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Bulgaria – Valuation for lending purposes
I. THE VALUATION
I.1 Regulatory Framework
| a) Is there a legal framework in your Member State for the valuation of real estate for lending purposes (loan origination)? If yes: • Is this framework specifically for the valuation of real estate for lending purposes or are provisions enshrined in a broader piece of legislation? • Is it limited to the transposition of European or International Standards or is it broader in nature? • Please provide references and indicate whether it applies to both residential and commercial property. If there are differences between both property types, please explain. |
In Bulgaria, the Bulgarian Valuation Standards (BVS) are mandatory under the National Valuation Act. These standards do not include specific requirements for valuations prepared for loan origination purposes. The BVS rely on certain aspects to the International Valuation Standards (IVS) and the European Valuation Standards (EVS). In practice, for loan origination, appraisers typically determine the market value of the property, and the definition of market value is provided within the Bulgarian Valuation Standards. The Bulgarian Valuation Standards (BVS) are not specifically tailored for valuations prepared for lending purposes. As mentioned above, the BVS provide definitions within a broader framework rather than detailed guidance for loan-related valuations. The BVS differ in certain aspects from the International Valuation Standards (IVS) and the European Valuation Standards (EVS). There is no distinction between RRE (Residential Real Estate) and CRE (Commercial Real Estate) in this context. According to the Bulgarian Valuation Standards (BVS), the applicable valuation approaches for both CRE and RRE are the Market Approach, Income Approach, and Cost Approach. These methods are applied based on the nature of the property, its location, and the independent judgment of the appraiser. |
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| b) If there is no specific legal framework, is the valuation of real estate for lending purposes covered by other means, e.g. self-regulation, sector recommendations or supervisory guidance? | |
| c) Do national valuation standards exist? Is there any cross-reference to European and/or International Valuation Standards (EVS/IVS)? | Yes, please refer to the answers provided in section (a). |
| d) How has the regulator in your Member State transposed Article 19(1) of the MCD regarding “reliable standards” for the valuation of residential property (into legislation or delivered through a professional body)? Indicate whether and how “reliable standards” are defined and whether and how the content of those standards are prescribed. | As stated above, under the National Valuation Act, the body responsible for setting the standards and regulating the valuation profession in Bulgaria is the Chamber of Independent Appraisers (CAIB). The Bulgarian Valuation Standards (BVS) are adopted by the CAIB and are mandatory for all real estate valuers. |
I.2 Valuation Bases & Methodology
| a) What valuation bases (Market Value, Mortgage Lending Value, etc.) are typically used in your Member State for the valuation of property for lending purposes (please disregard at this stage the specific requirements of Art. 229 CRR considering that the Property Value is not an independent basis of value). | Market value is the primary basis of value applied in the lending process. |
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| b) Based on what definition? Please provide the definition and reference to where it can be located. | definition - "Market Value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing, wherein both parties acted knowledgeably, prudently and without compulsion." It is announced on the official website of the Chamber of Independent Appraisers in Bulgaria (CIAB) – www.ciab.bg – under the section for Bulgarian Valuation Standards (BVS). |
| c) In case other valuation bases are used in your Member State for the valuation of property for lending purposes, please specify the effect, if any, on the final valuation. | N/A |
| d) Depending on the valuation base used, which valuation approaches or methods (comparison, income, cost, etc.) are typically applied in your Member State to value properties for lending purposes in each category? | For residential real estate (RRE), the Market Approach is typically applied, while for commercial real estate (CRE), both the Market and Income Approaches are commonly used. |
I.3 Valuation Report: Form & Content
| a) Does the legal or professional framework in your Member State specific to the valuation of properties provide minimum requirements in terms of the form and content of the valuation report? If yes, please indicate what these minimum requirements are. | YES. The Bulgarian Valuation Standards (BVS) state that the initial valuation must be prepared following a mandatory site inspection, and the valuation report must comply with the requirements set out in the BVS. |
