I. Introduction

Determining the fair market value of real property in Makati is a legally and commercially significant exercise. Makati is one of the Philippines’ most valuable real estate markets, containing premier business districts, high-end residential villages, mixed-use developments, condominium towers, commercial buildings, and redevelopment sites. Because of this, property valuation in Makati often affects sales, leases, estate settlement, taxation, financing, expropriation, corporate transactions, judicial disputes, and local government assessments.

In Philippine legal practice, “fair market value” is not always a single fixed number. Depending on the purpose, the relevant value may be the price a willing buyer and willing seller would agree upon, the zonal value set by the Bureau of Internal Revenue, the assessed value used by the local government for real property tax, the appraised value of a bank or private appraiser, or the just compensation value in an expropriation case. These values may differ substantially.

A correct determination of fair market value therefore requires knowing the purpose of the valuation, the legal framework involved, the characteristics of the property, the state of the Makati market, and the proper valuation method.

II. Meaning of Fair Market Value

Fair market value generally refers to the price that a property would command in an open and competitive market, where both buyer and seller are willing, informed, acting prudently, and under no compulsion to transact.

In practical terms, it asks:

What would a reasonable buyer pay, and what would a reasonable seller accept, for this specific property at this specific time, under ordinary market conditions?

Fair market value is different from:

Selling price, which is the actual contract price agreed upon by the parties.

Zonal value, which is the value assigned by the Bureau of Internal Revenue for tax purposes.

Assessed value, which is the value used by the city assessor to compute real property tax.

Appraised value, which is the opinion of value by a licensed appraiser, bank, or valuation firm.

Book value, which is the accounting value recorded in financial statements.

Sentimental value, which is personal to the owner and generally irrelevant to market valuation.

Investment value, which is the value to a particular investor based on that investor’s strategy, risk appetite, financing, or development plan.

For legal and tax purposes, the relevant value depends on the transaction or proceeding involved.

III. Why Fair Market Value Matters in Makati

Fair market value is commonly needed in Makati for the following purposes:

1. Sale or Purchase of Property

Buyers and sellers need a defensible market value to negotiate the purchase price. In Makati, this is especially important because prices can differ widely depending on whether the property is located in the central business district, a gated village, a fringe commercial area, or an older mixed-use neighborhood.

2. Capital Gains Tax and Documentary Stamp Tax

For real property sales, the Bureau of Internal Revenue generally uses the higher of the gross selling price or fair market value for purposes of certain transfer taxes. In practice, BIR zonal value often becomes a critical benchmark.

3. Estate Settlement

When a property owner dies, real property forming part of the estate must be valued for estate tax, partition, or settlement among heirs. Makati properties can form a substantial portion of an estate, making proper valuation essential.

4. Donation

Donations of Makati real property require valuation for donor’s tax and transfer documentation.

5. Real Property Tax

The City of Makati imposes real property tax based on assessed value, which is derived from fair market value under the local schedule of market values and assessment levels.

6. Mortgage or Loan Transactions

Banks require appraisal before accepting Makati property as collateral. Bank appraised value may be more conservative than open market value.

7. Expropriation

If government takes private property for public use, the owner is entitled to just compensation. Fair market value is a major factor, but judicial determination may consider evidence beyond tax declarations or zonal values.

8. Corporate Transactions

Real property valuation may be needed for mergers, acquisitions, asset transfers, capital contributions, related-party transactions, and financial reporting.

9. Litigation

Property valuation may arise in partition, annulment of sale, rescission, damages, foreclosure, ejectment-related claims, insolvency, family property disputes, and intra-corporate controversies.

IV. Key Legal Concepts in Philippine Property Valuation

A. Fair Market Value for Tax Purposes

For national tax purposes, the BIR often looks at the higher of:

the gross selling price or consideration stated in the deed;
the fair market value shown in the schedule of values of the provincial or city assessor; or
the BIR zonal value.

This means that even if a deed of sale states a lower price, taxes may still be computed using a higher government-determined value.

In Makati, where zonal values can be high, parties should verify BIR values before signing documents. Underdeclaring the selling price may expose parties to tax assessments, penalties, and documentary problems.

B. Fair Market Value for Local Real Property Tax

Real property tax is based on assessed value. Assessed value is derived by applying an assessment level to the fair market value determined under the local schedule of market values.

The City Assessor maintains records such as:

tax declarations;
classification of property;
market value;
assessment level;
assessed value;
property use;
improvements; and
land area or floor area.

The value appearing in a tax declaration is not always the same as actual market value. It may be lower than what buyers are willing to pay, especially in prime Makati locations.

C. Just Compensation in Expropriation

In expropriation, the Constitution requires payment of just compensation. Courts are not bound solely by zonal value, tax declaration value, or the government’s valuation. They may consider market data, comparable sales, location, current use, potential use, improvements, income-generating capacity, and expert appraisal.

