The appraisal of real estate mortgages in Joint Stock Commercial bank for Investment and Development of Vietnam (BIDV)

Cohort 2013 – 2015
MASTER’S THESIS
The appraisal of real estate mortgages in Joint Stock Commercial
Bank
for Investment and Development of Vietnam (BIDV)
Author: Tran Thi Huyen Linh
Advisor: Dr. Mai Anh
Hanoi, June 2015

DECLARATIONS
I declare the following:
(1) that the material contained in this master’s thesis is the end result of my own
work and that due acknowledgement has been given in the bibliography and references to
ALL sources be they printed, electronic or personal.
(2) that unless this master’s thesis has been confirmed as confidential, I agree to an
entire electronic copy or sections of the master’s thesis to being placed on the e-Learning
Portal, if deemed appropriate, to allow future students the opportunity to see examples of past
master’s thesis. I understand that if displayed on the e-Learning Portal it would be made
available for no longer than five years and those students would be able to print off copies or
download. The authorship would remain anonymous.
(3) I agree to my master’s thesis being submitted to a plagiarism detection service,
where it will be stored in a database and compared against work submitted from this or any
other School or from other institutions using the service. In the event of the service detecting
a high degree of similarity between content within the service this will be reported back to my
supervisor and second marker, who may decide to undertake further investigation that may
ultimately lead to disciplinary actions, should instances of plagiarism be detected.
(4) I have read the Thesis Guidelines of Master Program on Finance, Bank,
Insurance (Viet Nam and the South East Asia) for Cohort 6, period 2014–2015 and I declare
that ethical issues have been considered, evaluated and appropriately addressed in this
research.
SIGNED*: _________________________________________
DATE:____________________________________________
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ACKNOWLEDGEMENT
I am indebted a great various thanks to many people giving support me during doing
this master’s thesis.
In the first place, I would like to express honest appreciation to Dr. Mai Anh for his
assistance in the process of doing master’s thesis. He spent time and effort on discussing and
giving me helpful advice to ensure that the research was kept on the right track. Consequently,
I was able to complete the research successfully.
Secondly, I would like to thank all the lectures, tutors and staffs of International
School – Vietnam National University Hanoi and University de Nantes who are always
enthusiastic for helping me to gain knowledge and experience during the studying.
Thirdly, I would like to express my grateful thanks to the leaders of BIDV’s branches
in general and BIDV Ha Thanh in particular for their help and supports during my studying.
I also thank my family for their encouragements, support as well as motivation.
Last but not least, I would like to thank all of my friends who not only encourage my
spirit but also put much effort to help me check my writing styles.
Thank you!
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ABSTRACT
Currently, the economic context is stabilizing, the state's policy also has support for
enterprises to solve problems, promote the development of enterprises. Consequently, demand
for credit is also certain developments. However, the problem of bad debts at banks has not
yet definitively settle, causing banks want to grow fast, but even though, they have to ensure
the safety of the banking system. Therefore, the appraisal of assets is one of the important
parts that are needed to ensure the sustainable development of the bank, and the real estate is
considered as the most favorite and safe mortgage asset as well.
Because of these reason, the thesis “The appraisal of real estate mortgages in Joint
Stock Commercial Bank for Investment and Development of Vietnam (BIDV)” has been
lauched to help BIDV can improve and complete its own appraisal process.
The thesis was to clarify the role of lending with mortgages by assets in general and
real estate in particular, expressed the importance of the appraisal of assets in banks’ lending
actities. Thus, in order to determine the true value of real estate, the appraiser, also is credit
officer in bank, have to know about the real estate’s basis principles as how to determine real
estate’s value, affected factors, appraisal methods and appraisal principles…
Along with current situation of lending activities with real estate mortgage, the thesis
shown the achievements, limitations and causes of BIDV’s appraisal process, thus, lead to
problems need to be focused on the research.
Finally, after analyzing the collected data, based on the result and BIDV’s orientated
development, the solutions on the appraisal process as the management, information system,
interective between staffs and their manager, are pointed out
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TABLE OF CONTENTS
LIST OF ABBREVIATION........................................................................................................7
LIST OF TABLES....................................................................................................................8
Chapter 1 – Rationale for the appraisal of the property mortgaged to the Bank....................13
Chapter 2 – The current status of the appraisal process of real estate mortgage at BIDV....36
Chapter 3 - Research methods to improve the appraisal of the real estate mortgage to BIDV
..............................................................................................................................................52
Figure 3.1: Research approach.............................................................................................54
Chapter 4 – Data analysis.....................................................................................................61
Figure 4.1: Statistics on gender and age of the staff.............................................................61
Figure 4.2: Statistics on the training level of personnel.........................................................62
Figure 4.3: Statistics on the specialized training of staff.......................................................63
Figure 4.4: Statistics on work experience of staff..................................................................64
Figure 4.5: Review of 300 officers in assessing various assets were mortgaged most at BIDV
branches...............................................................................................................................65
Figure 4.6: Attitude of 300 staffs about appraisal process.....................................................66
Figure 4.7: Method frequently applied in appraisal process...................................................67
Table 4.8: Assessing how much time needed for completing appraisal report.......................68
Figure 4.9: Evaluate BIDV’s appraisal process.....................................................................69
Figure 4.10: Officers evaluate difficulties and obstacles in the process of implementing the
appraisal process of BIDV and regulatory compliance of Government..................................70
Figure 4.11: Assessment of staff on the most difficult step in the appraisal process of BIDV.71
Figure 4.12: Assess the views of staff on the most important step in the appraisal process..72
Figure 4.13: Determining who is actively planning asset appraisal.......................................73
Figure 4.14: The coordination of staff and manager in the process of appraising assets......74
Figure 4.15: Assess the coordination work between staff and manager................................74
Figure 4.16: The assessment of manager based on the work of staff...................................75
Figure 4.17: Assessing the information is applied during appraisal process of staff..............76
Figure 4.18: Assessing sources of information......................................................................77
Figure 4.19: Assessment’s staff in frequency of training courses..........................................78
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Figure 4.20: Review of staff to perform appraisal..................................................................79
Figure 4.21: Effectiveness of relationship staff in appraising assets.....................................80
Figure 4.22: Assessment of staff in building up the appraisal process...................................80
Figure 4.23: Assessment of staff to complete the appraisal process.....................................82
Chapter 5 – Solutions for perfecting the appraisal of real estate mortgage in BIDV..............83
CONCLUSION......................................................................................................................90
REFERENCES......................................................................................................................91
APPENDIX I..........................................................................................................................96
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LIST OF ABBREVIATION
BIDV Joint Stock Commercial Bank for Investment and Development of Vietnam
CBs Joint Stock Commercial Banks
SB State Bank
CI Credit Institutions
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INTRODUCTION
The rationale for research
The appraisal of real estate mortgage is one of the important professions of bank’s
credit activities. To the bank, the appraisal helps bank to determine the value of assets and the
appropriate level of lending based on the calculation and prediction of risk, which can occur.
It, at the same time, makes increasing competitiveness of bank in creating credibility and
attractiveness to customers for lending sector and improving the quality of lending operations.
To the customers, determining accurate and fair values of mortgage real estate will
boost metabolism capital in production and business, and create customers’ belief in the
quality of banking operations as well.
On the other hand, in terms of state management, the appraisal of the mortgage is the
basis for the management of State agencies, especially Central Bank can manage and evaluate
the quality of activities for loans, determine the level of risk in order to provide approximate
management policies.
However, the determination of loan’s amount based on the appraisal of real estate
mortgage is unsettled both the process and methods of implementation, leading to the result
which is still sketchy and not reflect the actual value of assets. Besides, other difficulties also
affect the evaluation results as unstable the real estate market, developed market economy is
not strong... cause of disadvantages to the customers and the bank. Thus, the appraisal of real
estate mortgage needs to be improved and accomplished adequately for higher quality of
credit.
From the need of above reasons, the thesis “The appraisal of real estate mortgages
in Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)”
is chosen for researching in order to complete the appraisal process of organization.
Research Objectives
The research will be started at the theories and lessons in appraisal of real estate
mortgages in BIDV, in detail as the contents, the basis and the affects to appraisal process of
real estate mortgages. From that, the practices are put out the weaknesses and incomplete
evaluation of the process of real estate collateral in order to offer solutions/modifications to
BIDV, which support for the determination the actual value of real estate collateral.
Subjects and scope of research
Subject is the appraisal of real estate mortgages in lending operations of BIDV.
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However, this study only focuses on some key issues such as valuation organizations
in banking, processes and methods are applied in appraising real estate mortgages for the
purpose of bank loan.
The analyzing and assessing will be focused on the process and applied methods in
appraisal of mortgage real estates in JSC Bank for Investment and Development of Vietnam
during process 2009 – 2014.
Research Questions
The thesis also aims to answer common questions about the appraisal of real estate
mortgages:
• What is the appraisal of real estate mortgages?
• Why the appraisal of mortgage real estate is important to the bank’s
operations?
• Which problems can be found from current appraisal process at BIDV?
• How BIDV can complete the process of the appraisal’s real estate collateral
effectively and adequately?
Contribution of Research
The rationale and empirical research of real estate mortgage appraisal is studied for
lending activities of commercial banks and also, to draw real lessons about the real value of
real estate collateral in lending operations of BIDV.
Analyzing and assessing appraisal the real estate mortgage in lending activity of
BIDV. Since then, the proposed orientation and solutions are created to improve and to
enhance the quality of the appraisal real estate collateral in lending operations of BIDV.
Methodology
To achieve research aims and to answer the research questions, the research methods
can be used are dialectical materialism, historical materialism, comparison, statistics, analysis,
logic...
And also, this research needs the support from asking questions and direct interviews
with credit management officials, appraisal officers, risk management officers, credit
management and leadership in JSC Bank for Investment and Development of Vietnam.
The detail of thesis proposal
Exception for the acknowledgement, conclusion, recommendations and appendixes,
the proposal is structured as five chapters as bellow:
Chapter 1: Rationale for the appraisal of the property mortgaged to the Bank
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1.1. Mortgage lending activities in commercial banks
1.1.1. Overview of commercial bank
1.1.2. Mortgage in lending activities of commercial bank
1.2. Appraisal in the real estate mortgage at banks
1.2.1. Overview of the appraisal real estate mortgage
1.2.2. Appraisal process in the real estate mortgage at banks
1.2.3. Some methods of appraisal of real estate mortgage under the appraisal process.
1.3. The quality of appraisal process in real estate mortgage in banks
1.3.1. System of indicators to assess the quality of appraisal in real estate mortgage in
banks
1.3.2. Factors affecting the quality of the appraisal process of the real estate mortgage
in banks
Chapter 2: Current status of the evaluation of the property mortgaged to the BIDV
2.1. BIDV’s Overview
2.2. Situation analysis of the appraisal of real estate collateral at BIDV
2.3. Assessment of the status of the appraisal of the mortgages to the BIDV
2.3.1. Achievements
2.3.2. Limitations
2.3.3. Causes
Chapter 3: Research methods to improve the appraisal of the real estate mortgages to
BIDV
3.1. Research Methodology
3.2. Selection of study subjects
3.3. Content Survey
3.4. Analysis of data
3.5. Research agenda
Chapter 4: Analysis of results from the research methods of the appraisal of the real
estate mortgages to BIDV
Chapter 5: Perfecting the appraisal of real estate collateral in BIDV
5.1. The orientation of the appraisal of the property mortgaged to the BIDV
5.2. Perfecting the appraisal of real estate collateral in BIDV
5.3. Recommendations for the appraisal of the property mortgages to BIDV
Conclusion
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Chapter 1 – Rationale for the appraisal of the property mortgaged to the Bank
1.1. Mortgage lending activities in commercial banks
1.1.1. Overview of commercial bank
1.1.1.1. The concept and role of commercial banks
According to Cull, Demirguc-Kunt, Morduch (2013), bank’s establishment and
development link to development of commodity economy in order to solve demand of capital
distribution, payment..., serve to develop and expand business and production of economic
organization, individual with specific business in currency field. The process of economy’s
development and the rapid development of market economy as well changed Commercial
Bank system from simple bank to modern bank, huge multinational and financial
organizations, have link closely with each other, make an unification in administration and
operation of banking system.
Through establishment and development process with economy ideology and specified
charisteristic services appropriate with circumstances of each nation where definition of
Commercial Bank is different but have same opinion: Bank is intermediate financial
institutions carry out the link between savings and investment of organizations and individual,
attract capital from unused place to scarce place. In other words, Commercial Bank is a
economic organization specialized operate in trading credit and currency, receiving deposit
from organizations and individual in economy, then implement loan business and invest to
make profit, and provide services of finance, credit and payment to economy factors. Besides,
banks also define based on functions, services and bank’s role implementation in economy.
(Dinh, 2012).
Based on service types provided by banking system, it was considered as “ Banks are
financial institutions which provide list of diversified financial service – especially credit,
savings, payment service and carry out most financial functions compare to any business
organization in economy” (Phan, 2007, pg.7).
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Therefore, Commercial Bank is one of important financial institutions in economy.
With intermediate role, Commercial Bank will transfer savings to investments. The
establishment of Banks solve contradictions of direct credit in economy, limited and disperse
risks, reduce transaction cost in credit activities of factors in economy. At the same time,
Commercial Bank also is credit provider with biggest scale, an important member in
development of stock market, Treasury bond and a place mobilize and provide long term,
medium term and short term capital for invidual, economic organization. With payment role,
Commercial Bank act on behalf of customers to carry out payments from goods purchase and
service through issuing cheque, payment card and providing other electronic payment
network. Currently, in most of countries, banks become largest payment intermediary, carry
out most of payment transaction of goods and services under forms of cheque, payment order,
document against, cards, and payment cards, link with funds and provide cash when
customers have demand. The development and standardized international payment contribute
to make unification in payment not only between banks in a country but also between banks
all over the world. Besides, the establishment of international payment centre also increase
effect of bank payment, make bank become important and effective payment centre, support
for economy. Due to highly solvency of Bank for customer, bank keep customers’ deposit,
bank have great repurtation and role in guarantee for customer. As a Guarantee, bank will
commit to pay customers’debt in case customers cannot pay/implement their own obligation
(Nguyen, 2013, pg.6-30)
1.1.1.2. Lending activities of commerical banks
Lending is one of main business activities of Commercial Bank to make profit.
Revenue from loan will compensate the costs of bank deposits, reserve, business and
management, floating capital, many kinds of taxes and investment risks. Lending activity of
Commercial Bank is one of credit issue form, after that, Commercial Bank hand over
customers using amount of money appropriate with purpose and fix-time in accordance with
agreement based on return origin and interest principle (Dinh, Nguyen, 2012).
With the development of economics, lending turnover increase rapidly and lending
type becomes extremely diversified. Although lending activity provides main profit and
decides the existence and development of Commercial Bank, this activity hold most of risk
factors which affect on operation of all banking system, including risks of credit, risks of
market, risks of politics and ethics.
Classification of lending activities
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According to D. Muraleedharan (2014) và Phan (2008), lending activity classified to
many different types depend on customer’s requirement and management target of bank. In
view of using purpose, lending activity including:
Firstly, consumer loan is a loan which satisfied consumption demands of customers
such as: purchase goods, build house and pay other common fees. At first, most of banks did
not lend actively to individual and household because they consider all consumption loan
have high insolvent risk. However, the income increasing and competitive in credit make
banks turn to consumers and considers as potential customers. Nowadays, consumption loan
becomes one of most developed type in countries with developed economy.
Secondly, commercial loan is a loan support for production and goods circulation, it
satisfied demand of capital during business and production process such as reserve materials,
cost of direct and indirect production or satisfied the lack of capital in commercial
relationship between enterprises.
Last but not least, it is project sponsor. Besides the tradition loan such as short term
loan, banks become more active in sponsor for construct new project, factory especially high
technology industry. Currently, many banks lend to invest in real estate market.
In view of loan term, lending activities classified to:
Firstly, short term loan, a loan with term below 12 months and use to compensate on
lacking of liquid capital of enterprise and short term consumption demand of individuals.
Secondly, medium term loan, a loan with term from 1 – 5 years to invest into fix assets
purchase, innovate or change equipment, technology, expand business and production,
construct new project with small scale and quick capital recover.
Thirdly, long term loan, a loan with term more than 5 years and maximum up to 20 –
30 years. This loan satisfied long term demand such as: construct house, purchase
equipments, transport means with big scale, or construct new factories.
In view of secured form, lending activities could be classified to unsecured loan and
loan with secured assets. Unsecured loan is a loan has mortgage assets, pledge or guarantee of
third party. Unsecured loan could only apply in good and honest customers in business, strong
financial capacity, effective administration, rarely debt available, or the loan is smaller than
capital of borrower. By contrast, the loan with secured assets is a loan which allow banks
have second source of debt recover by selling those assets in case the first source of debt
recover do not have or insufficient to recover.
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1.1.2. Mortgage in lending activities of commercial bank
1.1.2.1. Definition of real estate
According to Article 181, Civil Code regulating on: real estates are all unmovable
assets including: land, house, construction project associated with land, including all assets
associated with house and that construction project, other assets associated with land, other
assets under law regulation.
Even with the aboved opinion, the classification of assets to properties or real estate is
not simple issue. Is it true that all of construction and architecture projects called as real
estate? All assets associated with construction project also called as real estate?... The
difficulities in definied which is real estate could usually lead to abberant view to genuine
value of real estate under consideration. To avoid mistakes in real estate assess, we should
research to point out specific characteristics of real estate, classfied norms between real estate
and properties and other assets.
According to documents of Ministry of Finance (2012), the more common
understanding of real estate is unmoveable physical asset, and exist stability in long term.
Therefore, an asset is considered as real estate with conditions as follows: A useful physical
factor for human; possessed by individual or human community; could be measured by fixed
valued; unmoveable or limited moveable for unchanged features, functions, forms; long term
existence.
Real estate could be specified as group below:
- Land: land is primary factor and basic element to make real estate. Without land, real
estate could not be existed, and not any real estate did not associated with land vice versa.
Therefore, land is real estate and a part of other real estate as well. However, all of lands
cannot be considered as real estate. Only unmoveable land or insignificant moveable land,
personal sovereignty identified, value measured and quantified according to particular
standard of calculation measument.
- Construction associated with land and other assets associated with that construction.
Fix construction houses, unmoveable or insignificant moveable, construction project
associated with land. Assets associated, inseperated with that construction project. These
projects must have measure and quantified possibility to value according to fixed
measurement standard.
- Other assets associated with land such as perennial garden; projects of aquatic
products breeding, salt field, project of tourism, entertainment, sport, project of exploiting
mine.
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The classification of real estate as aboved help appraisers understand nature of real
estate, from that point they know particular character of real estate to have basis to identify
value of real estate, assets (Ministry of Finance, 2012).
1.1.2.2. The characteristics of real estate
Besides these creatation features of assets, the real asset has unique characteristics that
other properties do not have to make up the difference of real estate properties and other
assets, as well as one of the factors real estate value creation. Therefore, the appraiser must
consider the characteristics of how to influence real estate’s values.
According to Gold Land Company (2008), first of all, real estate assets are tied to land
or land is immovable, so it has always been considered assets of fixed location. Therefore the
value of real estate and interests associated with each specific location. Element position not
only determined by the geographical criteria normally measure which it is assessed primarily
by the distance to the center, to the point of public services, public works, such as trade ,
culture, health, education, and depends on the accessibility. Also due to the fixed nature of
real estate on location and tied to a certain location, the value and benefits of the property
affected by regional factors and distinct regions. The mission of the valuers is necessary to
assess the impact of factors on the value of real estate locations as natural conditions, socio-
economic and environmental conditions (Gold Land Company, 2008). When there is a change
in the elements of real estate, its values is also varied. Real estate is consider as a special asset
with specific nature. The difference of real estate primarily due to differences in location of
the plot; several structural and architectural differences in direction, several of the landscape
and surroundings. So when the real estate prices need to pay attention to the diversity of each
individual property, unable to evaluate, compare standard molding property together (Gold
Land Company, 2008).
Real estate is an asset types have limits on the size of the surface area due to limited
land area and by location decision factors, this resulted in the scarcity of real estate. In
addition, the real estate demand and supply are always unbalanced in the direction of
providing more small bridge leading to speculation about the property, so the long term real
estate values tend to increase, especially in the area developing or have the potential to grow
(Gold Land Company, 2008).
Real estate is taking a very strong influence among adjacent property and have a very
strong impact on the socio-economic activities are concerned. When the real estate appraisal
should take into account potential impact upon other real estate projects will be launched.
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Also, there is the real estate assets of great value and long shelf life at all in terms of
life expectancy and life physics of the real estate economy. Therefore, when assessing the
value of real estate need to consider and calculate the cost of crystallization in the process of
forming property and income while giving users real estate (Gold Land Company, 2008).
1.1.2.3. The real estate mortgaged in lending activities of commercial banks
Real estate is an important security assets and a large proportion of the total collateral
from commercial banks. Include the principal assets, such as land, houses, factories, buildings
associated with the land, the assets associated with construction work. That could be the
existing assets, could also be the assets created in the future (ie the assets formed during and
after the time of signing the mortgage contract) as profits gained from using property, assets
formed from loans and construction in the future... (Tran, 2007).
In order to be a assets as collateral, properties must meet the following conditions:
+ Under the ownership of the mortgage at the time of conclusion of real estate
mortgage transactions without dispute: is the property that at the time of conclusion of
security transactions, including real estate owners are not third person claims in court or state
agency having jurisdiction.
+ Real estate transaction should be allowed and able to sell: the property is not banned
under the law at the time of signing the mortgage transaction. For lending mortgage of banks,
