Real Estate Agent Written Assessments – It’s Law !
The Real Estate Agents Act 2008 provides a minimum requirement of a Licensed Real Estate Salesperson to complete a written current market assessment for prospective Vendors who maybe considering selling their home or investment property.
This is a change from the past, whereby agents of old would often walk through a home without taking detailed notes and providing a best ‘guesstimate’ of their opinion of market value based on their local experience.
In this modern age, with excellent databases and information recording property sales and statistics, there is absolutely NO excuse for a qualified real estate agent not to provide a comprehensive written assessment as an expert in their field.
We are still amazed that when interviewing prospective Vendors we find out that other agents have done the “walk-through”, with no backup report. This is clearly breaking the law under our Act and is totally unprofessional, however it still occurs.
Chris Gemmell – AREINZ & Registered Valuer/Award Winning Agent
A distinct point of difference
Being comprehensively trained and qualified as a Registered Valuer (non-practising as a Licensed Real Estate Agent), this a very unique skill set, provided Chris with the ability to assist Sellers in accurately analysing market sales, statistics and value of their homes and investments. This is combined with the hands-on experience of witnessing and working through 3 x complete real estate cycles over the last 30 years.
Experience and a proven sales record is invaluable when advising prospective Vendors as to the right marketing channels to use (depending on the market conditions prevailing at the time) and to enable informed decisions to be made by reading a thorough and comprehensive written assessment of value report.
How Are Values Assessed ? What’s the Methodology ?
Capital Value Method
At Lochores, we utilise data from 3 x nationwide databases, namely RP-Data; Property Smart; and the Real Estate Institute N.Z. monthly statistics. In addition to this data, Chris also takes the time to research recent sales of properties that may have SOLD in the immediate street or neighbourhood to complete the picture, having been sold by Lochore’s or other agencies.
With the market values researched, each property is then carefully compared in terms of their vitals, such as dwelling size, section size, overall condition for age & extent of renovating, development history, aspect, strength of location, views etc. and quality of materials used in construction.
There are a number of factors that need to be compared, as each property is individual.
Once sales are analysed, values sometimes need to be “indexed” to account for market movement upwards or downwards, depending when the sale occurred.
Replacement Cost Summation Method
Most real estate agents are not trained to complete a useful ‘cross check’ by utilising the replacement cost method. Registered Valuers are trained to complete such analyses, starting by valuing the property from the land up.
Apportionment of values are assessed for the land value component which the dwelling or investment property sits upon. This is researched by analysing vacant residential section sales in the immediate and wider area.
The value of improvements is then added to the land value. Valuers measure the home to gain an accurate guide on the size of the dwelling in square meterage. Accepted building industry rates for construction are then applied to calculate what the dwelling would cost to replace by a qualified builder under acceptable industry standard construction methods. Depending on the age of the dwelling depreciation or obsolescence factor percentages are then applied as the dwelling may not be new. Other improvements also need to be added to the mix, include swimming pools, outdoor decking, detached carports or garages, studios, fencing, paving, landscaping etc. Chattels are those items that can be removed from the property and definition comes back to the degree of fixation. Normal chattel items may include carpets, light fittings, drapes, curtains, appliances, automatic garage doors, heat pumps etc. These totals need to be adjusted to what a prudent purchaser would be prepared to pay for them as an “added value”. This sometime may not equal cost if an owner has “over-capitalised”.
So the Equation....
This method is excellent in creating a ‘cross check’ of value as compared to the capital value method above. The summation method is really a ‘mathematical’ value and in providing our market assessments, we often create a value range which also accounts for the ‘emotional value’.
An emotional value is where a higher level of value can be gained through competition and strong negotiation by an experience real estate agent. Creating competition can be heated bidding at an on-site Auction, or alternatively under a multiple-offer situation, whereby there may be more than one buyer submitting an offer at the same time. Negotiation is an art.
Our Value Assessment Reports
Prospective Vendors receive a 9-10 page Assessment Value Report, which includes an easily read and understood update of current market conditions & trends; key presentation tips to maximise saleability & value; the right marketing method recommended and channels to generate a larger buyer pool & competition; analysis of sales, plus details of competing properties on the market; plus the all important assessment of value under both the capital value and replacement cost summation methods above.
There is also an allowance for an “upswing range or premium value” that could potentially be paid as buyer emotions run strong under competition.
The Bottom Line
In a changing market, the choice of real estate agent by a prospective Vendor, is one of the most important determinants as to the end sales value they achieve.
After all, this is often a Sellers PRIME ASSET and a result of a life-times hard work and savings!
A responsibility not to be taken lightly, demanding careful skill, experience and focus.
Essential traits of the right real estate agent to choose.
WRITTEN BY CHRIS GEMMELL