larger number of small plots are combined into a single array, the value of which exceeds the sum of the values ​​of the individual plots that make up the array. For example, imagine a developer can buy Lot A for $15,000 and Lot B for $10,000. If the two lots are combined, the new land will cost $33,000. The incremental value will be $8,000, as shown in the following calculations:

Single array cost $33,000
Minus: the cost of lot A - 15000
Minus: the cost of lot B - 10000
Incremental value $8,000

Economic size is the amount of land required to reach the optimum scale of land use according to market conditions in a given location.

By revising options to increase the efficiency of using a real estate object, it is necessary to take into account the principle of separation of real estate elements and property rights to them.
The principle of economic separation means that the physical elements of real estate and property rights to them can be divided and combined in such a way as to achieve the maximum value of the object.

When separating the physical elements of real estate and property rights to them, the following options are possible:

Spatial division: division of rights to air space, to the soil layer of the earth, to underground space with subsoil, to coastal water resources, dividing the land mass into separate sections, dividing the building into a basement, floors, etc.;
. division by types of property rights: lease, limited use, mortgage, contribution to the authorized capital of enterprises, issue security for the issue of shares;
. division by time of possession or use: short-term and long-term lease, perpetual use, lifelong possession, the right of economic management, operational management.

A group of valuation principles related to the market environment include: dependency, conformity, supply and demand, competition and change. The dependency principle states that the value of a particular property is subject to, and itself affects, the nature and magnitude of the value of other properties in its area.

Location is one of the most important factors influencing the value of real estate. The quality of a location depends on how the physical parameters of the site correspond to the type of land use accepted in the area, as well as on its proximity to the economic environment. Together, these two characteristics make up the situs, or economic location of the property.

The situs is determined by the interaction of a particular land use option and the economic environment on at least four levels. These four levels are marked with concentric circles that represent the adjoining area, the immediate neighborhood, the trading area, and the entire region. For some types of land use, such as large enterprises manufacturing industry, levels of dependency may exist nationally or internationally.

If in surrounding system changes in land use or the economic environment of a property can affect its value. Some examples of changes in the surrounding land use system include: building a shopping center near the site, building a school, or opening a waste disposal facility. These changes can have both positive and negative impact on the value of the object. The degree of such influence is determined by the scale of the new land use option, as well as the links between the innovation and the assessed object.

Communication is measured by the cost of access from the object being evaluated to the objects serving it in order to achieve any specific goal. Relationships can be measured in terms of time, distance, or money. Some of these connections are difficult to measure. For example, if any lot has a scenic view, then this relationship can be valued as the difference in value between a lot with a scenic view and another without it.

The fit principle determines the extent to which the architectural style and the levels of amenities and services offered by a land development meet the needs and expectations of the market.

A project that does not meet market standards is likely to lose financially. A project made up of two-room apartments will meet opposition in the market if the rent for it is the same as for three-room apartments. Moreover, this will happen even if the two-room apartment has the same area as the three-room apartments. Therefore, in order to sell less attractive properties on the market, it may be necessary to reduce their rental rates.

Real estate development projects must be appropriate to the type of land use in the respective area. This does not mean that all houses should be built in the same architectural style. However architectural styles should be appropriate for the type of land use. Imagine the consequences of building a Victorian house on a block of rustic houses.

Related to the principle of correspondence are the principles of regression and progression. A regression occurs when a piece of land is overdeveloped for a given market. For example, if a $175,000 house is built on a block where other houses cost between $70,000 and $80,000, then the market value of the more expensive house will not reflect the actual cost of building it. The selling price is likely to be lower than construction costs. Progression occurs when the value of the property being valued rises due to the high value of neighboring properties. For example, if several stores are being reconstructed in a shopping area, then the cost of all stores in the zone may increase.

The principle of supply and demand means that the price of real estate changes as a result of the interaction of supply and demand.

A property has a value if it has utility for some user or group of users. However, utility is not the only factor influencing cost. Real estate should also be relatively scarce. Supply is the number of properties available on the market at certain prices. Demand is based on the desire of potential buyers with the necessary sources of financing to purchase real estate.

Since real estate markets are imperfect, supply and demand do not always dictate the price at which a change of ownership takes place. Negotiation skills, the number and sophistication of participants, emotions, financing costs, and other factors also play a role in setting selling prices.