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| b) Should the form and content of valuation reports be prescribed, are there differences between residential and non-residential properties? Please describe as appropriate. | NO - ther are not difference between RRE and CRE valuation reports |
| c) If the form or content of the valuation report are not prescribed, what form does the valuation report typically take? Please specify differences between residential and commercial property valuation reports. | N/A |
I.4 Technology & Valuation
| a) Does the legal or professional framework in your Member State provide specific rules/guidance on the use of digital valuation tools (AVMs, Artificial Intelligence etc.)? If yes, what does this consist of and is it restricted to a particular type of property? Please specify whether there is a correlation with the requirements of Article 208(3a) CRR and of section 7.4 of GLOAM or whether the latter provisions are of stand-alone application in your Member State. | NO. For initial valuations, AVMs and other automated models are prohibited. The initial valuation must be prepared individually by the appraiser, based on a mandatory site inspection, relevant documentation, and the methodology outlined in the Bulgarian Valuation Standards (BVS). |
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| b) For what purpose are digital tools and/or AI employed in your Member State? - Mortgage origination, monitoring and review of property values, revaluation etc. - Capital requirements, covered bond funding, securitisation transactions, mortgage portfolio risk management etc. |
N/A |
| c) Scope of digitisation: Please determine the scope of automated and digitised tools in your Member State. Are they confined to data collection, do they deliver reliable property values or are they even used to produce full or partial valuation reports including description of locations, infrastructure, building characteristics etc.? If the latter is the case, is internal data used or it is permitted to purchase data from an external data provider? | Currently, the Member State does not collect data from valuation reports and does not provide any aggregated information related to market development, real estate prices, or other relevant indicators. |
| d) Quality requirements: How are the reliability of the tools and their outputs assessed, e.g. by controlling the inputs, back-testing, supervision and/or plausibility checks by valuers etc.? | N/A |
| e) Do you foresee an increase in the use of automation and digitisation of property valuation processes in the future? Please describe potential technological developments which could impact the valuation profession and accelerate its transformation, notably through the use of AI. | N/A |
I.5 ESG, climate risk, transformation risk
| a) How are ESG factors and climate risk taken into consideration in the valuation process? Do Market Values and/or Mortgage Lending Values reflect the ESG characteristics of properties? | The CIAB has launched specific guidance for valuers regarding ESG factors, particularly Energy Performance Certificates (EPC), and their impact on market value. |
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| b) Are there rules in your Member State requiring assessment of EU Taxonomy alignment of a property in the valuation report and the subsequent impact of compliance/non-compliance on property values? | NO |
| c) Are digitised tools and AI applied in order to capture and/or measure the impact of ESG factors and climate risk on property values? | NO |
I.6 Market Initiatives
| a) Please describe any market initiatives which have been undertaken in your Member State (including cross border initiatives) and which have promoted market best practices and/or transparency of valuation practices. |
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II. THE VALUER
II.1 Regulatory Framework
| a) Is property valuation a regulated profession in your Member State (through legal, regulatory or statutory rules)? | YES – through the National Valuation Act and the Chamber of Independent Appraisers (CIAB). |
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| b) Is the use of the title of valuer protected in your Member State? If yes, by whom? | YES - bi CIAB |
| c) If the title of valuer is not protected in your Member State, how do lenders ensure that they work with ‘qualified’ valuers? Are there ‘professional’ certifications for property valuers in your Member State? If yes, please name them. | YES. According to the National Valuation Act, there are nine different specializations, each requiring a separate certificate—for example: real estate properties, plant, machinery and equipment, agricultural land, business valuation, intangible assets, financial instruments and institutions, etc. Each valuer holding a certificate is listed in the National Register of Independent Valuers. |
| d) Is the regulatory or professional framework the same for all valuers, whether they value residential and/or commercial property? Or are there differences? Please describe as appropriate. | YES it is the same |
II.2 Qualification and Independence