they are required on the liquidity of the collateral is of paramount importance. So besides the
condition of real estate properties, the legal conditions for easy transfer capability, or the
nature of liquidity in the market of collateral banks are very concerned (Ministry of Finance,
2012 ).
According the Ministry of Finane (2012), to determine the level of lending is based on
customer requirements and the value of collateral, one of the first requirements in the
mortgage lending bank is required to determine the value of property mortgage at the time of
signing the security contract. For each of a certain asset classes, depending on the nature and
characteristics of such property and the relationship with customer, the bank has identified
different values in lending. Real estate is a special form and diversification of assets. The
constituent elements of real estate assets worth very complex and also very different
compared to other asset classes, even in some countries it is considered assets property is the
power assets (ie assets expressed in the form of ownership and the right to use that property
and not personal property). So, the appraisal of real estate requires the method and manner
separately determined formula.
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1.2. Appraisal in the real estate mortgage at banks
1.2.1. Overview of the appraisal real estate mortgage
1.2.1.1. Definition of appraisal
According to W.Seabrooke, “Appraisal is value estimation of specific assets
ownership by monetary form for specific purposes” (Ministry of Finance, 2012). According to
Fred Peter Marrone, “appraisal is value of real estate identified at time with nature of real
estate and purpose of appraisal under consideration. Therefore, appraisal applied on
comparative market data which appraiser collected and analysis, then compare with assets
required to be appraisal to make their value” (Ministry of Finance, 2012).
According to Ordinance No. 40/2002/PL-UBTVQH10 in 2002 of Vietnam, value
appraisal means assessment or re-assessment value of assets appropriate to market at specified
time and place according to Vietnam standard or international practice. In general, these
above concepts in relation to value of appraisal have several factors in common as follows:
+ Current value estimation
+ Currency calculation
+ Regarding assets, real estate, or ownership of assets, real estate
+ According to specified requirement and purpose
+ At specified time and place
+ On basis of using data, market factors
In lending activities of banks, there are many objective and subjective reason cause
risks which make banks difficult to debt recovery or insufficient ability to recover. To reduce
rising risks, Banks required customers have secured assets and secured assets value must be
identified to make basis of credit limit as well (Ministry of Finance, 2012). Mortgage real
estate appraisal is known as particular value of mortgage real estate identified by monetary
form at specific time, as identification basis of credit limit of bank based on secured asset –
real estate. Mortgage real estate appraisal is one of important phases and not intergral part in
lending process of Commercial Bank in order to indentify legal of secured asset real estate
and make basis of giving reasonable credit limit. Based on structure of organization and
operation of each bank, appraisal could be carried out by Credit Section or independent
appraisal department of bank or lease appraisal organization outside (Ministry of Finance,
2012) .
According to Ngo Thi Phuong Thao (2011), in general, banks will based on recovery
ability of real estate to identify mortgage real estate value. Detailed as belows:
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Value of mortgage real estate = Market price of real estate * ratio of real estate
recovery
Ratio of real estate recovery depended on ratio of reduce value of real estate, due to
depreciation, old-fashioned, value decrease affect from market factors, and recovery fee from
real estate sale in case customers cannot pay back debt. To identify reasonable ratio of real
estate recovery during process of mortgage real estate appraisal, some following issues must
be notice:
Mortgage real estate should be put in less develop and quite market condition. This is
condition to ensure secure in credit activity which using real estate as secured asset. Main
target of mortgage real estate appraisal is decision of total value of mortgage asset real estate
in case of selling that real estate. In this case, we cannot always put that real estate to market
at most beneficial time and favourable circumstance. Therefore, appraiser should conduct and
consider carefully to decide value of asset real estate in adverse and quite market condition.
Mortgage appraisal is loan appraisal in case the lender do not want to receive excessive risk
(Ngo Thi Phuong Thao, 2011).
During mortgage appraisal process, mortgage condition and situation of customers
should be considered carefully because these factors will impact on real estate value required
to be appraisal. Objective of real estate appraisal is identification of value of real estate
market. This value established in real estate transaction time in term the parties which
participate into transaction, have sufficient information and time for selection, decision
making; stable market and less fluctuation; transaction relationship on basis of commitment,
voluntarily, without force of price; transaction parties act on basis of knowledgable and
caution. Market value of real estate mainly based on appraisal activities of types of assets.
When all aboved condition satisfied, real estate price will be used as basis of reference for
real estates in market (Ministry of Finance, 2012). However, in fact, there are many factors
impact on price of real estate which lead to untrue market value, as known as non-market
value. Real estate price could not reflex the true market value when breach some of
conditions: force in purchase transaction, purchase between family members; transaction
between internal company; transaction of strong corporation; sale of exclusive product; the
Buyer has right of possess real estate; and sell real estate under co-ownership. In these cases,
appraiser collect information to compare, adjust or eliminate all inconsistent cases and cannot
put it as reference price for targeted real estate (Ngo Thi Phuong Thao, 2011).
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1.2.1.3. The necessary of appraising real estate mortgage
According to Ministry of Finance (2012), right identification of mortgage real estate
value is essential because it is important basis to give the reasonable loan by Bank, avoide
risks for bank and increase competition in banking activities. Real estate is special
commodity, real estate market changes constantly, it can increase suddenly or “freeze”.
Hence, mortgage real estate appraisal is necessary toward Bank, it ensure secure and reduce
risks. Towards real estate appraisal, loan could be secured by revenue of real estate. The
Lenders only want to lend a secured loan and limited minimum all rising risks in transaction.
Normally, loan is secured by value of buying assets, in case Borrower could not pay back,
value of mortgage secured asset is basis to guarantee that loan (Nguyen Dinh Nam, 2008).
Mortgage real estate appraisal not only implement in beginning stage of capital borrow
but also consider in put asset on sale while customer does not have ability to repay. Because
after real estate mortgage, Mortgager still use this real estate, during this time, mortgage real
estate could have depreciation, damage. Before putting on sale, mortgage real estate need
appraisal to identify value of real estate have sufficient solvency or not, customer also want to
know value of real estate higher than the loan or not. Without appraisal, when asset put on
sale, customer or Bank could be damage benefit (Luu Van Nghiem, 2000).
In addition, in current integrated condition, the fierce competition between domestic
and foreign banks demand banks change their own business strategies. One of the changes is
credit process improve and specified again value of mortgage real estate in order to attract
customer. Only when the asset’s value is determined by market value, along with the policy
system of state law allows the new facilitate the secondary real estate market with growth
opportunities (Luu Van Nghiem , 2000).
1.2.2. Appraisal process in the real estate mortgage at banks
According to Phan Nguyễn Đinh La (2013), appraisal process includes sequential
steps, which began since preparation of appraisers conduct the appraisal until the end of the
work. At each step in the process often record the contents of the work done, time for each
work content, the functional units and staff responsible for performing the work. In each
commercial bank, depending on the conditions and characteristics of the activities that have
rules and sequence of steps in the appraisal of real estate.
According to Ministry of Finance (2012), normally, the process of real estate appraisal
consists of the following basic steps:
- Identify problems
- Appraisal Plan.
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- Collection of Documents and information
- Analysis of documents and information, and applications of appraisal method.
- Prepare and complete appraisal report.
- Appraisal Report.
Step 1: Determine the appraisal problem:
In this step, appraiser should clearly identify the type of property mortgaged for
pricing, as land, houses or factories... The real estate’s features such as location, economic
characteristics, skills legal and technical real estate
Step 2: Planning for appraisal
Based on clearly defined real estate types appraised and the characteristics of real
estate and customer, appraisal department needs a clear plan of the appraisal: timing...
Identify the information and documentation is necessary to gather and supply reliable
information, and market data. Up program and timetable of work
Step 3: Collect and analyze data
In this step, the appraiser should collect the documents provide information about real
estate goals. This information can be exploited from the customer or from the actual survey.
The documents are collected as a basis for comparison, analysis, evaluation and adjustments,
such as purchasing materials, supplies consumption norms, unit costs, property tax rates,
brokerage fees , proceeds from land use... Collect the legal documents of state and local
government related to land use rights, ownership of construction works, the provisions of the
purpose, authority and time term lease ...; Need to collect the full text of the legal system
affecting the mining rights of property interests synthetic materials economically, politically,
culturally, socially, such as the general situation; Development and economic growth,
indicators such as GDP, CPI, inflation, the housing price index, the policy of the State on
housing policy, land tax policy, changes in planning and urbanization, the ability of the State
to control the property market.
The source of this information may be received from the specialized agencies,
international organizations, banks, from the investigations of the private organization or
government. Here is some information to help the appraiser can analyze the evolution of the
market and given the elements affect the valuation results.
Based on documents and information gathered, the appraiser should select how
reliable information and best suited to target real estate valuation and analysis to handle.
Step 4. Apply the appropriate valuation method to conduct property valuation target.
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The above analysis will be the basis for the appraiser for using appropriate appraisal
methods. Actually, there are many different methods for appraising real estate. Yet, another
method is the basic recognition that strict rationale and scientific basis of the method is based
on basis of review, analyze and assess the impact of factors particularly affected and to
comply fully and absolutely the principles of valuation. In the appraisal method, there is no
single correct that only the most appropriate method. To choose the method most appropriate
principal and must rely on the properties of the assets, the ability to use the market data, the
purpose and principles of appraisal. Appraiser can apply one or more valuation methods,
depending on different circumstances. The appraisal method used: comparative method,
method of cost, profit, method surplus value (residual value), the investment method.
Step 5: To compare the actual value and the estimated value
After calculating the value of property on the basis of calculations according to the
method of appraisal, the appraiser must survey the market value beyond reality to collate the
accuracy of medium value pricing. If there is a discrepancy, the adjustments can be made, and
concluded officially on determined prices.
Step 6: Complete appraisal reports and submit them for approval, sent to the client and
the relevant parts
The final step in the appraisal process is completed when the appraiser must report a
full appraisal required content represents the entire pricing process and submit them for
approval. Without any change in the decision on the level of assessed value as stated in the
appraisal report will be the basis for the implementation process of granting credit to
customers.
1.2.3. Some methods of appraisal of real estate mortgage under the appraisal
process.
Real estate appraisal carried out with many different types of real estate and for many
different purposes. This appraisal method may suitable with this real estate but not suitable
with other real estate or suitable with this appraisal purpose but not suitable with other
appraisal purpose. Therefore, with many different appraisal methods, each method has
different implementation. It can be used independent or combine with each other in order to
help appraiser indentify reasonable price. According to Doan Van Truong (2009), in real
estate appraisal, no method could be called no the best or most accurate method, it only be the
most appropriate method. Hence, mission of appraiser is selecting the most appropriate
method with each type of real estate and as required, purpose of appraisal as well. (Nguyen
Minh Hoang, 2011).
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Towards current mortgage real estate appraisal, the most common using methods are
comparative method and cost method. In this thesis, the author will analysis three basic
methods such as: comparative method, cost method and investment method. Two remained
method are profit and surplus method which is derivative method of three aboved method.
1.2.3.1. Comparative method
According to Nguyen Ngoc Vinh, Nguyen Quynh Hoa (2014), comparative method is
appraisal method by direct compare targeted real estate with similar real estates which sold in
market. This method based on the rationale to say that market value of a real estate linked
closely to same real estates which may be compared, has been purchased , traded in the
market
When compare similar real estate sold in market with targeted real estate, the
requirement must be satisfied as belows:
- The real estate must be used to compare similar or nearly similar one to the appraisal
of real estate. These real estates have the same homogenous nature as apartments,
condominiums, row houses built with the same kind of design, the offices... In case of lack
any documents about the puarchasing, selling transations, it is needed to have minor
adjustments to make real estate prices compare almost equal to the value of real estate
valuation needs. Use only the results of the real estate sale and purchase agreement based on
market price and time associated with the valuation or the nearest time.
The collected information must be checked and evaluated strictly. This method does
not have formulas or fixed models that rely exclusively on market information, thus requiring
the collection of information must be extremely accurate and quality assurance and placed in
market conditions relatively stable, without sharp fluctuations, such as fevers, or in periods of
economic crisis.
Advantages and disadvantages of comparative method: This is one method widely
used, common in the appraisal activity, especially for real estate appraisal. Because it is
conducted simple, does not require a lot of technical requirements, and its result reflected the
market value of real estate (Ministry of Finance, 2012).
However, because of the method of comparing prices on the market, market value
depends entirely on the reliability of information collected. Good quality information will
bring good the result of prices and vice versa. Many information is still on backward, lead to
the comparability may be incorrect. The adjustment of the difference value and give the final
value of the target property depends on the subjective nature of the evaluation (Ministry of
Finance, 2012).
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Comparative method is applied to the appraisal of land or housing prices for the
requirement as purchase, mortgage, capital contribution and distribution of property rights. It
is particularly suitable for the property have high uniformity as the apartments and townhouse
suites are built the same way, the same area of real estate. This method is usually the best
application for residential real estate (housing) and the availability of land in the residential
sector and trade - services, because the real estate is often quite common purchase and ease of
comparison (Nguyen the Phuong, 2011).
1.2.3.2. Cost method
According to Ministry of Finance (2012), in fact, lending activities have secured
assets, in many cases, banks and other credit institution receive mortgage from unpopular real
estate, or rarely trade through market such as production workshop, storage, projects with big
investment as hospital, school… In these cases, comparative method could not be used to
estimate value of mortgage real estate, it must rely on cost method. Cost method based on
replacement capacity of that real estate with resumption of real estate required to be mortgage
which caclculate by cost making the similar real estate. According to this method, value of
real estate are calculated as follows:
Value of
real estate
= Value
of land
+ The construction cost of real
estate project
- The discount
factors
(Tran Minh Nguyet, 2011)
The most important thing of cost method is calculation of necessary cost crystallize
into real estate value; factor and reason cause reduction value of real estate. Normally, costs in
calculation will include direct and indirect cost in construction investment such as material
cost, labour cost, general management cost, profit of contractor and other related fees. Depend
on types of project, and construction time, it may apply the suitable technique of specified
cost (Ministry of Finance, 2012). To specify cost, some techniques could be used as follows:
- Statiscal technique
According to this technique, people carried out itemized to work content during
construction process, from foundation to final design, to estimate detailed fee for each of
work, material and equipements for each item. After that, addition design cost, management
cost and profit of constructor. This method usually used to calculate cost of big project, work
completed according to plan and detailed construction technique (Ngo Thi Phuong Thao,
2011).
- Method of Survey actual situation of number of work
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Method of survey actual situation of number of work is method identified value (cost
price) of one project construction unit based on summary of cost which complete each work
and additional intermediate cost to link between contruction projects.According to Ngo Thi
Phuong Thao (2011), the classification of item could be implement according to 2 ways:
+ Survey actual situation of number of work: in order to divide project to construction
stages, specify cost of each stage, and divide project in accordance with complete works.
+ Technique based on cost price of each construction price: is estimation method on
basis of specified cost price of each m2
or construction project unit based on price of each
construction factor. This technique usually use on basis of norm of cost according to
regulation.
+ Comparative method in market: As techniques determine the cost based on the cost
of the market taken by each construction unit as a basis for calculating the value of each work
- How to determine:
+ Method 1: Retrieved works were exchanged on the market to work out the
construction unit prices. Example: an apprartment with area of 100m2
was sold at 1,800
million  the price can be determined as 18 million/m2
. So, the appartment needs to be
appraised with area 120m2
, so, the price of real estate is 120 x 18 million/m2
+ Method 2: Use the unit price level is predetermined
Both of these approaches imply the full minimum cost of investment and the
profitability of construction norms. This method is applied to the appraisal of works must
have quality and relatively uniform, standard regulations.
- Techniques to determine the discount rate
To determine the discount factor, first of all, it should be based on the cause of
reducing real estate prices. The possible causes may be subjective or objective, but in general
the price reduction may be due stems from the following reasons:
+ Due to natural factors such as: Damage caused by use (cracked, broken ...); Damage
caused by the impact of the time factor by weather conditions and climate; Damage caused by
accidental impacts outside...
+ Discounts by natural obsolescence: As the price reduction due to the mismatch of
the elements of real estate than the requirements of the current performance of works:
obsolescence by design; incomplete, asynchronous...
+ Discounts by the impact of the price externalities outside, include: degradation,
inconvenience of external factors related to work
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Advantages and disavantages of the cost method and the ability to apply (the Ministry
of Finance, 2012):
This is the method of appraisal of property based on the grounds have concrete and
clear evidence. Appraisal results accurately reflect the costs crystallize into real estate, the
arguments about the value of real estate is a basis to determine the asset’s value.
But the cost method has certain drawbacks:
- This method is based on the cost and value of each division, meanwhile, the value of
all real estate projects is not a mechanical summation value of each part.
- The discount factor of each section depends on the person's subjective appraisal (no
specific measurement standards ...)
- The assessment of the level of reduction requires the valuation price must have
technical knowledge of architecture and structural constructions.
- This method does not reflect the relationship of supply and demand, so that real
estate values do not reflect the market value of real estate.
1.2.3.3. Income method
According to Ministry of Finance (2012), investment method is a method, which
identifies value of real estate based on process of converted future cash flow to current capital
value. This method based on annual income realted to value of initial investment capital.
Investment method is includes calculation technique which appraiser use to analysis capacity
of real estate make income at present and future. This is one of basic method in real estate
appraisal. However, it is not totally independent method, it is uninterrupted and combine with
many methods.
According to Ministry of Finance (2012), to identify value of real estate according to
this method, income from using real estate and rate of return of that real estate must be
calculated. Income flow of real estate could be assessed based on the following targets:
+ Potential Gross Income (PGI): is total potential revenue could possible contribution
of real estate at full tenure before deducting operating costs
+ Effective Gross Income (EGI): is the forecast income from activities of real estate
which is adjusted for the vacant without lease fee.
+ Operating cost (OC): including cost of management, maintainance, utility expenses,
insurance, and tax
+ Net Operating Income (NOI): is actual net income or forecast remained after
deducting all operating cost from total effective income but not yet deduct mortgage loan
interest and depreciation in records.
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Investment method using in cases:
+ Real estate still let out for lease, duration remained
+ Real estate used by owner, exploited and did not let out for lease.
+ Real estate let out for lease but the contract expired.
Advantages, disadvantages and applied condition of investment method:
According to Hay Sinh, Tran Bich Van (2012), this method has close theory, based on
directly profit of real estate, simple and easy usage, applicable to real estate make income.
However, this method also has some limitations. All income flow from real estate mainly in
future, based on forecast basis of appraiser. Thus, the forecast result may not accurate due to
subjective and objective factors such as, time of using real estate, price of leasing in future,
other rising cost…These parameters could change and lead to inaccurate forecast income,
impact on appraisal result. Moreover, many risks are difficult to forecast in real estate
investment, thus, rate of return or appropriate ratio of depreciation are difficult to identify.
Therefore, this method only using in case real estate have capacity to bring stable income,
appropriate forecast model, usually in case of consulting to make decision for investment
project selection. This method rarely use directly, it usually combine with other methods such
as comparative, cost method to give reasonable investment option. (Nguyen The Phuong,
2011).
1.2.3.4. Surplus method
Surplus method is an appraisal method of level depreciation of value (project) of a real
estate through compare, calculate ratio of value decrease of similar real estate, which traded in
market to take out ratio of value decrease of targeted real estate. The objectives applicable to
this method are real estate have development or potential development. These real estates
could be blind area or land with out of date construction structure existed or need replacement
or innovation (Tran Minh Nguyet, 2011).
Regarding advantages and disadvantages of surplus method: this method could be
used as appraisal of real estate has development capacity. The method appropriate applicable
to give price when participate into auction, or consult maximum construction cost and
minimum fee of selling/ leasing. However, appraisal follow this method is difficult to identify
the best and highest using. All cost and selling price estimation and the final value could be
changed depend on market condition, and without consideration of time value of money.
(Nguyen Ngoc Vinh, Nguyen Quynh Hoa, 2014).
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1.3. The quality of appraisal process in real estate mortgage in banks
1.3.1. System of indicators to assess the quality of appraisal in real estate
mortgage in CBs
Currently, all the appraisal process at any bank or credit institution or appraisal
organisation has to comply with the appraisal’s principles that are issued by the Ministry of
Finance. These standards rigorously defined the conditions and criteria that any person who
participated in the process of appraisal must follow. According to the content of Circular
No.28/2015/TT-BTC dated 06/03/2015, 158/2014/TT-BTC dated 27/10/2014, 06/2014/TT-
BTC dated 07/01/2014 and decision No.129/2008/QĐ-BTC dated 31/12/2008, the criteria are
defined as follows:
1. Standard No.01: Market value as a basis for assets’ appraisal
The purpose of this standard is to define the contents of the market value of assets and
market value applied when conducting asset appraisal. This standard requires when the
appraiser conducts the appraisal report, he must be based on the transaction data on the
market in normal commercial conditions. As the content of the standard, "the market value of
an asset is the estimated price will be traded in the market at the time of appraisal, between a
buyer have willing to buy and a party have willing to sell, in a trading objective and
independent, in normal commercial conditions ".
This standard requires the information, data and technical and legal terms of assets;
property transfer prices may actually be comparable on the market. If the event of limited
information and data on the market, the results of appraisal must state the situation and report
the level of influence due to the limitations of such data.
2. Standard No.02: Non-market value as the basis for the appraisal of assets
The purpose of this standard is to define the contents of the non-market value of assets
and the value of non-market applied when conducting appraisal of assets. Because of
appraisal activity largely based on market value, however, there are distinct types of assets;
appraisal purposes separately, requires appraisal to be based on non-market value. Non-
market value of the asset is estimated price which is determined with different basis of market
value, or can be bought, sold or exchanged in accordance with the prices do not reflect market
value as: worth assets are in the process of use, value investing value insurance... Depending
on the purpose of specific appraisal, appraisers can use non-market value as the basis for
appraisal. In the process of appraisal, appraiser must rely on the data and actual conditions to
determine the market value of non-essential assets. To ensure there is no confusion between
the valuation of the market and non-market value, appraisers must comply with the defined
29

