A new approach to appraisal: combating the undervaluation of property?

The State property fund of Ukraine (SPFU) has published a draft order titled “On amendments to the procedure for maintaining the unified database of appraisal reports”, which aims to improve the functioning of the Unified database of appraisal reports. The proposed changes focus on enhancing the monitoring of information submitted by appraisers and appraisal entities, as well as streamlining the process for suspending or restoring access to the database for such entities and professionals.

However, the primary goal of the SPFU is to combat undervaluation in property appraisals.

The Fund points to the issue of undervaluing real estate by appraisers, emphasizing that, under current regulations, a key requirement for registering an appraisal report in the Unified Database is the compliance of the appraised market value with a 25% price range based on comparable properties listed in the database. This effectively results in the application of a 25% “discount” from market value, especially for standard property types in major cities where the automatically calculated indicative value is consistent with actual market prices.

In numerous cases, the actions of appraisal entities (or individual appraisers) have been driven by the prospect of receiving additional compensation from clients in exchange for significantly undervaluing property. The goal is often to reduce the tax base for transactions, thereby minimizing the taxes and fees payable by clients—revenues that would otherwise contribute to the State budget of Ukraine and other public funds.

According to SPFU monitoring data, there have been repeated instances where parties to a transaction, using services of appraisers, intentionally apply the 25% discount when determining market value, while still formally complying with the database registration rules.

The Fund cites examples of undervaluation in major cities across Ukraine, reporting that the average reduction in market value recorded in appraisal reports used in notarized transactions is approximately 22.62%.

What the SPFU proposes:

• Expansion of valuation objects: including indivisible unfinished construction objects and future real estate objects.
• Notary checks: appraisers’ entries must match official property documents (identity of the object).
• Access to the database: clarified procedure for suspension and reinstatement of access, including administrative proceedings.
• Report formatting: reports must be submitted as unprotected PDFs with a mandatory qualified electronic signature (QES) and indication of an email address.
• Publication of data: clarified list of public and non-public data fields (e.g., apartment numbers).
• Monitoring: refined to include validation of incorrect or misleading entries.
• Selective peer review: a full procedure for selective appraisal report review is introduced.
• Public access: data to be made available via the Unified state open data portal.

You can share your opinion on whether these changes will truly prevent the undervaluation of real estate in the “Urban planning in Ukraine” group.

Yuriy Brykaylo, attorney

DREAMDIM & URBANDATA

Ⓒ 2025