The relevant date of valuation is often legally significant. Depending on the circumstances, valuation may be reckoned from the time of taking or another legally applicable date.

D. Fair Value in Corporate or Accounting Contexts

In corporate transactions, valuation may be governed by accounting standards, Securities and Exchange Commission requirements, tax rules, or contractual valuation clauses. A Makati property contributed to a corporation, transferred between related parties, or recorded in audited financial statements may require a formal appraisal report.

V. Main Sources of Property Value Information in Makati

1. BIR Zonal Values

The BIR zonal value is one of the most important reference points for Makati real property. It is used mainly for tax purposes. BIR zonal values are usually organized by revenue district, street, barangay, condominium project, classification, or property type.

For Makati, zonal values may vary greatly depending on whether the property is in places such as the central business district, Ayala Avenue, Salcedo Village, Legazpi Village, Bel-Air, San Lorenzo, Dasmariñas Village, Forbes Park, Urdaneta, Guadalupe, Poblacion, Bangkal, Palanan, or other barangays.

Zonal value is important, but it should not automatically be treated as the actual market price. In some areas, market prices may be higher than zonal value. In other cases, especially for unusual properties, distressed assets, or properties with title issues, actual market value may be lower.

2. City Assessor’s Fair Market Value

The City Assessor’s records show the fair market value and assessed value for real property tax purposes. These are reflected in the tax declaration.

Important documents from the City Assessor may include:

certified true copy of tax declaration;
property record card;
tax map information;
assessment records;
classification data;
improvement records.

The assessor’s value is useful for tax and administrative purposes but may not represent the actual sale value in the private market.

3. Recent Comparable Sales

Actual recent sales of similar properties are often the most persuasive evidence of market value. For Makati property, comparable sales should ideally be:

located in the same building, street, subdivision, village, barangay, or district;
recent;
similar in lot area, floor area, frontage, shape, access, and condition;
similar in permitted use;
not distressed or forced sales;
supported by documents, not merely hearsay.

Comparable sales are particularly important for residential lots, condominium units, office condominium units, and commercial properties.

4. Asking Prices and Listings

Online listings, broker quotations, and advertisements can help identify market expectations, but they are generally weaker evidence than closed sales. Asking prices may be inflated, negotiable, outdated, duplicated, or posted by intermediaries without authority.

Still, listings may be useful when actual sale data is scarce, especially for high-end villages or unique commercial properties.

5. Appraisal Reports

A formal appraisal by a licensed real estate appraiser is often the most reliable method for legal, banking, corporate, or litigation purposes. A proper appraisal report should identify the property, state the valuation date, explain the methodology, analyze comparable data, discuss assumptions, and provide a reasoned conclusion.

For valuable Makati property, a written appraisal is usually preferable to informal broker estimates.

6. Bank Appraisal

Banks conduct appraisals when property is offered as collateral. Bank valuation may consider market value, loan value, forced sale value, and risk factors. A bank appraisal is useful, but it is not necessarily equal to fair market value because banks may use conservative assumptions.

7. Broker Opinions

Experienced Makati brokers can provide valuable market intelligence, especially in buildings or villages where they regularly transact. However, broker opinions should be tested against actual sales, title condition, tax values, and independent appraisal.

8. Developer Pricing

For condominium units, developer pricing may influence market expectations. However, developer prices for new projects may include marketing premiums, financing terms, brand value, furnishing packages, or other non-market components.

9. Court or Administrative Valuation Evidence

In litigation or expropriation, evidence may include appraisals, tax declarations, zonal values, photographs, maps, expert testimony, comparable deeds of sale, income statements, permits, leases, and inspection reports.

VI. Factors Affecting Fair Market Value in Makati

A. Location

Location is the dominant factor in Makati valuation. Properties in the central business district, prime villages, or major commercial corridors command significant premiums.

Relevant location factors include:

barangay;
street;
proximity to Ayala Avenue, Paseo de Roxas, Makati Avenue, Gil Puyat Avenue, EDSA, South Avenue, or other major roads;
proximity to offices, malls, schools, hospitals, transit, and commercial centers;
neighborhood prestige;
access and traffic conditions;
flood risk;
noise and congestion;
surrounding land uses;
future infrastructure or redevelopment potential.

A property in Legazpi Village, Salcedo Village, Bel-Air, San Lorenzo, Forbes Park, Dasmariñas Village, or Urdaneta will not be valued in the same way as a property in a fringe or transitional barangay.

B. Property Classification

The classification of the property affects both legal use and valuation. Common classifications include:

residential;
commercial;
industrial;
mixed-use;
condominium;
office;
parking slot;
vacant land;
special property.

A residential lot in a gated village may be valued differently from a commercial lot of similar size because of zoning, access, development potential, restrictions, and market demand.

C. Zoning and Land Use

Zoning affects what may legally be built or operated on the property. A property with commercial zoning or high-density development potential may have a higher value than one limited to low-density residential use.