objects valuation; legal rights associated with property valuation; purpose and basis of
valuation with some additional conditions.
3. Standard No.03: The ethical rules of practice appraisal assets
This standard prescribes rules governing ethical appraisers about prices, businesses
and organizations in the appraisal process. Because appraisers must take responsibility for the
correctness of the contents of appraisal report, therefore, businesses, appraisal institutions and
appraiser must comply with ethical standards and the professional qualification as follows:
+ Ethical Standards: Independence, integrity, objectivity, confidentiality, openness and
transparency
+ Qualifications: Qualifications and prudence; Professional behavior and Compliance
with professional standards.
4. Standard No.04: Report the results, record and appraisal certificates
This standard specifies the format and contents of the statement, deed records and
appraisal certificate by enterprises, appraisal institutions and appraisers exercise price,
announced the completion the appraisal of assets. Appraisal’s results report must reflect the
price in accordance with the actual information, descriptive is based on concrete evidence to
justify the price of assets through appraisal. This information must be presented in a logical
sequence, appropriate description, factors affecting the market value, analyze the data
gathered in the market to get appraisal results. Reporting the results must reflect these
arguments; a method applied in the appraisal process and clearly explains all the issues that
affect the value of assets.
The detailed content of report on appraisal results may vary according to appraisal’s
object, purpose, requirements and evaluation conducted at the request of customers. However,
any appraisal report must include the following basic content:
+ Basic information: name, type of asset; place of origin; location and related
information
+ The legal basis for appraisal: the legal documents, related standards issued by the
competent State.
+ Description of technical and legal characteristics
+ The assumptions and limitation during appraisal process
+ Results of fieldwork
+ The arguments about the final price
+ Methods used in appraising
+ Dealing with complex issues, obviously not in the appraisal
30