In the long run, supply and demand are relatively effective factors in determining the direction of price changes. However, in short periods of time, supply and demand factors sometimes lose their effectiveness in the real estate market. Market distortions may result from monopoly control over land by private owners. In addition, markets are affected by government control mechanisms. For example, local governments can hold back the growth of the market or rent levels, change the mechanism of the market in many other ways.

If there is an oversupply or a lack of demand in the market, prices and rents will decrease. In the short run, real estate supply is relatively inelastic. This means that increasing supply requires planning for long term: even if prices have risen, supply cannot be increased very quickly. It is also difficult to reduce the supply of real estate. If too many objects of one particular type have been created, the load level will remain low for an extended period of time. This creates a great bargaining opportunity for hunters as prices remain low or even fall.

The opposite pressure on prices occurs when there is insufficient supply or high demand. Demand is usually more volatile than supply. It reacts more easily to changes in prices. Changes in money supply, interest rates, bursts of emotional speculation, fear, and other factors can affect the nature of demand at any given time.

When supply and demand are balanced, the market price usually reflects the cost (cost) of production. If market prices are higher than the cost of production, more and more new properties will be put into operation until equilibrium is reached. If market prices are lower, new construction will slow down or stop altogether until demand picks up as market prices rise.

The principle of competition. Increased competition will lead to an increase in the supply of this type of real estate in the area. If demand does not increase, then the average net income from all real estate of this type will decrease. If competition is excessive, profits may fall below normal or, in some cases, disappear altogether.

When profits in a market exceed the level required to pay for factors of production, competition in that market intensifies, which in turn leads to a decrease in the average level of net income.

This principle is important to the analyst who is trying to estimate the value of a stream of earnings that exceeds the market rate. Unless the windfall is due to a long-term lease or some other reason, the income stream should be considered with caution. Basically, the analyst can take one of two approaches. First, excess profits can be separated from normal profits and treated as a separate stream of income.

The principle of change: the value of real estate usually does not remain constant, but changes over time.

Objects gradually wear out. Some businesses are opening, others are closing. The nature of land use is changing under the influence of the state and the private sector. The money supply and interest rates fluctuate. Economic conditions open up new possibilities. International events affect the cost of commodities. New technology and social behavior create new demand for real estate. Demographic development generates needs for various types of housing. Human aspirations and tastes are changing. The location environment of an object goes through phases of growth, maturity, decline and renewal. All of these factors and many more can change the usefulness of a property in a given location.

Analysts need to keep track of events that are highly likely to affect real estate. Conditions that existed in the past will not necessarily persist in the future. In order to correctly estimate the value of future income from a property, it is necessary to carefully calibrate the underlying assumptions about future revenue and costs. Since events and conditions are constantly changing, valuers adhere to professional standard- make an assessment on a specific set date.

The fourth group of valuation principles (LNEI) means that from the possible options for using the property, the one is selected that most fully realizes the functionality of the land plot with improvements. This option is used to assess the value of real estate.

The appraiser makes an allowance for losses in the collection of payments by analyzing historical information on a specific object with the subsequent forecasting of this dynamics and thus can determine the option that brings the maximum possible income from the land plot, regardless of whether the site is built up or not and what buildings are located on it. the date of the assessment.

LNEI is defined as the use of real estate that:

a) is legally permitted, i.e. complies with legal regulations, including zoning ordinances and security regulations environment, urban planning restrictions, requirements for the protection of historical monuments of architecture, improvement of the adjacent territory, etc.;
b) is physically feasible, i.e. the size and shape of the land plot, its transport accessibility, existing buildings allow the implementation of the chosen use case;
c) financially justified in terms of return on invested capital, i.e. use provides income in excess of capital expenditures, operating costs and financial obligations;
d) provides the highest value or profitability of real estate.

LNEI is considered in two stages: firstly, the land plot as free, and secondly, the land plot with existing improvements. If the site is free from buildings, then it is determined which object is the most efficient to build, taking into account legal, urban planning, environmental and other restrictions, as well as taking into account the prospects for the development of the area. LERI can evolve over time, influenced by market standards and external changes. If a freeway has recently been laid near the land, then the construction of a gas station, a fast food point or a car service may be its best use. In practice, the LEIR principle is the initial premise on which the choice is based specific type the assessed value of real estate and a conclusion is made about its value.