Important zoning considerations include:

allowable use;
floor area ratio;
building height restrictions;
setbacks;
parking requirements;
heritage or special district rules;
environmental limitations;
village restrictions;
deed restrictions;
easements and right-of-way limitations.

For Makati, zoning must be checked carefully because the highest and best use of a property may be affected by both public regulations and private restrictions.

D. Highest and Best Use

The highest and best use is the reasonably probable and legally permissible use of the property that results in the highest value.

For example:

A small old house in a commercializing area may be more valuable as redevelopment land than as a residence.

A vacant lot near a major road may be valued based on its potential for commercial or mixed-use development.

A condominium unit may be valued based on residential occupancy, rental income, or resale demand.

A village lot may be valuable because of exclusivity, scarcity, and prestige, even if redevelopment is restricted.

The highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive.

E. Land Area, Shape, and Frontage

For land valuation, size and configuration matter. A regular-shaped lot with wide frontage and good road access generally has better marketability than an irregular, interior, narrow, or landlocked lot.

Important factors include:

total land area;
frontage;
depth;
corner influence;
shape;
slope;
elevation;
access;
road width;
availability of utilities.

F. Improvements

Buildings and other improvements may add value, but not always. In some cases, old structures may have little contributory value or may even reduce value because the buyer expects demolition costs.

For improvements, consider:

age;
condition;
design;
structural integrity;
materials;
compliance with building permits;
occupancy permits;
maintenance history;
remaining economic life;
income-generating capacity.

G. Condominium-Specific Factors

For Makati condominiums, valuation depends on both the unit and the project.

Relevant factors include:

building name and reputation;
developer;
property manager;
location;
unit size;
layout;
floor level;
view;
orientation;
parking slots;
balcony;
furnishings;
condition;
association dues;
building age;
amenities;
occupancy rate;
rental demand;
elevator condition;
title status;
restrictions on short-term leasing;
pending assessments or special dues.

A unit in a premium building in the central business district may command a much higher price per square meter than a similar-sized unit in an older or less desirable building.

H. Title Condition

A clean title supports higher value. Title issues can materially reduce marketability and price.

Common title concerns include:

adverse claims;
liens;
mortgages;
notices of lis pendens;
annotations;
unpaid real property taxes;
estate settlement issues;
co-ownership disputes;
missing owner’s duplicate title;
technical description errors;
encroachments;
easements;
restrictions;
pending cases;
possession issues.

In Makati, buyers often insist on thorough due diligence because property values are high and title defects can involve substantial financial exposure.

I. Possession and Occupancy

A property occupied by tenants, informal settlers, holdover occupants, relatives, lessees, or adverse possessors may have a lower value than a vacant and immediately usable property.

For leased properties, valuation must consider:

lease rate;
lease term;
escalation clause;
security deposit;
tenant quality;
renewal rights;
restrictions on sale;
termination provisions;
registration of lease;
actual rental yield.

A property with a long-term lease below market rent may sell at a discount, while a property with strong rental income may command a premium.

J. Market Conditions

Real estate value changes over time. Makati values are affected by:

interest rates;
availability of bank financing;
office demand;
residential demand;
foreign investment sentiment;
business district activity;
infrastructure projects;
vacancy rates;
rental trends;
redevelopment demand;
macroeconomic conditions;
investor confidence;
supply of new condominium units;
changes in taxation or regulation.

The valuation date must always be identified. A value estimate without a valuation date is incomplete.

VII. Accepted Valuation Approaches

Professional valuation commonly uses three main approaches: the market approach, income approach, and cost approach.

A. Market Data Approach

The market data approach compares the subject property with similar properties that have recently sold or are being offered for sale.

This is commonly used for:

residential lots;
condominium units;
office condominium units;
parking slots;
comparable commercial properties.

Steps in the Market Data Approach

First, identify comparable properties.

Second, verify that the transactions are real and recent.

Third, compare location, size, condition, use, title status, and other attributes.

Fourth, adjust for differences.

Fifth, arrive at an indicated value.

Example

A 100-square-meter Makati condominium unit is being valued. Recent comparable sales in the same building range from ₱230,000 to ₱260,000 per square meter. A unit on a higher floor with better view and parking may be closer to the upper range. A unit needing renovation may be closer to the lower range.

The indicated value may be computed as:

Unit value per square meter × floor area, plus value of parking slot, adjusted for condition and other factors.

Strengths

The market approach reflects actual buyer and seller behavior. It is persuasive when comparable sales are available.

Weaknesses

Comparable data may be difficult to verify. Makati transactions are often private. Asking prices may not reflect actual sale prices.

B. Income Approach

The income approach values property based on its capacity to generate income. It is often used for:

leased commercial buildings;
office units;
rental condominium units;
apartment buildings;
income-producing land;
mixed-use properties.

Common Methods

The income approach may use direct capitalization or discounted cash flow.