+ Some other information such as the display of individual rights and interests related
to the appraisal of assets required; Name and signature of the examiner; Appendix (if any)
attached to the appraisal report.
5. Standard No.05: The Appraisal process
To carry out the appraisal assets, organizations, appraisal institution and appraiser
have to comply fully with the other of 6 steps:
+ Step 1: Determine comprehensive about assets and the valuation the market or non-
market in order to make basis for appraising.
+ Step 2: Appraisal planning
+ Step 3: Surveying the scene, gathering information
+ Step 4: Analyze Information
+ Step 5: Determine the asset value
+ Step 6: Prepare reports and appraisal certificates results
6. Standard No.06: The economic principles dominate appraisal assets
This standard stipulates the principles of appraisal of assets and guiding principles
when conducting an appraisal. Because the value of the assets is formed by many factors as
the value in use, scarcity, solvency demand..., so, during the study, appraisers must consider
and apply the laws and economic principles involved. Appraiser must analyze the factors
affecting the formation of the specific assets’ value, thus, these principles must be applied to
provide accurate conclusions about the assets’ value. The following principles:
+ Best used and most effective principle + The principle of supply - demand
+ Changing principle + Replacement principle
+ Increased or decreased income principle + Balance principle
+ The principle of income distribution + Contribution principle
+ Compliance principle + Competitive principle
+ Principle of expecting future benefits
7. Standard No.07 to No.11: regulation of comparative method, cost method, income
method, surplus method and profit method with instructions implementing these method in
appraisal process.
8. Standard No.12: Assets’ classification
This standard is provided for the classification of assets and guidelines to classify
assets in the appraisal process in order to determine what kind of property, from that, which
methods are used to evaluate specific assets. Assets include objects, money, valuable papers
and property rights. In valuation, assets are classified mainly into real estate and estate.
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- Real Estate include Land; Houses, buildings associated with the land, including the
assets associated with the house, there construction work; other assets attached to land; other
assets prescribed by law.
- Estate's property is not property (machinery, equipment, vehicles, technology
lines ...).
- Ownership of the property is a property right includes the full right to possess, use
rights and the right to dispose.
9. Standard No. 13: Appraisal of intangible assets
Standard no.13 regulates and guides to implement appraising intangible assets in order
to serve the purpose of purchase, sale, transfer, mortgage, consolidation and merger, capital
contributions, profit sharing, disputes and bankruptcy proceedings and other purposes as
prescribed by law. Intangible assets are defined as “Property is no material form and is
capable of creating rights and economic interests. Intangible assets are mentioned in this
standard must satisfy simultaneously the following conditions:
+ No physical forms; however, some intangible assets may contain in or on a physical
entity, but the value of the physical entity is negligible compared to the value of intangible
assets;
+ Can make identification and have tangible proof of the existence of intangible assets
(e.g., contract, certificate, registration documents, computer floppy disks, customer lists,
financial reports, etc.);
+ Capable of generating income for people with property rights;
+ The value of intangible assets can be quantified.
To be able to appraise the value of intangible assets, it is needed to consider many
factors, aspects of the property, and need to rely on different methods to determine the value
of intangible assets.
1.3.2. Factors affecting the quality of appraising real estate mortgaged at
commercial banks
1.3.2.1. Subjective factors
a. View of appraisal problems in CBs
According to Dr. Nguyen Minh Hoang (2011), the bank’s operational objective is
profit; in order to achieve those objective, specific strategies will be determined to make sure
it is suitable for operating conditions in each period. Thus, the views of each bank on the
appraising real estate mortgaged is not the same. With a view to extending credit in economic
conditions for stable growth, market has low-risk, some CBs will reduce the binding loan
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conditions, including rules on collateral, thus, the appraisal assets process in general and real
estate in particular will be eased. During the crisis, the economy is in difficult situatuation, the
credit risks are growing, most of banks will have more measures to tighten lending, and more
stringent rules for appraising of real estate mortgages (Nguyen Ngoc Vinh, Nguyen Quynh
Hoa, 2014). Moreover, depending on operating conditions, the competitive environment and
the proportion of collateral assets per total loans, the banks will self-assess in order to have
reasonable investment in the appraisal real estate mortgaged or not. View on appraisal process
of each bank is also expressed through the perspective of developing real estate mortgage
activities. With a view that assets are mortgaged for lending purposes only, the value of real
estate will be determined as a basis for a reasonable level of lending based on risks reductions,
thus, the value mortgage will different to the real value in market transitions. In addition, the
appraisal real estate mortgaged will present subjective view of each bank or depending on
each type of banks when they are based on the level of risk identified and properties recovery
rate and the level of competition on the financial and monetary market as well when
customers cannot pay their debts (Ngo Thi Phuong Thao, 2011). With the purpose that
mortgage assets for developing the secondary financial market, the value of real estate need to
be determined based on market value. Thus, the appraisal real estate should be unified in both
process and methods for the whole banking system, credit institutions and to be considered as
independent activity (Nguyen The Phuong, 2011).
b. How to organize and process the appraising real estate mortgage
The appraisal is very important, it is reflecting the professionalism or not during
appraisal process. The closely collaboration between departments in banking system will
make appraisal process become simpler. The appraisal process is constructed as standard,
simplicity, clarity will reduce time and costs, also, affect the appraisal actively (Ngo Thi
Phuong Thao, 2011).
c. Selecting appropriate appraisal methods
Real estate is assets with specific characteristics; in particular, it also is affected by
many objective and subjective factors. Method is selected will affect directly to the appraisal
result. In appraising real estate, no method is assessed as the most accurate, but, the most
suitable and effective method will present the closest value with real market value based on
applied conditions and type of assets, and also reduce costs during appraisal process.
Selecting appropriate appraisal methods based on the available and reliable information will
help appraiser to have reliability price that can be persuaded customers and also, reduce costs
during process (Nguyen Minh Hoang, 2011).
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d. Information System
According to Ngo Thi Phuong Thao (2011), although the information is objective
factor from the market, but the development of information system is totally dependent on
appraiser and bank’s strategy. To determine the real estate’s value, it requires the appraisers
collect and process information regularly. Moreover, the methods applied in appraising
process rely on the comparative method and the market value. Thus, with the standard
information system, a reliable, adequate and up-to-date source of information will be the basis
for the accurate assessment and analysis of appraiser. Therefore, it will influenced the
appraisal results, reduce the costs and time for appraising real estate.
e. Workforce
Shagufta (2013) proposed that, in any condition, the human resources are very
important for appraising. Moral qualities, professional qualifications and experience of the
appraisers will greatly influence to the appraisal’s process and result. Appraising real estate is
complicated and difficult work, and requires good qualifications, expert knowledge,
understanding real estate itself and factors affecting real estate’s value, mastering knowledge
of the economic, social and technical processes applied (Nguyen Ngoc Vinh, Nguyen Quynh
Hoa, 2014). To be an appraiser, that require experiment, can react quickly to the factors
affecting to the real estate’s value and unusual changing in order to avoid mistakes and
negatively impact to appraisal activities. Besides, moral quality is also important factors that
make influence and dominant to the appraisal activities. The valuation of the mortgages will
directly influence to the value of loans. Therefore, if the appraiser does not have good moral
qualities, he will take advantages for himself in order to raise value of mortgages, which
affect the quality and the result of appraising (Nguyen Ngoc Vinh, Nguyen Quynh Hoa,
2014).
f. Other subjective factors
There are also other subjective factors affecting the appraisal and its quality. For
example: bank’s business strategy in each period, office, equipment, system information…
Besides these subjective factors, the appraisal is also affected by many objective factors
(Nguyen Ngoc Vinh, Nguyen Quynh Hoa, 2014).
1.3.2.2. Objective factors
a. Natural conditions
According to Ministry of (2012), natural conditions are objective factor, which make
up positions in both relative and absolute property, thus, affect to the real estate’s value. The
34