Administrative restrictions and zoning existing in Russia today often do not reflect the requirements of the developing real estate market, and therefore the actual use of land with improvements often does not correspond to the best option.

All of the above principles of assessment are closely interrelated and, depending on the type and specifics of the object being assessed, on the assessment method used, they can play a major or auxiliary role. These principles are theoretical basis cost estimates. Three fundamental approaches to valuation are based on them - profitable, comparative and costly.

The principles of enterprise valuation can be differentiated into four categories:

1. enterprise user principles;
2. principles related to the valuation of land, buildings, structures and other property constituting a single property complex of the enterprise;
3. principles related to the external market environment;
4. the principle of the best and most efficient use of the property complex of the enterprise.

When analyzing financial and economic activities and evaluating an enterprise, all the principles of evaluation should be involved, but they can be used with varying degrees of significance. The degree of significance of each assessment principle is determined by the specific situation that develops in the assessment of an enterprise (for example, the implementation of some assessment principles may be hindered by the position of municipal authorities or the imperfection of legislative and regulatory acts in force in a given region Russian Federation).

User Principles

The enterprise user principles include the principles of utility, substitution, and expectation.
The principle of utility. An enterprise has value only if it can be useful to a potential owner or user. An enterprise can be useful only insofar as it is necessary for the implementation of a socially useful function - the production of a certain type of product, service on the market and making a profit. An enterprise can also be useful for a specific owner to realize a sense of pride from owning this enterprise or to realize his other psychological needs.
Utility- is the ability of the enterprise to meet the needs of the user of the enterprise in a given place and for a certain time. In the case of a revenue-generating enterprise, the satisfaction of a user's needs is usually ultimately expressed as a cash income stream.

substitution principle. This principle states that a reasonable buyer will not pay more for an enterprise than the lowest asking price in the market for another enterprise with the same degree of utility. This means that it is unreasonable to pay more for an existing enterprise than it costs to create a new similar enterprise in a reasonable time frame. The appraiser, analyzing the income stream from the operation of this enterprise, determines its maximum value based on a comparison of income streams from other similar enterprises characterized by similar risk and quality of products and services. The maximum value of an enterprise is determined by the lowest cost at which another enterprise of equivalent utility can be acquired.

The principle of expectation. In most cases, the utility of an enterprise is associated with the expectation of future profits. For operating businesses that generate income, their value is often determined by the amount of expected profit that can be obtained from the use of the property of the enterprise, as well as the amount of cash in the event of its resale. Methods for calculating expected returns are described elsewhere in this book.

Expectation- this is the expectation of future profits or other benefits that may be received in the future from the use of the enterprise being valued. Since money, when it is in circulation, brings a percentage of income and inflation processes occur, the ruble received in the future has a lower value than today. It's about the time value of money. The process of converting future rubles into current values ​​is called discounting. In order to determine the present value of future profits expected from the use of the enterprise, it is important to adjust the forecasted profit by adjusting for its value over time.

Principles related to the valuation of land, buildings, structures and other property constituting a single property complex of an enterprise

This group includes the following principles: residual productivity, contribution, increasing and decreasing returns, balance, economic (optimal) value, and economic separation and combination of property rights.

The principle of residual productivity of the land. Any kind entrepreneurial activity, as a rule, requires the presence of four factors of production: labor, capital, management and land. Each factor of production used must be paid for by the newly produced value created by the activity. The land is immovable, and labor, capital and management are “attached” to it. First, three "tied" factors of production are paid, and then the owner of the land receives rent from the rest of the profit (either land tax or rent). Thus, the land has a residual value (residual productivity), i.e., it is compensated when there is a residual after payment for the reproduction of all other factors of production.

Residual productivity is defined as net land-based income after labor, capital and management costs have been paid.
Residual productivity, characterized by the location of the land, allows the user to maximize profits, minimize costs and meet special needs (or a combination of these three conditions). For example, a user of a marble finishing slab business will be able to maximize their profits if the land on which it is located this enterprise, will be located next to the quarry where marble is mined. He will be able to maximize profits by minimizing the costs of transporting raw materials. Therefore, the user of an enterprise will pay a higher price for this enterprise than for a similar enterprise located far from the resource base.