Under direct capitalization, value is estimated by dividing net operating income by an appropriate capitalization rate.

Value = Net Operating Income ÷ Capitalization Rate

Net operating income is gross income minus vacancy allowance, operating expenses, property taxes, insurance, repairs, management fees, and other operating costs.

Example

If a Makati commercial property generates annual net operating income of ₱5,000,000 and the appropriate capitalization rate is 6%, the indicated value is:

₱5,000,000 ÷ 0.06 = ₱83,333,333.33

This figure must still be tested against market evidence.

Strengths

The income approach is useful for investment properties and leased assets.

Weaknesses

It depends heavily on accurate rental data, expense assumptions, vacancy estimates, and capitalization rates.

C. Cost Approach

The cost approach estimates value by determining the cost to reproduce or replace the improvements, less depreciation, plus land value.

It is commonly used for:

special-purpose buildings;
newly constructed improvements;
properties with limited comparable sales;
insurance-related valuation;
institutional or unique properties.

Basic Formula

Value = Land Value + Replacement Cost of Improvements - Depreciation

Depreciation may be physical, functional, or economic.

Strengths

The cost approach is useful where improvements are new or unique.

Weaknesses

It may not reflect actual market behavior in Makati, especially where land value dominates and old improvements contribute little value.

VIII. Valuation of Different Types of Makati Property

A. Vacant Land

For vacant land, valuation focuses on location, size, zoning, access, frontage, and development potential.

Key documents include:

transfer certificate of title;
tax declaration;
lot plan;
zoning certification;
tax clearance;
subdivision restrictions, if applicable;
survey plan;
right-of-way documents;
encumbrance search.

Vacant land in Makati may be valued based on comparable land sales or redevelopment potential.

B. Residential House and Lot

For house-and-lot properties, especially in villages, land often represents most of the value. Older houses may be valued based on whether they are usable, renovated, architecturally significant, or likely to be demolished.

Relevant considerations include:

village prestige;
lot size;
house condition;
age of improvements;
security;
association dues;
deed restrictions;
renovation potential;
parking;
flood risk;
surrounding properties;
buyer profile.

C. Condominium Units

For condominium units, price per square meter is a common starting point. However, it should not be the only measure.

Consider:

unit area;
usable layout;
building quality;
title status;
floor level;
view;
parking;
association dues;
rental income;
condition;
furnishings;
occupancy rate;
elevator and common area condition;
building age;
developer reputation.

Parking slots should be valued separately when separately titled or separately transferable.

D. Office Units

Office condominium valuation depends on building grade, tenant demand, floor efficiency, parking ratio, building management, accessibility, and rental rates.

Important indicators include:

rental per square meter;
occupancy;
operating expenses;
association dues;
floor plate;
building age;
elevator service;
location within the CBD;
proximity to transit and major roads;
tenant profile.

E. Commercial Buildings

Commercial building valuation often requires a combination of market, income, and cost approaches. The income approach may be especially relevant if the building is leased.

Review:

lease contracts;
rent roll;
operating expenses;
occupancy permits;
building permits;
fire safety certificates;
real property tax records;
maintenance records;
zoning compliance;
redevelopment potential.

F. Parking Slots

Makati parking slots can have significant value, especially in office and residential condominium buildings. Value depends on location, building, title status, accessibility, scarcity, and whether the slot can be sold separately.

G. Properties for Redevelopment

Redevelopment properties should be valued based on highest and best use, not merely existing use. Relevant considerations include:

assemblage potential;
zoning;
allowable density;
demolition cost;
development cost;
projected sale or rental income;
permits;
neighborhood transformation;
access;
investor demand.

IX. Documents Needed to Determine Fair Market Value

A proper valuation should begin with complete documents. The following are commonly needed:

Title and Ownership Documents

Transfer Certificate of Title;
Condominium Certificate of Title;
owner’s duplicate title;
deed of sale or acquisition document;
extrajudicial settlement, donation, or transfer document, if applicable;
corporate secretary’s certificate, board resolution, or authority to sell, for corporate owners;
special power of attorney, if an attorney-in-fact is involved.

Tax Documents

latest tax declaration;
real property tax receipts;
real property tax clearance;
statement of account from the City Treasurer;
BIR zonal value reference;
capital gains tax or creditable withholding tax computation, if applicable;
estate tax or donor’s tax computation, if applicable.

Technical Documents

lot plan;
vicinity map;
survey plan;
floor plan;
condominium master deed information;
building plans;
occupancy permit;
building permit;
zoning certification;
certificate of no improvement, if applicable;
photos and inspection report.

Transaction Documents

recent deeds of sale of comparable properties;
broker quotations;
listings;
lease contracts;
rent roll;
appraisal reports;
bank valuation reports;
offers to buy;
letters of intent;
contracts to sell.