real estate is located at convenient position, with good natural conditions, will have high
price. The real estate have different form, size and area that affects differently to its value, and
also final result of appraiser.
b. Regulatory environment – Policy mechanisms
Real estate is under strict management and law of the State, so, the State’s regulation
on the ownership or use or conditions when joins in mortgage transactions will influence
significantly on the receipt of collateral, and therefore, it will affect the appraisal. The State’s
policies in the framework of land prices and norms will also affect bank’s appraisal process.
When there is a change in State’s regulations on planning, land used planning, public building
and development will affect the texture of infrastructure, and influence the real estate market.
This will make the value of real estate changes over (Ministry of Finance, 2012). Besides, the
regulations of the SB and CBs on their own credit operations, transactions with collaterals
will affect to their values, also affect to the appraising real estate mortgage. Thus, with
favorable legal environment and legal system of the State related to real estate, real estate
market, credit activities, lending activities of banking system will make the appraisal of
mortgage is well underway, ensuring the safety of loans (Nguyen Ngoc Vinh, Nguyen Quynh
Hoa, 2014).
c. Economic environment
Economic conditions will enable the development of real estate market, making prices
on the real estate market increases. Thus, in the area of real estate with a favorable economic
environment, the use of real estate in specific area will create large profit; the land price in the
area will be higher than the others. Besides, the economic development, the demand of capital
for production also increased, thus, increasing the amount of loans at CBs, means, the number
of assets need to be appraised increasingly. Thus, a favorable economic environment will
affect the appraisal in both quality and quantity (Ngo Thi Phuong Thao, 2011).
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Chapter 2 – The current status of the appraisal process of real estate mortgage at BIDV
2.1. BIDV’s Overview
2.1.1. Introduction of Bank for Investment and Development of Vietnam (BIDV)
Founded in 1957, Joint stock commercial Bank for Investment and Development of
Vietnam now also known as BIDV (Prospectus of BIDV, 2011). Over the last 58 years,
BIDV, which is recognized as a state enterprise of special rank and operated in the form of a
state corporation, became to one of the four oldest and largest commercial banks in Vietnam.
Through the years of operation and development, the changes of BIDV will be shown in the
table below:
1957
Established under the name of Bank for Construction of Vietnam under the
Ministry of Finance, and wholly owned by the State
1981
Changed name to Bank for Investment and Construction of Vietnam (under
the State Bank)
1990
Changed name to Bank for Investment and Development of Vietnam
(BIDV)
1992 Commenced cooperations with overseas partners
1995 Commenced operations as a full-service commercial bank
1996
The first commercial bank in Vietnam to conduct both Vietnam and IFRS
reporting, and continuously applied until now (15 years)
2001
The first commercial bank in Vietnam to receive ISO 9001:2000
certification
2001- 2006 Implemented the plan of bank restructuring
2006
The first bank in Vietnam ranked by Moody’s for its operational reliability,
with all indices meeting national standards
2008
Comprehensively transformed its organizational structure at the Head office
and branches towards a modern retail commercial bank up to international
standards under Project TA2
2011
Bank for Investment and Development of Vietnam is converted from a
state-owned enterprise to One-member Limited Liability Company owned
by the State and conducting equitisation.
Table 2.1: BIDV’s development process (BIDV prospectus, 2011)
According to BIDV’s prospectus (2015) and annual report (2014), With the diversified
of services about finance, monetary, credit, banking and non-banking services, BIDV has
already satisfied a number of customers, even the fastidious ones. For banking, BIDV
provides full of modern and convenient products and banking services, such as deposits,
credit activities, payment and treasury services, etc. For insurance, it offers products for non-
life insurance designed to match the package to customers. Furthermore, for securities, the
36

