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Useful info

Assessment of a real estate
Change of function of agricultural land
Property insurance
Questions and answers

Assessment of a real estate

The expert assessments of real estates are usually used for making investment decisions, sale of property, for receiving a credit and determination of the insurance value of a building. The three most common methods for assessment of real estates are: method of expenses, method of market analogy, and method of income.

Method of expenses
With this method the experts calculate the cost of constructing a similar building with current prices of materials and services. After that they add the amortization for the existence period of the building.

The other important element is market value of the plot on which the building stands. The market value is determined after comparison with the land prices in the same area in the recent months.

The assessment of the real estate through the method of expenses is calculated as a sum of the value of the amortized building and the market value of the plot.

Method of market analogy
This method is based on the principle of comparison, i.e. the assessed real estate costs as much as a property with the same construction quality, facilities, function, location, access, etc. It is applicable only if there is information available about deals with similar real estates.

Method of income
The main quantity, necessary for the calculation of the value of a real estate through the method of income, is the standard of capitalization. It is determined by the market, and indicates the level of development and liquidability of the market, as well as the risk of investment in the respective kind of real estates

Depending on the fact if the real estate is being used by the owner, or it has been rented, two techniques can be applied – of the direct capitalization, and of the discounted money flows.

Direct capitalization is applied when the assessed real estate is being used by its owner. The potential annual income from renting of the property is calculated. After that the expenses for the maintenance of the building are deducted, and the potential operative profit of the real estate is acquired. This profit is capitalized by means of the standard of capitalization for the respective kind of real estates.

The discounted money flows are used as an assessment technique in cases when the object of the assessment is a building that offers rented spaces. Usually, ten-year-long prognoses are made for the future operative profit of the real estate. After discounting with the proper standard of capitalization, the value of the building is acquired through the method of income.

Fair market value
After assessing the real estate through the three methods, the assessment expert must calculate the fair market value of the property. This can be done by means of choosing the value, acquired through one of the methods, or by calculating the average value of all the methods used for the assessment.

Change of function of agricultural land

The change of function of agricultural land in an industrial or residential area is done according to an order, established by the Bulgarian legislation: Declaration of investment intentions for the specific property in a state newspaper and the regional press. Opinion of the Regional Inspection for Environmental Protection (RIEP). Permission by the mayor of the municipality for conducting the procedure. Act for discarding of perennial plants, if such have been mentioned in the document for ownership. Projecting. In includes several projects – geodesy, architecture, water supply and drainage, electrical and road communications. RIEP opinion about the prepared project. Approval of the project by the municipality council. Payment of the taxes regulated by the municipality council, and connected with the type of the built-up area. After the completion of this procedure, the real estate has a statute of a regulated land property (RLP). Construction works can be performed within the real estate, according to the approved projects.

Property insurance

A lot of licensed insurance companies offer various kinds of property insurance. Both immovable property (houses, villas, offices, business buildings) and movable property (furniture, technique, appliances, business property, machines, equipment, etc.) owned by companies, organizations and citizens, can be objects of insurance.

The basic risks they cover, are:

  • Fire and its consequences;
  • Natural disasters – storms, hailstorms, heavy rains, floods, damages of snow or ice, freezing;
  • earthquakes;
  • thunderbolts, explosions, collision of falling of a manned aircraft;
  • water supply and drainage failures;
  • arson;
  • burglary;
  • ill-intentioned actions by third parties – breaking of windows, shop-windows, advertisement notices, signs, etc.;
  • damages due to a vehicle collision;
  • landslides or collapsing of earth layers, underground waters;
  • damages due to sea waves;
  • hit/sound waves;
  • strikes and civil unrest.

The insurance sum is usually determined by the client, and depends on the value of the property. The price of the insurance (the insurance bonus) is determined by the insurance company in accordance with the type of the property, the insurance sum, the risk circumstances, the chosen cover and the insurance duration.

In cases of damage, the insured client has to inform the insurance company within 24 hours. The client should not undertake any actions that might increase the size of the damage. The damage is established through an inspection by representatives of the insurance company, the insured client and an independent expert.

The insurance compensation is determined within the insurance sum or in accordance with the responsibility limit. In cases of total damage, the size of the damage is equal to the actual value of the damaged property, but it cannot exceed the insurance sum. In cases of partial damage, the damage is determined in accordance with the expenses necessary for recovery of the property to its state before the event. The compensation is usually paid within 15 days after presenting all the documents necessary to prove the event and determine the damage size.