Due Diligence Documents

certified true copy of title from the Registry of Deeds;
encumbrance check;
court case search, if relevant;
homeowners’ association clearance;
condominium corporation clearance;
utility bills;
possession documents;
tenant information;
association dues statement;
special assessment records.

X. Step-by-Step Method for Determining Fair Market Value in Makati

Step 1: Identify the Purpose of Valuation

The first step is to determine why the valuation is needed. The method and evidence may differ depending on whether the purpose is sale, tax, estate settlement, bank loan, litigation, corporate reporting, or expropriation.

A valuation for negotiation may be more flexible. A valuation for court or tax purposes requires stronger documentation.

Step 2: Identify the Property Precisely

Confirm:

title number;
registered owner;
exact location;
lot area or floor area;
property type;
boundaries;
improvements;
parking slots;
tax declaration number;
condominium project or subdivision;
barangay;
legal restrictions.

Errors in property identification can lead to serious valuation mistakes.

Step 3: Verify Title and Encumbrances

Obtain a certified true copy of title from the Registry of Deeds and check all annotations. A title with a mortgage, adverse claim, lis pendens, restriction, or unresolved estate issue may be less marketable.

Step 4: Get the Latest Tax Declaration

The tax declaration shows classification, declared owner, area, market value, assessed value, and tax declaration number. Compare the tax declaration with the title to ensure consistency.

Step 5: Check BIR Zonal Value

Determine the applicable BIR zonal value based on the property’s exact location, classification, and property type. For condominiums, the relevant zonal value may be specific to the building or project.

The zonal value is essential for estimating tax exposure.

Step 6: Check City Assessor’s Value

Review the City Assessor’s fair market value and assessed value. This is important for real property tax and may also be used as a reference in legal documents.

Step 7: Gather Comparable Market Data

Identify similar properties recently sold or offered in the same area. Give greater weight to actual closed transactions than asking prices.

For condominium units, the best comparables are usually within the same building. For village lots, the best comparables are often within the same village or immediate neighborhood. For commercial properties, compare properties with similar zoning, frontage, access, and income potential.

Step 8: Inspect the Property

Physical inspection is important. The appraiser or buyer should examine:

condition;
occupancy;
access;
neighborhood;
improvements;
repairs needed;
unauthorized structures;
encroachments;
flooding signs;
noise;
actual use.

For condominium units, inspect the unit, common areas, lobby, elevators, parking, amenities, and building maintenance.

Step 9: Determine Highest and Best Use

Ask whether the property’s current use is also its most valuable legal use. A property may be worth more as redevelopment land, commercial space, rental property, or owner-occupied residence.

Step 10: Apply the Appropriate Valuation Method

Use the market approach for ordinary residential and condominium properties.

Use the income approach for rental and commercial properties.

Use the cost approach for new or special-purpose buildings.

In many cases, use more than one method and reconcile the results.

Step 11: Adjust for Property-Specific Factors

Adjust value upward or downward based on:

title condition;
occupancy;
legal restrictions;
physical condition;
renovation needs;
urgency of sale;
financing terms;
payment terms;
tax assumptions;
included furniture or equipment;
parking;
lease terms;
association dues;
marketability.

Step 12: Reconcile the Values

After gathering all indicators, reconcile them into a final value opinion.

For example:

BIR zonal value: ₱X;
City Assessor value: ₱Y;
comparable sales indication: ₱Z;
income approach indication: ₱A;
bank appraisal: ₱B.

The final fair market value should explain which evidence was given more weight and why.

XI. BIR Zonal Value vs. Fair Market Value

One of the most common mistakes in Makati property transactions is assuming that BIR zonal value equals fair market value.

They are related but not identical.

BIR Zonal Value

BIR zonal value is a tax reference. It is used to determine the minimum taxable base for certain real property transactions.

Actual Fair Market Value

Actual fair market value reflects the price the property would likely command in the open market.

Differences

A property may sell above zonal value because of scarcity, prime location, high demand, or redevelopment potential.

A property may sell below zonal value because of title problems, poor condition, restricted use, pending litigation, adverse possession, unusual shape, flooding, lack of access, or distressed circumstances.

For tax purposes, however, a sale below zonal value may still be taxed based on the higher government value.

XII. Assessed Value vs. Fair Market Value

Assessed value is used for real property tax. It is derived by applying an assessment level to the fair market value determined by the local assessor.

For example, if the assessor’s fair market value is ₱10,000,000 and the assessment level is 20%, the assessed value is ₱2,000,000. Real property tax is then computed based on the assessed value.

Assessed value is usually not the same as actual sale value. In Makati, actual market prices can be significantly higher than assessed values.

XIII. Valuation for Sale Transactions

When buying or selling Makati property, parties should consider at least three figures:

expected market price;
BIR zonal value;
local assessor’s value.

The contract price should reflect commercial agreement, but tax consequences must be calculated using the legally applicable tax base.