bank gives a huge range of brokerage services, investment and investment consultant, and for
financial investment, BIDV contributes capital and lease financial to establish companies in
order to invest to projects.
Based on website of BIDV (2015), until now, through 58 years in operation and
development, with more than 19.130 officers, employees and financial consultants who are
well-qualified and well-trained with full experience, BIDV always bring the most benefits and
reliability to its customers. Until now, BIDV has expanded the business to 136 branches and
nearly 600 transaction officers, thousands of ATMs and point of sale (POS) transactions in 63
provinces and cities nationwide throughout Vietnam. It also has non-banking networks such
as Investment Securities Company (BSC), Insurance and Investment Company, etc.; overseas
representatives in Laos, Cambodia, Russia, Myanmar, etc. and joint venture bank (BIDV,
2015).
Moreover, BIDV always innovates and applies technology to serve effectively for the
management and improvement of quality of banking services. Since 2007, BIDV has
occupied the leading position in the top list of Vietnam ICT index that is available for
application development and information technology, and in the typical Top 10 CIO (Chief
Information Officer) of Indochina in 2009 and of the Southeast Asia in 2010. Until now, the
bank has received many rewards which are from domestic and foreign institutions such as
Top 20 most famous brands in Vietnam, the Best Local Trade Finance House 2012 by Euro
money Magazine, Vietnam Gold Star Award, etc. (BIDV, 2015).
BIDV always accompanies customers to provide the best and modern financial-
banking services, committed to bringing the best value to shareholders, creating a professional
and friendly working environment as well as career development opportunities and benefits
for all employees, and being the pioneer bank in community development activities (BIDV,
2015).
With the aim to develop and improve the organization, BIDV has established an
appropriate strategy with core values following as:
- Mission: BIDV commits to provide the best modern banking-finance services to
customers; bring the best value to shareholders, create a profesionnal and prominent working
envrionemtn for employees and pioneers in community development activities.
- Vision: To become the most qualified, efficient and reputable Banking – Finance
group in Vietnam
- Core value: Customer orientation – Rennovation and Development – Creation and
Professionalism – Social Responsibility – Quality and Reliability
37

