OCTOBER 17, 2024 – Fifteen years ago, I was hopeful that American bank regulators would research the concept of Mortgage Lending Value (MLV) and make lenders adopt it for real estate loans. Of course, there was little chance as us Americans love booms and busts (ok, some don’t like this part of the cycle). Lenders live off of the fees they generate. Lots of money to be made when asset prices skyrocket. And, as the movie The Big Short showed, lots of money to be made when asset prices crash.
First the Germans (around the 1890’s), and now all of Europe, decided the crazy cycle of boom and bust was not ideal for its citizens. The following excerpts are from the 2025 European Valuation Standards (EVS). Maybe one day America will also decide to rid itself of the concept of Market Price (we do not have Market Value in USA real estate appraisals).
Shalom,
The Mann
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At least as far as the valuation of bank collateral is concerned, the European authorities are no longer satisfied with a stand-alone ‘Market Value’ that they correctly view as a ‘spot value’ at the date of valuation. They want to ‘secure the future’ by excluding expected price increases and internalising the potential for future lower market prices/values.
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The CRR lays down that in valuation according to ‘prudently conservative valuation criteria’, “the value excludes
expectations on price increases”. EVS 2025’s EVGN 2 addresses the issues arising from this in the contexts of:
• Valuation under the income approach.
• Using the direct capitalisation model.
• Valuations carried out by means of a DCF model.
• Treatment of rental increases.
• And the developer’s profit in the residual method of valuation.
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The second CRR requirement for appraisal according to ‘prudently conservative valuation criteria’ is that
“the value is adjusted to take into account the potential for the current Market Value to be significantly above
the value that would be sustainable over the life of the loan”.
▶ HERE EVGN 2 HIGHLIGHTS ISSUES OF:
• Assessing the sustainability of the value over the life of the loan.
• The impact of oversupply of a particular type of property on prices and value.
• The impact on future value of declining population of a given locality and
other negative factors changing the surroundings of the real estate.
Tag Archives: EVs
BAN AND BOYCOTT EVs!!!
JANUARY 8, 2024 – I am providing a link to an automotive expert that has obviously been around the industry for ages. It is good to see more facts about how EVs are destroying this planet. I would ask for us to seek a ban on them. But, I know that is unrealistic and anti-free market. It is good to see the consumer not support this woke movement that is hurting the environment, increasing costs for the common person that cannot afford higher and higher car prices, and lining the pockets of the rich. One more movement that robs the poor to give to the rich. And people fall for it again and again. Truly sad. I will now get in my 2003 Diesel 2500 truck and just ride around for an hour doing nothing but feeding CO2 to the area trees:) Someone has to help the environment! Viva La Petro!
https://fee.org/articles/why-the-ev-market-is-sputtering/?utm_source=email&utm_medium=email&utm_campaign=2020_FEEDaily
Amazon has switched back to diesel and now Hertz back to gas cars. Bravo to them!