| a) The qualified valuer • How has the regulator in your Member State transposed the requirements of Article 19(2) of the MCD, of Articles 229(1) and 208(3b) of the CRR regarding the instruction of “professionally competent valuers” or valuers who possess the “necessary qualifications, ability and experience” (transposition through legislation or by self-regulation)? Indicate how professional competence and qualification requirements are prescribed. |
Each valuer holding a specific certificate must first pass an examination organized by the CIAB. After successfully passing the exam, the valuer receives the certificate and is authorized to appraise only the type of assets for which they are certified. Each valuer must meet specific requirements: hold a bachelor’s or master’s degree and comply with the National Valuation Code of Conduct. |
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| a) The qualified valuer • If professional competence, qualification, ability and experience requirements are not prescribed, what is general practice with regard to professional qualifications? |
Only certified valuers are authorized to prepare valuations. |
| b) The independent valuer • How has the regulator in your Member State transposed the provision in Article 19(2) of the MCD or in Articles 229(1) and 208(3)(b) of the CRR regarding “sufficient independence from the credit underwriting process” or “independence from the loan processing and loan decision process” (through legislation or delivered through self-regulation)? Indicate whether and how the requirement is defined and whether and how it is prescribed. |
The independence of valuers is defined in the National Valuation Act, officially titled - “Law on the Independent Appraiser.” |
| b) The independent valuer • If “sufficient independence” is not prescribed, what is general practice to ensure the valuer is unbiased and not subject to undue pressure? |
N/A |
II.3 External vs. Internal
| a) Does the legal or professional framework in your Member State specific to the valuation of property for lending purposes lay down rules for banks and lenders as to whom they may use to value properties? • If yes, do credit institutions have the possibility to employ both internal and external valuers? • Is one type of valuer typically employed more frequently than the other? |
Banks may use both internal and external appraisers. All appraisers must be certified by the CIAB and listed in the National Register of Valuers. Usually, it is balanced between internal and external valuers. External valuers typically have an agreement with the bank that includes specific requirements. |
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| b) If there is/are no legislation/rules regarding the use of external and internal valuers, what is typical practice? | There are no specific rules in place. |
II.4 Professional Indemnity Insurance
| a) Does the legal or professional framework in your Member State specific to the valuation of property for lending purposes require: • Valuers to have professional indemnity insurance cover? • Lenders to use only valuers covered by professional indemnity insurance? |
Yes. Yes. |
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| b) If there are no such requirements, how are lenders/valuers covered for the risk? • Is/are there legislation/rules in your Member State determining the responsibility of the valuer vis-à-vis his client? If yes, please describe the legislation/rules and the responsibility of the valuer. |
Each client has the right to challenge a valuation or report an unprofessional conduct to the Ethics Committee at CIAB. The responsibility of the valuer is both criminal and administrative. |
III. VALUATION & CAPITAL REQUIREMENT
| a) Property Value How are the Property Value requirements of Article 229(1) CRR transposed in your Member State: • by calculating the Mortgage Lending Value • by Market Value adjustments ◦ adjustments determined by the valuer on a single property by property basis ◦ adjustments determined by the credit institution on a portfolio level based on internal historic market data series ◦ adjustments determined by the credit institution on a portfolio level based on data provided by external research institutes or data providers |
Currently, there is no specific guidance regarding the new ‘Property Value’. |
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| b) Monitoring of property values Has the regulator in your Member State laid down criteria regarding "more frequent monitoring where the market is subject to significant changes in conditions"? |
NO |
| b) Monitoring of property values Has the regulator in your Member State laid down criteria regarding “advanced statistical or other mathematical methods” complying with the technical requirements of Article 208(3a) CRR? |
NO |
| b) Monitoring of property values Please provide an overview of the different statistical methods/tools complying with Article 208(3a) CRR applied by lenders in practice. |
There are no such methods or tools available. |
| c) Review of property values and revaluation • Has the regulator in your Member State laid down criteria which define “review” of the property valuation? If so, what are the minimum and maximum periods within which a review must be conducted? Based on which criteria? |