Seller’s Perspective

A seller should determine:

realistic market value;
minimum acceptable price;
capital gains tax or income tax exposure;
documentary stamp tax allocation;
unpaid real property taxes;
broker’s commission;
clearance costs;
mortgage cancellation costs;
estate or corporate authority issues.

Buyer’s Perspective

A buyer should determine:

fair purchase price;
transfer tax and registration costs;
title risk;
possession risk;
renovation cost;
association dues;
zoning restrictions;
financing value;
resale potential;
rental yield.

XIV. Valuation for Estate Settlement

For estate tax purposes, real property must be valued according to applicable tax rules. In practice, heirs must identify the fair market value as of the date of death, considering relevant BIR and assessor values.

For Makati property, this can be significant because estate tax exposure may be substantial.

Documents commonly needed include:

death certificate;
title;
tax declaration;
BIR zonal value at the relevant date;
estate tax return;
extrajudicial settlement;
real property tax clearance;
certificate authorizing registration;
proof of relationship among heirs;
settlement documents.

Where the estate includes multiple heirs, valuation is also needed to determine shares, equalization payments, or possible sale proceeds.

XV. Valuation for Donation

A donation of Makati property requires valuation for donor’s tax and transfer purposes. The donor and donee should check the applicable BIR zonal value, assessor’s value, and legal restrictions before executing the deed of donation.

Donation may also have implications for legitime, collation, estate planning, and future disputes among compulsory heirs.

XVI. Valuation for Mortgage and Financing

Banks typically require appraisal before granting a loan secured by Makati property.

The bank may consider:

market value;
forced sale value;
loan-to-value ratio;
title condition;
location;
property type;
liquidity;
occupancy;
insurance;
borrower risk.

A bank’s appraised value may be lower than the seller’s asking price. The loanable amount is usually based on the bank’s accepted collateral value, not the contract price.

XVII. Valuation in Litigation

Valuation disputes may arise in civil, tax, probate, land registration, expropriation, and commercial cases.

Courts may consider:

expert appraisal reports;
testimony of licensed appraisers;
comparable sales;
tax declarations;
zonal values;
location maps;
photographs;
ocular inspection;
income data;
replacement cost;
actual offers;
contracts and deeds;
government valuations.

In litigation, the credibility of evidence matters. A bare opinion without supporting data is weak. A detailed appraisal with verified comparables and clear methodology is stronger.

XVIII. Special Considerations in Makati

A. Prime Village Properties

Makati’s exclusive villages may involve private restrictions, association rules, security regulations, minimum lot sizes, construction restrictions, and approval requirements. These can affect value.

For village properties, due diligence should include:

title review;
village association clearance;
deed restrictions;
unpaid dues;
renovation restrictions;
access rules;
permitted uses;
construction guidelines;
security rules;
buyer eligibility rules, where applicable.

B. Central Business District Properties

CBD properties require careful analysis of commercial use, rental income, building grade, access, parking, and redevelopment potential.

Important considerations include:

office vacancy;
tenant demand;
rental rates;
building management;
pedestrian access;
proximity to malls and transit;
parking;
age of building;
strata title restrictions;
association dues.

C. Older Buildings

Older Makati buildings may have lower values because of maintenance concerns, outdated systems, limited amenities, or high association dues. However, they may also have larger unit cuts, prime locations, or redevelopment potential.

D. Poblacion and Fringe Areas

Some Makati neighborhoods may have mixed residential, commercial, hospitality, and nightlife uses. Valuation should account for changing land use, foot traffic, zoning, noise, redevelopment, and neighborhood character.

E. Flooding and Environmental Risk

Flooding, drainage, elevation, and infrastructure conditions may affect value. Buyers should inspect during rainy conditions if possible and check local flood history.

F. Foreign Ownership Restrictions

Foreigners generally cannot own Philippine land, subject to specific exceptions such as hereditary succession and certain condominium ownership structures. Foreign buyers may own condominium units subject to the constitutional and statutory limits on foreign ownership of condominium corporations.

This affects marketability. Landed residential property in Makati may have a more limited buyer pool than condominium units available to qualified foreign buyers.

XIX. Tax Implications of Valuation

A. Capital Gains Tax

For sales of capital assets classified as real property, capital gains tax is generally computed based on the gross selling price or fair market value, whichever is higher, subject to applicable law and classification.

B. Creditable Withholding Tax

If the seller is engaged in real estate business or the property is an ordinary asset, creditable withholding tax rules may apply instead of capital gains tax.

C. Documentary Stamp Tax

Documentary stamp tax is imposed on certain documents transferring real property and is generally computed based on the consideration or fair market value, whichever is higher.

D. Local Transfer Tax

The City of Makati imposes local transfer tax on transfers of real property ownership. The tax base may consider the consideration or fair market value, depending on applicable local rules.

E. Real Property Tax

Real property tax is imposed annually based on assessed value. Unpaid real property taxes must usually be settled before transfer.