The principle of investment. The owner of the business decided to sell it. The appraiser estimated it at 25 million rubles. To obtain the maximum price, the owner of the enterprise made a new fence and painted the buildings and structures included in the property complex, spending 500 thousand rubles on this. After that, the enterprise began to be valued at 29.5 million rubles. Thus, painting buildings and structures worth 500 thousand rubles. adds 4.5 million rubles to the value of the enterprise.

Contribution- this is the addition to the value of the enterprise, which provides an increase in its value in excess of the actual costs. However, the contribution can also be negative, when the actual costs incurred reduce the value of the enterprise. For example, the color of the paint used to paint the buildings and structures of the enterprise turned out to be such that the enterprise after painting began to look worse than before.
Contribution is the amount by which the value of an enterprise is increased or decreased, or net profit received from him, due to the presence or absence of any improvement or addition to the existing factors of production: labor, capital, management, land.

The principle of increasing or decreasing returns. The owner of the land plot on which the enterprise stands often thinks about how intensively the land plot should be built up. Having built one workshop, he receives a certain amount of profit; having built a second workshop, he makes a big profit; having built a third shop - even more. However, having built the third shop, the owner notices that the profit received from the construction of the third shop pays off in terms that exceed the normative ones. This means that the built third workshop turned out to be inefficient.

The principle of increasing or diminishing returns is: as resources are added to the main factors of production, net profit tends to increase at an increasing rate up to a certain point, after which the total return, although growing, is already at a slower pace.

The principle of balance (proportionality) of the enterprise. All factors of production in the enterprise must be balanced: the ratio of the main and auxiliary production, main and auxiliary workers, worker and management personnel and others. The optimal ratio between the factors of production ensures maximum profit.
The principle of balance (proportionality) states: any type of production corresponds to the optimal combination of factors of production, at which the maximum profit is achieved.

The principle of optimal size (scale). This principle can apply to any factor of production. Any factor of production must have optimal dimensions - be it the enterprise itself (when, with its optimal capacity, we have maximum size profit), or its individual production facilities, or the land on which it is located. It is known that in order to achieve a normal technology for the production of this type of product, a land plot of a certain size is required. This specific size will be optimal for this type of production.

One of the particular examples of the optimal size principle is the concept of the incremental value of a piece of land. This concept occurs when two (or more) parcels of land are combined into one, the value of which exceeds the sum of the values ​​of the individual parcels that make it up. This excess is the incremental value of the land. So the optimal size is the optimal size individual factors production (the optimal capacity of the enterprise or its individual components of production, or the optimal size of the land plot), ensuring maximum profit from the operation of the enterprise in accordance with market conditions in the region.

The principle of economic division and connection of property rights of ownership. The system of property rights of the Russian Federation provided for Civil Code(Civil Code of the Russian Federation), allows you to separate and sell separately property rights to property, including enterprises. Each individual property right can be represented as a component of a single package of rights.

The principle of economic division and combination of property rights says: property rights should be divided and combined in such a way as to increase the total value of the enterprise. The division of rights can be carried out as follows:

• physical division: division of rights to use airspace, surface land and subsoil;
• division by time of ownership: different kinds leases, lifetime ownership, future property rights;
• division according to the rights to use the enterprise: limited right to use the property of the enterprise, licenses, restriction on the use of property;
• division by types of property rights: joint lease, partnership, trust management, corporation, option, contract with agreed terms of sale;
• division according to the rights of the creditor to take possession of the enterprise: mortgages, pledges, judicial pledges, participation in capital.

The main criterion for the economic division of a package of property rights is the difference between the interests of investors who invest their capital in an enterprise and the owners of enterprises.
Economic division and association of property rights of ownership are always carried out when there is a difference of interests in this property. This division and combination of property rights leads to an increase in the value of the enterprise.

Principles related to the external market environment

The group of principles related to the external market environment includes the principles of dependence, conformity, supply and demand, competition and change.

