Market data collection LITERATURE REVIEW

15 According to INLA Project Report, a system for mass valuation of land consists of three main parts; a market data collection system, a valuation system and an assessment system. The market data collection process has been described above. If there is a need of recurrent market valuation collection of market data is a continuous process. The second process is the valuation process. At this stage, the researcher analyzes market data and develops the valuation models. If deal with the value factor location through zoning, then this part of the work also is included in the process. The result of the work is valuation models, value maps with value zones and tables or formulas for valuation of each property. The third process is the assessment. During this process, the researcher collects data about characteristics which is included in the valuation model for all properties that are going to be valued. The valuation models applied to the properties with their characteristics or value factors will result in assessed values.

a. Market data collection

Based on the experience of INLA Project, market data collection must be undertaken. Attempts to determine market values without collection of market data will cause to failure. To collect market data for example information about real prices is difficult in many countries including Indonesia. Transfer taxes and notary fees are based on the reported prices. To avoid tax and fees people involved in real estate transactions do not report the real price to PPAT. The transfer tax in Indonesia is at least in theory high. In practice it is not so high 16 because people do not report the real transaction prices. The situation is similar for notary fees. It would be better to base fees to notaries on other parameter than reported price for example on assessed value multiplied with some factor or to have some kind of fixed fee per transaction. Similar calculation is also compatible for transfer tax. If people report the real transaction prices the tax rates could be decreased but the state and local authorities receive the same revenues from the taxes. There will also be problems if carry through a fair valuation with market values for one region but not for others. The relation between the assessed values in the region and market values may be fair. But in comparison with the values in other regions will not be fair, especially not as long as the tax rates are the same. To find information about real prices, interested parties have to use other sources than reported prices from PPAT. In urban areas this can be done through advertisements. PBB partly uses this way to work. In rural areas advertisements are not a common way. To get more information on real price, interview with buyers or people such as head of village in rural areas is more effective. The quality of the collected market data is very important for the valuation. There is general rule garbage in garbage out . If collected information about prices and characteristics for sold properties is not reachable, the result of the valuation will probably be the same.

b. Value zoning