DEBT VALUATION

Currently, according to the international trend, real estate transactions are evaluated by an independent organization of valuation consultancy to ensure objectivity and transparency in the transaction process of property.

When dealing with bad debts, in addition to selling collateral to recover debts, if not yet fully recovered, the bank will continue to collect debts with other financial resources of the borrower. And financial resources other than collateral are other assets of the enterprise (for limited liability companies, joint stock companies) and assets of enterprises and individuals (for private enterprises or for individuals). Thus, the actual value of the debt will have to be further assessed in addition to the value of the collateral above. At that time, if the debt is sold to another creditor, the bank will have to provide a value for that debt and the new creditor will collect the debt through the sale of security assets and debt collection from other sources of assets of the debtors.

I. Introductory section

Pursuant to decree 61/2017/ND-CP, the cases in which the starting price of a bad debt or collateral must be appraised are as follows: The bad debt was purchased by the Asset Management Company at book value with special bonds that, when determining the starting price for auction, the Asset Management Company could not reach an agreement with the selling credit institution on the starting price of the bad debt. The bad debt was purchased by the Asset Management Company at market value. The collateral of bad debts that, when determining the starting price for auction, the Asset Management Company could not reach an agreement with the guarantor on the starting price.
Pursuant to Decree No. 61/2017/ND-CP, with reference to the selection of a valuation enterprise to carry out the valuation for starting price of bad debts and collaterals of bad debts, the Asset Management Company shall agree with a debt-selling credit institution on the selection of a valuation enterprise within 07 working days. In case of failure to reach an agreement with the debt-selling credit institution on the selection of a valuation enterprise, the Asset Management Company shall publicly notify the hiring of a valuation enterprise at least 07 working days on the Website of the State Bank of Vietnam, Website of the Asset Management Company for valuation enterprises to register to participate. The Asset Management Company shall decide to select a valuation enterprise according to the following principles: The selected valuation enterprise must be on the public list of valuation enterprises eligible for valuation activities of the Ministry of Finance; The selected valuation enterprise is not among the valuation enterprise, which is not eligible for valuation according to the provisions of the Law on Prices and its guiding documents. It is extremely necessary and especially important to provide adequate records, documents and data related to bad debts and collateral assets of bad debts subject to appraisal for valuation enterprises. From the property legal documents and data provided, the valuation company will have a plan to survey the property and implement the property valuation process to give the most accurate and timely results.

Debt valuation for the purpose of debt trading is currently a particularly important issue that is of interest to organizations and businesses. Especially for banking institutions, the analysis and valuation of debts is even more necessary to handle bad debts in order to avoid damage and losses to banking institutions.

II. Valuation entity

Objects and assets of real property valuation include:

Types of land: residential land, agricultural land, land with gardens, production and business land, special-use land, other land, etc.
Construction works, construction works attached to the land (including properties attached to that construction work): townhouses, apartments, villas, schools, hospitals, etc.
Land for projects of factories, trade centers, apartments, office buildings, etc.
Restaurants, hotels, resorts, etc.