Dependency principle. The dependency principle states that the value of an enterprise depends on many factors. The cost of large industrial enterprises depends not only on the nature of the economic environment in the territory adjacent to the enterprise, the immediate vicinity, the region where the enterprise is located, but also on the national character of the country, as well as on international relations. This dependence is determined by connections, which, in turn, are measured by the costs of either time, or money, or other units of measurement. For example, often large industrial enterprises located in suburban areas and to get from the city to the place of work, workers have to spend a lot of time and energy. As a result, labor productivity drops. The construction of a high-speed road will reduce the time and energy costs of workers.

This indirectly ensures an increase in labor productivity, and hence the value of the enterprise itself. The principle of dependence is also expressed in the fact that the assessed enterprise itself affects the value of surrounding real estate and other enterprises located in the region. One of the tasks scientists in Russia - to explore the links and dependencies between the value of the enterprise and the factors influencing it, in order to more accurately and reliably assess the value of the enterprise.

The principle of conformity. Any enterprise must comply with market and urban planning standards in force in the region. Projects of enterprises must comply with generally accepted traditions of land use in the region. For example, it is undesirable (and it is forbidden by urban planning regulations) to build a chemical plant in the center of a densely populated area.
Conformity is the extent to which the enterprise itself, its architecture and its impact on the environment are combined with this natural environment and market needs.

The principle of supply and demand. The value of enterprises is greatly influenced by the ratio of supply and demand: if demand exceeds supply, prices rise, if supply exceeds demand, prices fall. Prices are stable if demand matches supply. However, due to the imperfection of the market in which the sale of enterprises is carried out, in addition to the ratio of supply and demand, the art of bidding, the number of bidders, financing schemes for this transaction and other factors have a great influence on the sale price. The influence of these factors is enhanced if the transaction must be completed in a short time.
Usually, demand has a greater influence on the price than supply, since it is more volatile. This market trend is especially visible in Russian market, where the prices of enterprises depend mainly on the capabilities of investors.

Offer- this is the number of sold enterprises (or their property) available on the market at a given price, demand is the number of enterprises (or their property) that they want to purchase at a given price. The principle of competition. Capital moves where there is more profit; therefore, where surplus or monopoly profits are made, new actors try to penetrate. Competition is the competition of entrepreneurs in making a profit. Competition is intensifying in those areas of the economy where profit growth is planned. Increasing competition leads to an increase in supply, a decrease in price and a decrease in the mass of profit (if demand does not increase).

The principle of change. The market situation is constantly changing. Some enterprises appear, others change their profile, produce other products or close. The economic, social, technical, political spheres of activity that affect the value of enterprises are changing. The emergence of a new, more advanced production technology can dramatically increase the value of the enterprise.
The life cycle of an enterprise goes through the stages of birth, growth, stabilization and decline. And from what stage life cycle the enterprise or its natural environment (district, city, industry) is located, its value depends: if it is in the growth stage, the cost will be higher, if it is in the decline stage, the cost will be lower. The principle of change states that the value of an enterprise is constantly changing under the influence of changes in internal factors, as well as the natural and market environment. For this reason, appraisers evaluate the value of the enterprise on a specific date. At the same time, normative acts regulate that the results of the assessment are “valid” for six months from the date of the assessment.

The principle of the best and most efficient use of the enterprise

The principle of the best and most efficient use of an enterprise is the basic principle for assessing its market value. It determines the choice of factors that affect the value of the enterprise. The best and most efficient use principle is the reasonable and possible use of an enterprise that will provide it with the highest present value at the valuation date, i.e. the use selected from reasonable possible alternatives and resulting in the highest value of the land on which the enterprise is located.

In the Russian practice of assessment, experts distinguish two aspects of the implementation of this principle: one is its application to knowledge, the other - to the land. This is due to the fact that most enterprises have not privatized land, that is, it is in state or municipal ownership. Therefore, in the practice of evaluation, the first aspect of the implementation of this principle is mainly considered. This principle is unifying for all other principles of valuation: utility, substitution, expectation, residual productivity, contribution, increasing or decreasing returns, balance, optimal (economic) size, economic separation, dependence, matching of supply and demand, competition and change.

