Protected Collateral Value: An Approach to Valuation of Commercial Properties for Loan Guarantees

Abstract

The valuation of commercial properties for the guarantee of loans is extremely relevant for financial institutions, since it directly impacts the calculation of the loan to value ratio (LTV). However, despite the vast literature on the subject, the choice of methodological basis and the definition of the type of value to be employed are not pacified issues among researchers and practitioners. In this sense, the main objective of this paper is to present a methodological approach, as well as a suggestion of the type of value for the valuation of commercial properties bound collateral.

Keywords

• valuation
• commercial property
• loan guarantee
• loan to value
• income approach
• value at risk
• c15
• c51
• d46
• d81
• o22