The scheme of real estate valuation created by Vitaliy Khomutynnik with the support of Volodymyr Groysman is going to bring them 13 mln USD of profit.
Lately my colleagues have been agitated with the news of the updated property valuation system for making real estate deals.
To cut a long story short, the State Property Fund issued a decree No. 956 creating an E-platform called ‘OTSINKA.Online’ (Valuation. Online). So now every property valuer should send valuation reports to this electronic service in the first place and the reports can be passed to a notary for further taxes and duties assessments (1% of tax paid to the Pension Fund Tax and 1% of state duty) only upon receiving the confirmation of the valuation credibility.
The key thing of the scheme developed by Khomutynnik upon Groysman’s approval lays in the valuation mechanism of the service OTSINKA.Online as it inflates the assessed value of the majority of facility objects to be sold because building condition, number of storeys, location etc. are simply not taken into consideration.
The city is just divided into ‘zones’ with a minimal valuation price fixed for each of them. For instance, real estate valuation price in Pecherskyi District zone of Kyiv is at least 33k UAH for a square meter.
Such notions like ‘newly-erected buildings’ or ‘resale property’ are simply excluded. The platform does not provide objective zone division according to the land value.
In some cases it all leads to the inflation of the real estate estimated value in 1.5-2 times. So payments of buyers and sellers grow accordingly.
For example, an apartment located in the center of Kyiv with a real price of 50k USD will now be estimated twice as much namely 100K USD. So the sum of the transaction parties payments in the sale (2% of the estimated value) will rise from 1 000 USD to 2 000 USD.
Our dear ‘developers’ mentioned above earn money with the help of their puppet managers of lower ranks using this very ‘drawback’ of the platform. After the introduction of these new estimation rules brokers who still prepare deals say that the correction gap between the estimated value then and now is 10 000 UAH.
Let’s calculate it together:
According to the data of the Ministry of Justice the number of sale transactions (sales of apartments and dwelling houses) struck by private and state notaries in the regions of Ukraine in 2017 reached the number of 255 733.
Just the assessment of real estate valuation credibility will help Mr Khomutynnik and Mr Petrenko make something around 85 mln UAH (in the period from August to December) on their ‘innovation’, based on the price for value estimation of one object ‘processed’ per OTSINKA.Online platform that is 390 UAH (+ 390 UAH paid for notarization).
More than 7 000 property valuation reports have been introduced in the OTSINKA. Online platform for their further registration and it’s only for the last 10 days the base has functioned. In so doing 417 real estate objects got registration denials due to real estate undervaluation of 2-3 times. Such deals made 11.58% of the overall number of deals for their total amount of 135 mln UAH.
If we assume that only every 10th deal is made undervalued the additional inco me of the frauds who introduced the scheme and helped with undervalue will be 250-300 mln UAH out of 25-30k of deals with 10 000 UAH for each of them.
This huge figure appears if we turn a blind eye to the nuances. And the nuances are even more important. For instance, valuation of a plot of land with a building on it is formalized through filing two separate evaluation reports (for the building and for the plot of land). It also requires a separate registration of every object of the evaluation. It means that in some cases Khomutynnik and Groysman (and their puppet managers) will double their income at our expense.