Analysis of the best and most efficient use of land

This analysis It is carried out when it is necessary to make an optimal decision: which of several possible enterprises it is advisable to build on a given land plot.
In practical appraisal activities There are four investment situations where:

• there is free land;
• the user is looking for a specific type of land;
• investor is looking for optimal combination land and user;
• An investor-speculator selects a piece of land that has significant potential for value appreciation.

The solution of the first two situations can be carried out using a comparative approach to the assessment, while the last two - only after determining the best and most efficient use of the land. The appraiser must first
analyze different land development and development options to determine which one will provide the highest residual value of the land. This analysis is based on the implementation of the principle of the best and most efficient use of the land: “the use selected from among reasonable, possible and legal alternatives that is physically possible, reasonably justified and financially feasible and that results in the highest value of the land”.
The choice of the optimal option for using a land plot is determined by the potential location of the site, the ability of the market to accept this option for using the land plot, the possibility of implementing this option for using the site from a legal point of view, the physical, physical, landscape capabilities of the site, technological and financial feasibility.

Potential of the land plot location- the main factor affecting its cost. For example, if the investor intends to build a cafe, then the land plot should be located on a busy street, if the warehouse - it is necessary that there are railway entrances and highways nearby, etc. When analyzing the use case for the site, various inconveniences and inconveniences should be considered negative points associated with this option and plot them on the map. Information about a land plot can be obtained from city and district land committees and commissions, as well as from technical inventory bureaus and appraisal firms.

Analysis of market opportunities to accept this option of using the land plot conducted to determine how a particular use of the site "reasonably fits" into the nature of supply and demand in a given market. The infrastructure of the land plot itself and the areas adjacent to it are considered (the degree of development of the road network, the intensity of transport and pedestrian flows, the presence of railway access roads, remoteness from shopping centers etc.), the demographic situation in the area where the land plot is located (the age composition of the population, its ability to pay), possible competitors or competing objects, etc. the ratio of supply and demand of the products that are planned to be produced on the land plot in question is estimated, and a final conclusion is made about the appropriateness of just such a use of the land.

Legal validity of land plot development consists in its expertise from the point of view of the current legislation, urban planning standards (zoning, environmental protection, fire safety, energy consumption, etc.), promising solutions for the district planning of the site, restrictions of the local administration and the requirements of the local population.
Important factors for the best and most efficient use of land are its physical, ground and landscape possibilities. The size, shape and natural features of the land plot, vegetation are determined, topography is carried out, the depth of water is measured. These data are necessary to decide what number of storeys and sizes of building can be built on a given land plot.

Technological feasibility of building a land plot consists in answering the question of whether it is possible to implement the planned construction option within the specified time frame with the appropriate financing schedule and the project for organizing construction and installation works. The restrictive conditions of the project for the organization of construction and installation works are the availability of qualified workers and managers, security building materials and equipment, safety standards during construction and installation works, etc.

Financial soundnessinvestment project- the main factor in the implementation of the principle of the best and most efficient use of land. At this stage, the tasks of financing the investment project are solved, the cash flows and discount rates that meet the requirements of the investor. Particular attention is paid to the timing of cash inflow and outflow, sales proceeds, equipment operating costs, debt service payments, proceeds from the sale of a facility, and cash refinancing.

The following is short description technologies for determining the best and most efficient use of a land plot. The essence of the principle of the best and most efficient use of land is the formation and comparison of various options for the development of a land plot and the choice of the optimal one based on the magnitude of the residual value of the land.

On the first stage options for the development of a land plot are formulated, which are selected based on the potential of the location, the ability of the market to accept this development option, the legal possibility of implementation this project, physical, soil and landscape features of the site, as well as technological and financial feasibility. If, for example, an approved detailed district planning plan for the considered land plot is planned for industrial development, then the selected options should provide for the organization of industrial production.

On the second stage analysis of the best and most efficient use of the land plot, costs, revenues, profits are determined for each of the selected options by years, taking into account the stipulated standards for the organization of construction and installation works. The calculation process divides the total income received from the complex (land - buildings) into two parts related to land and buildings. This division is made using capitalization ratios calculated on the basis of certain risk values, the length of the capital recovery period, the financing structure and the expected increase or decrease in the value of the complex. The income thus obtained relating to the land is capitalized and the residual value of the land is obtained. According to the highest residual value of the land plot, the option of the investment project is selected, which will be the best and most effective of the possible.