2.1.2. BIDV performance in the period of 2010 – 2014
According to annual report period 2010-2014 of BIDV, In view of economy in general
and operations of enterprise in particular, there are many difficulties, BIDV has followed the
guidance of management authorities, flexible in dealing with the changes of market, creative,
use general source while promoting value of internal forces to the first priority in order to
achieve positive results, affirm position, role of leading financial institution.
Since 2010 up to now, the growth rate of total assets achieved average 15.4%, fund
mobilization and credit always maintain in turn as 18.8% and 15.1%. Quality of bad debt has
been always controlled below 3%. The December 2011 marked a turning point in BIDV’s
development process when BIDV Initial Public Offering shares (IPO) to officially change into
Joint Stock Commercial Bank in May 2012.
Joint stock commercial Bank for Investment and Development of Vietnam (BIDV) is
one of largest Commercial bank, leading in Vietnam banking system about capital, assets,
human resources, operation network and number of customers, operating in all fields with
total loan book of 445,693 billion dongs.
Up to 31 December 2014, BIDV has total asset of 650,340 billion dongs, equity
capital of 28,112 billion dongs; total capital is 33,271 billion dongs; total liabilities of 445,693
billion dongs, staff member of 19,130 people, 136 branches with 595 transaction offices, and
16 savings banks operate in all 63 city, provinces.
During the past year, although the world economy has many changes, the
Management Board of Bank and branches in whole system has made great effort to maintain
and develop growth of banking system in both quality and quantity, and achieve many
positive results as well. BIDV continues to maintain with good quality of credit and control
bad debt ratio at 2.03%.
Regarding fund mobilization:
Until 31 December 2014, fund mobilization (including customer deposit and valuable
papers issued) has been 501,909 billion dongs, increased 85,182 billion dongs (equivalent
20.4%) compare to 2013. In there, mobilization from customers achieved 440,472 billion
dongs, increased 30% compare to 2013, hold 87.76% density of total fund. Mobilization from
issuing papers achieved 20,077 billion dongs, increased 12.24% compare to 2013 (BIDV,
2014).
38

Figure 2.1: Funding Mobilization Growth (BIDV’s annual report 2014)
Structure of fund mobilization move to direction of increasing stability of fund:
Residents deposit achieve 248,962 billion dongs, approximately 22.3% compare to 2013, hold
56.5% density of customers deposit, confirm the leading position in market in both scale and
density of residents deposit (BIDV, 2014).
Credit growth:
According to BIDV’s annual report 2014, credit activities in 2014 were undertaken in
an active, flexible and timely manner, which presented the Bank’s leading role in
implementing monetary policies, contributing to the stabilization of monetary market and
macro-economy and also providing its responsiveness to the market movements and funding
needs of the whole system. Total outstanding loans as at the end of the year 2014 were VND
463.567 billion, a rise of 18,9% comparing with 2013 in which outstanding loans for
economic organizations and individuals reached VND 445.694 billion, increasing by 13.9%.
Credit growth was closely controlled in conformity with credit quality. BIDV set
priority to meet funding needs of manufacturing and export areas. Credit growth was strictly
managed in line with credit quality in order to ensure the effectiveness and safety of credit
quality. As BIDV aimed to restructure its customer base, adjust credit structure and control
credit quality, the rate of bad debts was stayed at 2.03.
39

2.2. Situation analysis of the appraisal of real estate collateral at BIDV
According to Prospectus 2015 of BIDV, in the period of 2010 – 2014, due to the result
of financial crisis as well as the global economic recession, Vietnam’s economy faced various
difficulties and challenges. The world financial market not only had unexpected fluctuations
but also brought the risks to the economy. As a result, those positive influences had a
significant impact on the balance of trade and the foreign balance of Vietnam. It also led to
the risks and challenges for banking industry in general and for BIDV in particular.
In term of unexpected fluctuations in the market, a number of business face with
bankruptcy and the inability to pay the debt at BIDV since they cannot stand for the economic
pressure as well as difficulties in operation. Additionally, those organizations overcoming the
economic crisis have to meet the harsh
competition between banks, such as join-
venture banks or wholly foreign-owned banks.
However, BIDV have already provided up-to-
date credit policies for each period of the
economy and for each type of customers that
lead to satisfy the needs of their customers.
Now, loans and advances to customers still
have had stable remains.
Figure 2.2: The growth rate of the
BIDV’s loans (BIDV’s annual report, 2014)
As being recognized as a state enterprise and being followed all the procedures as well
as requirements of the State of Bank, BIDV concentrate on providing loans for some specific
industries, such as agricultural and rural development; funding for export, small and medium
enterprises; support to overcome natural calamity as well as support for the operation of
business in technology, a processing industry, etc. that make up to 40% total loans. As the
preferential customers and businesses tend not to have mortgaged assets or the mortgaged
assets being established from the loans, loans and advances to customers with mortgaged
assets are limited. In addition, according to the customer policy of BIDV, there are some
types of customers and business being considered to make an unsecured loan with 100%,
including the customers and business having stable development in business (based on the
40

annual report and credit rating of BIDV) and customers rated at AA and more, debt rate under
2.5, no bad debts, as well as no debt overdue in 5 recent years. Otherwise, customers and
businesses are considered to receive 50% unsecured loan if they satisfy these conditions: rated
at a and more, debt rate under 5 and no debt overdue as well as bad debts. These policies
bring not only advantage but also disadvantage for their organization. In term of advantage,
these policies support customers and businesses that do not have sufficient mortgaged assets
to make a loan for operation and expansion. However, BIDV might face with difficulties in a
case that customers and businesses do not have ability to pay the loan. Therefore, loans and
advances to customers with mortgaged assets are not high (approximately 43% total loans). It
can be said that the real estate appraisal activity is just one single step in the appraisal process.
In 2015, the real estate appraisal activity of BIDV have improved significantly by establishing
the updated process about real estate appraisal and secured transactions with the purpose to
follow requirements of the State bank about ensuring safety loans and tightening terms and
conditions of real estate mortgage in general and other assets in particular. In that updated
process, BIDV provides specific instructions for each step in order to improve the appraisal
activity of BIDV in this period. The updated process of BIDV is following as:
Firstly, BIDV provides clear and exact conditions for each types of mortgaged assets
to ensure secured loans. Specifically, in term of real estate asset:
2.2.1. Principles of receiving Secured assets
- BIDV only receive secured assets when BIDV is first preferential creditor according
to law regulation in case of processing that process, except the customer policy of BIDV or
General Director have other regulations, guidance.
- In case of receiving secured assets, the order of preferential payment of BIDV behind
other credit organization/ third Party, branches/ department must report to General Director to
consider and accept depend on detail case if it meets some of conditions as follows:
+ Value of secured assets ensure sufficiently the obligation in BIDV and other credit
organization/ third Party
+ Secured obligation in other credit organization/ third Party is identified clear and
detailed value
+ Secured asset without bind of limited condition which establish by other credit
organization/ third Party to secured asset.
2.2.2. Condition of secured asset and guarantee
- All assets must belong to ownership, land use right of guarantee or allocate to
enterprise/ organization manage, use and have right to use to mortgage, pledge according to
41

law regulation of land. Towards assets under co-ownership, the approval of all co-owners
must be in written or authorized according to law regulation, all documents, legal ownership
certificates of secured assets
- All assets can be trade, not involved in any dispute, not under requisition object,
revoke or in any distrain record for judgment implementation, location of asset could not be
under project/ clearance area or already had decision of revoke land.
- At the same time, Guarantee must satisfy some conditions as follows:
+ Must have civil law capacity, civil behavior capacity and undertake responsibility
relevant to law regulation.
+ Have mortgage right to assets.
2.2.3. Receive mortgage real estate:
a. BIDV only receive mortgage house which currently not mortgage to ensure any
obligation in other credit organization/ third party at the time settle secured transaction.
b. Value of house must be more than total value of all secured oligations (in case law
regulation of this content change, then must comply with new law regulation).
c. Towards land use right have properties associated with land, BIDV receive from
land use right and properties associated with landto ensure the right when process secured
assets, avoid the rising disputes.
d. In case mortgage house is leasing:
+ Contract of leasing must ensure the settle right of BIDV
+ If customers have already let out for lease, customers will be required to adjust
contract of leasing to ensure the settle right of BIDV or until expiration date/ mature date,
contract of leasing must ensure the settle right of BIDV.
e. To receive secured assets as house, properties associated with land, customers must
have Certificate of Land use right, house ownership and other properties associated with land
or other document prove land use right/ house ownership appropriate with law regulation.
f. In case house establish in future, buy from enterprise trading in real estate in house
construction investment project (including villa, row house, apartment building):
+ BIDV receives house mortgage which establish in future of customer to ensure all
loan of buying that house or other house of enterprise trading in real estate in house
construction investment project, comply with rights and obligations according to concurrent
regulation of house mortgage establish in future.
42