No, usually we refer to Article 575: for RRE, the revaluation must be done every 3 years, and for CRE, annually. |
| c) Review of property values and revaluation • Has the regulator in your Member State laid down criteria which define “material decline relative to general market prices”? How are ESG-related considerations assessed as an indicator for a material decline? |
NO, for ESG please refer to 1.5 |
| c) Review of property values and revaluation • Please provide a description of how ‘reviews’ are carried out in your Member State, e.g. by a new full-size valuation report, a desk-top valuation, a valuation certificate, a plausibility assessment or alike. What criteria are used to determine how the reviews are to be carried out? |
“According to the National Valuation Act, there is only a description of initial valuation or post-control revaluation, which must be prepared individually with an on-site inspection. In the banking sector, some revaluations cloud be desktop-based, relying on market analysis without on-site inspection, and applied only for clients in Stage 1.” |
| c) Review of property values and revaluation • For the calculation of average values in accordance with Article 229 (1)(e) CRR in the context of upward revisions of values, are there any guidelines from regulators or lenders addressing the data points to be used and the comparability of properties? Please indicate whether there are requirements from regulators or lenders for ‘sufficient data’ and ‘unequivocal increases of value’. |
No, there are no such guidelines. |
IV. VALUATION OF THE COVER POOL
| a) Are valuation rules for cover assets provided at national level in accordance with Article 6(5a) CBD? Are they provided by national covered bond legislation or by professional guidance/standards? | No |
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| b) What valuation bases apply for the valuation of cover assets (Market Value, Mortgage Lending Value)? | |
| c) In the case of Market Value valuations, are there any prudential or longer term/sustainable features of the property to be considered? If yes, to what extend? | |
| d) How is the requirement that the valuation shall be carried out by a valuer who possesses the necessary qualifications, ability and experience transposed in your Member State (Article 6(5b) CBD)? Are there specific qualification requirements for valuers? | |
| e) How is the requirement that the valuer shall be independent from the credit decision process transposed in your Member State (Article 6(5c) CBD)? | |
| f) Are there differences in valuation rules and/or qualification requirements with regard to the property type (residential vs. commercial properties) or to the loan amount? | |
| g) Are there specific monitoring, review and revaluation requirements for cover pool assets at national level (see Article 129(3) CRR referring to Article 208 CRR)? | |
| h) Do regulators of your Member State provide a waiver from the limitation of calculating average values for cover assets in case of upward revision of values (Article 129(3) second subpar. CRR)? |
V. OTHER
REGULATORY HARMONISATION AND NATIONAL DIVERGENCES
| 1. What challenges does your Member State face in harmonising with EU regulations (e.g. legal, technical, market-related)? | Legal and Market related |
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DATA QUALITY, TRANSPARENCY AND COMPARABILITY
| a) What data sources are typically used by valuers in your Member State, and to what extent do they comply with Article 208(3a) of the CRR? | Usually, asking prices with specific adjustments and actual transaction prices, where such information is available. |
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| b) What measures have been taken to improve transparency and comparability of valuation data within your Member State? | N/A |
| c) Is there a central database or platform for sharing valuation data in your Member State? | NO |
EDUCATION, TALENT PIPELINE AND PROFESSIONAL DEVELOPMENT
| a) What training programs or continuing education opportunities are available for property valuers in your Member State? | According to the National Valuation Act, each valuer must complete CPD—5 hours annually for each specialty. These CPDs are monitored by the Ethics Committee and are mandatory data in the annual report to CIAB. |
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| b) Is there collaboration between universities, professional bodies, and regulators to ensure a sustainable pipeline of qualified valuers? | Yes, CIAB has agreements with all major universities. |
| c) How does the EU regulatory environment influence the development and attractiveness of the valuation profession? | CIAB is recognized as an AMA organization and holds membership in TEGOVA. |
FUTURE TECHNOLOGICAL AND REGULATORY DIRECTIONS
| 1. What technological developments are expected to impact valuation processes in your Member State over the next five years? | AI and AVM |
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