F. Estate Tax and Donor’s Tax

Estate and donor’s tax computations require proper valuation. For Makati properties, this should be checked carefully because the tax impact can be substantial.

XX. Common Valuation Mistakes

1. Treating Zonal Value as the Exact Market Price

Zonal value is a tax tool, not conclusive proof of actual market value.

2. Relying Only on Listings

Asking prices are not the same as sold prices.

3. Ignoring Title Defects

A property with title issues may be worth much less than a clean property.

4. Ignoring Occupancy

A property occupied by tenants or adverse occupants may be harder to sell.

5. Ignoring Zoning

A property’s legal use can greatly affect value.

6. Ignoring Building Condition

For condominiums and commercial buildings, poor building maintenance can reduce value.

7. Using Old Comparable Sales

Makati market conditions can change. Comparable data should be current.

8. Failing to Separate Land and Improvement Value

In many Makati properties, land value dominates. Old improvements may contribute little value.

9. Ignoring Transaction Costs

Taxes, registration fees, broker commissions, unpaid dues, and clearance costs affect net proceeds.

10. Valuing Without Inspection

Desk valuation may miss defects, occupancy issues, access problems, and neighborhood conditions.

XXI. Practical Checklist for Determining Fair Market Value

A careful Makati property valuation should include the following:

Identify the exact property and title number.
Obtain a certified true copy of title.
Review annotations and encumbrances.
Secure the latest tax declaration.
Check real property tax payments.
Obtain tax clearance or statement of account.
Determine applicable BIR zonal value.
Verify City Assessor’s fair market value and assessed value.
Check zoning and land use.
Review subdivision or condominium restrictions.
Inspect the property.
Photograph the property and surroundings.
Identify comparable sales.
Review listings with caution.
Interview knowledgeable brokers.
Check rental income, if applicable.
Review lease contracts, if any.
Estimate renovation or demolition costs.
Consider occupancy and possession.
Apply appropriate valuation methods.
Reconcile all indicators.
Obtain a licensed appraisal report for high-value or disputed matters.
Compute tax consequences.
Document assumptions and valuation date.
Keep supporting evidence.

XXII. When to Obtain a Formal Appraisal

A formal appraisal is advisable when:

the property is high-value;
the property will be used as collateral;
the parties disagree on price;
the property is part of an estate;
the property is involved in litigation;
the transaction is between related parties;
the property is owned by a corporation;
the property is unique;
the property has income-producing potential;
the valuation will be submitted to a court, bank, auditor, or government office.

The appraiser should be licensed, independent, and familiar with Makati property.

XXIII. Contents of a Good Appraisal Report

A reliable appraisal report should include:

purpose of appraisal;
valuation date;
property identification;
ownership information;
title review;
location description;
neighborhood analysis;
zoning;
site description;
improvement description;
photographs;
market analysis;
comparable data;
adjustments;
valuation methodology;
assumptions and limiting conditions;
final value conclusion;
appraiser credentials;
certification.

For litigation or corporate use, the report should be detailed enough to withstand scrutiny.

XXIV. Evidence Ranked by Persuasive Value

In determining actual market value, evidence may generally be ranked as follows:

Strong Evidence

recent verified sales of comparable properties;
independent appraisal report;
actual offers from qualified buyers;
income records for income-producing property;
court-tested expert testimony.

Moderate Evidence

bank appraisal;
broker opinion supported by data;
developer resale data;
recent listings with verified seller authority;
tax declarations and assessor data.

Limited Evidence

unverified online listings;
hearsay prices;
outdated sale data;
sentimental owner estimates;
speculative future development assumptions;
informal opinions without documentation.

XXV. Special Issue: Related-Party Transactions

When Makati property is sold or transferred between relatives, related corporations, shareholders, or affiliates, valuation should be handled carefully. Tax authorities may scrutinize transactions that appear undervalued.

Parties should consider obtaining an independent appraisal and ensuring that the price is commercially defensible.

Related-party transactions may arise in:

family settlements;
corporate asset transfers;
shareholder buyouts;
mergers;
donations disguised as sales;
estate planning;
transfers to holding companies;
transfers between parent and subsidiary corporations.

XXVI. Special Issue: Distressed Sales

A distressed sale may not reflect fair market value because the seller may be under pressure to sell quickly. Examples include:

foreclosure;
urgent liquidation;
estate disputes;
tax delinquency;
insolvency;
family conflict;
litigation risk;
forced relocation.

Distressed sale prices may be considered but should be adjusted carefully.

XXVII. Special Issue: Foreclosure Value

Foreclosure value or forced sale value is usually lower than fair market value. Banks and lenders may use conservative values to account for liquidation risk, legal expenses, possession issues, and resale uncertainty.

A property’s fair market value may be ₱100 million, while its forced sale value may be materially lower.

XXVIII. Special Issue: Lease-Encumbered Property

A property subject to a lease may be valued differently from a vacant property.

If the lease rate is above market, the property may be more valuable to investors.