+ BIDV receives assets right mortgage from Contract of purchase house in order to
ensure obligations of customers with BIDV, comply rights and obligation according to assets
right.
+ In this case, BIDV only receive house mortgage establish in future or asset right
rising from contract of purchasing house, in there, the option of receiving house mortgage
establish in future is preference.
g. In case, assets associated with land of individual, household, organization could
build in campus under their own legal use right but not yet issued Certificate of assets
ownership/ project ownership, depend on specific situation, BIDV could implement as
follows:
+ Receive land use right mortgage and properties associated with land (assets establish
in future). To make favourable condition of registration of secured transaction, some content
need concern as follows:
- Appraisal report about evaluating of real value of assets: describing in specific
secured assets, including land use right, housing and other assets related to actual situation of
assets.
- Appraisal report and mortgage contract:
+ Land use right: describe specific each type of asset
+ Housing and other asset that do not have certificate of ownership: note as housing
established in future.
- In case article (a) is not followed, bank can receive mortgage that land use right and
housing established in future which follow the conditions below:
+ Land use right mortgage contract: notarize mortgage contract and register secured
transactions.
+ Housing established in future mortgage contract: notarize mortgage contract.
h. In case assets associated with land of individual, household, organization build in
campus under their own legal right but land use right not belong to mortgage object according
to law regulation and assets on the land without Certificate of asset ownership, BIDV receive
mortgage asset associated with land (assets establish in future) and certify and register
mortgage contract.
43

In case Office of registration on Secured transactions do not agree registration, they
must complete procedure of mortgage contract certification. In this case, the asset owner
provide document with certificationfrom Commune People’s Committee and over or
appropriate authority (towards assets of household, individual, and organization) or
certificationfrom management Board of Industrial Area, economic zone (towards assets
establish on the land in industrial area, economic zone) about comfirmation of assets associated
with land under ownership of individual, household, organization.
2.2.4. Assets are real estate but not considered as secured assets
- Assets bought by guarantee from third party with agreement of redeem
- House, properties associated with land and land use right curerntly mortgage in other
credit organization/ third party.
- House, assets associated with land which the guarantee borrow land use right from
other organization, individual; or the guarantee lease that land but the lessor is not State
appropriate authority or enterprise have business activity as let out land. Except the case of
receiving mortgage house, assets associated with land, the lender, lessor also mortgage land
use right (if the land use right could be mortgaged) to ensure the obligation implementation
together.
- The land use right or assets associated with land related to worship, religion,
cemetery, land with tombs, the land use right or assets associated with land issued to some
special object, then BIDV could meet dificulities when processing secured assets.
Secondly, in term of process and appraisal method of BIDV. Real estate mortgage
appraisal is another step of appraisal process of BIDV. After analyzing the loan request
document in terms of ability of making loan, loan purposes, financial ability, etc. that satisfy
the requirement of BIDV policies as well as level of accepted risk, BIDV will examine the
document and the real value of real estate mortgage. In every branch, based on BIDV policies,
all the loan request documents have to go through 3 levels of approving authorities: credit
officer receives and have full responsibility to do appraisal duty; manager of credit
department will review the document and report to the deputy director, the deputy director
will make decision whether or not the loan request document is accepted or not. However,
with the update appraisal process of BIDV, it is required to have at least 5 credit officers
(including approving authority) for the loan over 5 trillion dong. For the assets having specific
characteristics, credit officers do not have adequate ability to evaluate, it can be suggested to
hire external appraisal company in order to ensure the value of assets. The process will be
implemented as follows:
44

Step 1: Receiving and evaluating the secured assets in general
Credit officers receive and examine the loan request document. Customers are
required to provide full of required documents or are asked to bring the supplement
documents in order to make sure the sufficient information of real estate mortgage. In case
lack of required documents, credit officers have the right to reject the loan request. After
examining the mortgage document, credit officers will set up the appraisal proposal according
to the standard procedures.
Step 2: Investigation phase and verification of legal responsibility
Under the instruction of credit manager, credit officer examine the current status of
real estate mortgage and implement the appraisal subjectively. Credit officers have
responsibility to associate with customers when they examine the value of real estate
mortgage. Evaluating the current status of real estate mortgage and the ability of alienation
play an important role that provides information and basis to adjust the real value of real
estate mortgage. Therefore, the content and quality of information will have a significant
impact on the real value of real estate appraisal.
Step 3: Appraisal implementation and creating appraisal report
Based on gather data, credit officers will analyze, apply the most appropriate appraisal
method to implement the real estate mortgage appraisal. This process will be described by
report for real value of real estate mortgage and the agreement of customers. In term of over-
5-trillion-dong secured assets, credit manager and credit officers are required to take part in
the appraisal process. After both credit manager and credit officers have to examine the real
value of assets, to discussions to finalize the report with full agreement, the appraisal
document will be delivered to the higher apprising authority level.
Step 4: Creating a real estate mortgage contract
Based on the real estate mortgage report, credit officer implement a real estate
mortgage contract with the agreement of credit officer. After examination and approval of
director or deputy director, a real estate mortgage contract will be signed.
Step 5: Register secured transactions
After signing the mortgage contract, credit officer do the warehouse procedure. BIDV
has responsibility to register secured transactions, make noticement about mortgage to
authority.
Thus, the appraisal process is conducted BIDV branches in the system are made quite
clear, tight to ensure safe operation of the bank loan. To better understand the method and
manner of pricing of BIDV, we analyze a concrete example of collateral transactions at a
branch of BIDV.
Example: Relationship officer of Corporate Banking 2 appraises the real estate located
45

at No. 25 B2-3 Dam Trau, Bach Dang Ward – Hai Ba Trung District, Hanoi. Tran Van Son
and Bui Bich Thuy are owner to mortgage property for the loan obligations of JSC Investment
and technology Development at Faith Vietnam BIDV Ha Thanh (Mr.Son currently is Chief
executive Officer of company). Asset’s record includes: Certificate of housing ownership and
use of housing rights; Family household registration book, ID of household  Officer
concluded owned and used by the guarantor. Officer is based on the Decree and relevant laws
and regulations of the Government and BIDV to appraise the value of collateral. Property
location described in detail and is represented by the map. Land position and morphological
characteristics of the specific described along with the appraisal criteria identified
advantages /drawbacks of property based on location, traffic, area, infrastructure, civil
location, security, interior architecture, goodwill, other factors, the ability to sell... Officer
also raise the idea to generalize the real estate market in order to explain the commercial
viability assessment and duration may sell the property at the time of the appraisal value of
real estate. Officers based on circulars and regulations of the state in order to determine the
price of 5 million/m2
, with an area up to 170m2
, the house is worth 853 million, after taking
into account the depreciation period (9/15 years), the residual value is 546 million. Then the
officers is based on the price specified by the Finance Ministry and determine the value of
land is 12.5 million/m2
, with a land area of 50m2
, is 627 million. The total value of the house
is determined to be 1,173 million  Officer assessed that evaluate is inconsistent with the
market value. Then, officer used the comparison method based on market value with supply
and demand principles to appraise the value of assets. After determining the price of
comparable real estate is located close to the property, officials determined the market value
of the assets was 186,5 million/m2
. To ensure safety for the bank, officer identified the price
was 120 million/m2
, with total value is 6 billion, and do not consider the value of the house
attached to the land. Then the application of the Bank's assets is 0.8, the value of assets apply
to customers is 4.8 billion.
By analyzing the examples above, it can be seen that the appraisal process: the officer
has to comply with the steps and content of the appraisal process that BIDV had made. But a
few steps in the process have not been implemented thoroughly and seriously, by both
objective factors and subjective. Firstly, there is not sufficient information to have a basis to
adjust the market price for the land and the house built on the land. The price at 186.5
million/m2
is due to obtained valuation of the transaction nearby but not or next opposite
positions  may caused an incorrect price. Therefore, this is a subjective price. Secondly, the
adjustment of mortgage’s price is 120 million/m2
is no concrete basis, on the one hand to
46

The appraisal of real estate mortgages in Joint Stock Commercial bank for Investment and Development of Vietnam (BIDV)

The appraisal of real estate mortgages in Joint Stock Commercial bank for Investment and Development of Vietnam (BIDV)

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