If the lease rate is below market or the lease term is long, the property may be less attractive.

If the tenant has renewal rights, purchase options, or registered lease rights, these may affect marketability.

XXIX. Special Issue: Co-Owned Property

A co-owned Makati property may have a lower practical market value if unanimity is required to sell or if co-owners are in dispute. A fractional undivided share is generally harder to sell than the entire property.

In partition cases, fair market value may be needed to determine whether the property should be physically divided, sold, or assigned to one co-owner with payment to others.

XXX. Special Issue: Properties with Unsettled Estates

Many properties remain registered in the name of deceased owners. Before sale, heirs may need to settle the estate, pay estate tax, execute settlement documents, and secure a certificate authorizing registration.

The fair market value may be affected by:

number of heirs;
disputes among heirs;
estate tax liabilities;
missing documents;
unpaid real property taxes;
title issues;
possession;
delay risk.

Buyers may discount the price if they must wait for estate settlement.

XXXI. Special Issue: Property with Pending Litigation

A notice of lis pendens, adverse claim, injunction, ownership dispute, or possession case can substantially affect value. Even if the property is physically attractive, legal uncertainty reduces marketability.

A valuation should disclose pending cases and consider their effect.

XXXII. Special Issue: Unauthorized Improvements

Buildings or renovations without proper permits may affect value. Buyers may require proof of building permits, occupancy permits, fire safety compliance, and condominium or village approvals.

Unauthorized improvements may lead to:

demolition risk;
fines;
insurance issues;
financing problems;
buyer discount;
transfer complications;
association penalties.

XXXIII. Special Issue: Tax Declaration Not Matching Title

Discrepancies between title and tax declaration should be resolved before relying on valuation. Common issues include:

incorrect area;
incorrect owner name;
wrong classification;
missing improvements;
outdated building data;
incorrect address;
duplicate declarations;
undeclared structures.

Such discrepancies may affect tax computations and transfer processing.

XXXIV. Determining Value per Square Meter

Makati valuations often use price per square meter, but this must be applied carefully.

For Land

Land value per square meter depends on location, frontage, shape, zoning, and highest use.

For Condominiums

Condominium price per square meter depends on net saleable area, building quality, floor, view, parking, layout, and condition.

For Buildings

Building value per square meter may refer to replacement cost, sale price, or income potential. The basis must be clear.

A simple price-per-square-meter comparison can be misleading if the properties are not truly comparable.

XXXV. Sample Valuation Framework

A practical valuation table may look like this:

Indicator	Value
BIR zonal value	₱X
City Assessor fair market value	₱Y
Assessed value	₱Z
Comparable Sale 1	₱A/sqm
Comparable Sale 2	₱B/sqm
Comparable Sale 3	₱C/sqm
Adjusted market range	₱D to ₱E
Income approach value	₱F
Cost approach value	₱G
Recommended fair market value	₱H

The final number should not be a mechanical average. It should be a reasoned conclusion based on the most reliable evidence.

XXXVI. Legal Documentation After Valuation

Once value is determined and a transaction proceeds, the parties may need:

deed of absolute sale;
contract to sell;
deed of assignment;
deed of donation;
extrajudicial settlement;
board resolution;
secretary’s certificate;
special power of attorney;
tax declarations;
tax clearance;
certificate authorizing registration;
transfer tax receipt;
registration fee receipt;
new title;
updated tax declaration.

Valuation affects several of these steps, especially tax computation and documentary requirements.

XXXVII. Best Practices

The following best practices help produce a defensible valuation:

Use the correct valuation date.
Identify the legal purpose.
Verify title first.
Check both BIR and City Assessor values.
Do not rely only on asking prices.
Prefer recent comparable sales.
Inspect the property.
Consider highest and best use.
Adjust for legal and physical defects.
Obtain a licensed appraisal for high-value matters.
Keep documentary support.
Compute tax consequences before signing.
Disclose assumptions.
Separate land, building, and parking value where appropriate.
Confirm zoning and restrictions.
Review leases and occupancy.
Reconcile all valuation indicators.

XXXVIII. Conclusion

Determining the fair market value of property in Makati requires more than checking a single number. A reliable valuation considers the purpose of the valuation, BIR zonal values, City Assessor records, recent comparable sales, title condition, zoning, highest and best use, physical condition, income potential, and current market conditions.

For ordinary sale negotiations, comparable market data and broker intelligence may provide a useful range. For taxes, BIR zonal values and assessor values are indispensable. For litigation, expropriation, financing, estate settlement, corporate transactions, and high-value transfers, a formal appraisal by a licensed real estate appraiser is usually necessary.

In Makati, where property values are high and legal risks can be costly, fair market value should be supported by documents, verified data, and a clear valuation method. A well-supported valuation protects sellers from underpricing, buyers from overpaying, heirs from disputes, lenders from collateral risk, and parties from tax and legal complications.