Market Appraisal Flashcards
Explain how you prepared a market appraisal report from beginning to end.
I am responsible for the preparation of client reports on all units / developments that I sell.
Example : Opera Lane Strategy documents with market commentary
Inspection
I inspected the apartment internally and externally (as they became vacant). I took detailed room descriptions. I noted key information, i.e., type of flooring, lighting, heating, fireplaces, phone/TV points, alarm panels, intercom units, appliances, and any special features. I measured the properties and compared against architect drawings.
Desktop research on market conditions
I researched comparable sales, provided a price review of what else is available on the market at each price point, and compared against our key comparable scheme.
I researched recent marketplace reports including Daft Report, MyHome report, Sherry Fitz market outlook, Lisney Reports. I reviewed the SCSI newsletters to assess if any of the recent newpaper articles were relevant and to include.
I prepared the market appraisal report which outlined the recommended selling price in writing to the client, along with the AMV (required by PSRA). The market appraisal also included a marketing strategy, estimated completion timeframe and current market conditions. I asked my colleagues to review as a fresh set of eyes. I issued this to the client.
How have you demonstrated your knowledge and understanding of the purposes for which market appraisals are undertaken?
When a person/ entity wants to sell their property, they enlist the help of a suitably qualified estate agent to prepare a market appraisal on the property, which will provide a recommendation on the property’s worth. The agent that prepares the market appraisal is expected to have locak knowledge, on the ground customer sentiment, know the target buyers and best method of sale.
What is a market appraisal?
A market appraisal is a professional judgement on the selling price or rent based on local knowledge, and it is not a formal valuation. It is important to make this clear to the client. Not only will the agent look at all of the sales in the area, not just their own, but they’ll provide a unique insight into the local market.
What relevant appraisal methods and techniques have you used?
Desktop appraisal
Full market appraisal which includes an inspection (most common)
Ongoing market appraisal for large schemes
New build development market appraisal to win instruction/ influence pricing
What are the appropriate standards and guidance you must adhere to in appraisal work?
Property Services (Regulation) Authority 2011
SCSI Real Estate Agency Practical Manual (2013).
RICS Real Estate Agency (Blue Book) Its for the UK, but principles are the same.
RICS Real Estate Agency and Brokerage Standards (REABS). REABS is a RICS guidance note and has been produced to ensure that estate agency standards are consistent with internationally recognised standards and ethics.
What are the limitations of market appraisal advice?
Market appraisals are not as in-depth as valuations.
An estate agent may inflate the price to win the business, important to be prudent.
Market conditions can change so the market appraisal is time sensitive.
Valuations are expected to be more accurate, as agents may have differing opinions on the local market.
Explain the principles and application of open market appraisal for sale purposes, including relevant appraisal standards, methods and techniques.
Given the associated time and costs, a full valuation is not the approach most sellers will want their estate agent to take when advising them of the price and marketing tactics that should be employed to sell their home for the best price.
For these reasons ,I may not provide clients with formal valuations. Instead, as marketers, I provide a free market appraisal service that incorporates recommendations on asking price and marketing strategies. I take into consideration the sellers’ individual requirements, our expectations of the market going forward, and known interest in the particular property and/or location.
I recommend what actions the seller can take to attract buyers and achieve the best sale price. This can include de-cluttering, gardening and redecoration. I am not qualified to comment on the structural condition and recommend specialist advice is taken where a concern of this nature is identified.
To achieve the best price and terms for our clients, there are many strategies that can be employed – for example, ask a very competitive price to generate a queue. This can lead to a competitive situation where what is paid has little resemblance to a Registered Valuer’s opinion of value. Alternatively, we can ask a full price and be prepared to consider negotiating if the marketing strategy demonstrates that the asking price cannot be achieved within an acceptable timeframe.
Explain your understanding of client requirements in the market appraisal process.
Not only do clients require the usual aspects of a market appraisal, ie:
- Price expectations/ AMV.
- Method of sale
- Speed of sale
- Target buyers
- Fees
- Joint agency/ sole agency
But clients often also want to use the market appraisal meeting to discuss:
- how the sales process works
- how to get the property ready
- ascertain the personality and characteristics of the estate agent
How does market appraisal / valuation / pricing differ?
A market appraisal is where an agent values your property for sale purposes and provides a possible guide price. It also provides the perfect opportunity for an agent to get to know you and your property.
A valuation is more formal than a market appraisal and is done by a professional surveyor, there is usually a charge for this service, and you can request to use the document towards a legal proceeding such as probate or a divorce settlement.
Price is the amount of money a seller is asking for a property.
Importantly, while the professional valuer’s figure is unbiased, the agent’s figure is generally indicative of interest in the suburb and it may even be influenced by conversations the agent has had with potential buyers in the area.
How have you demonstrated practical competence in undertaking both sale and rental market appraisals.
Any sales rental figure that I provide is:
1) realistic and justifiable
2) based on my best professional judgment.
3) given in good faith
4) reflects current market conditions.
5) supported with comparables.
6) given with a thorough knowledge of the market.
7) clearly pointed out as an estimate.
I can arrange a formal valuation on the client’s behalf if further detail is required.
Explain your involvement with the presentation of client reports.
I am responsible for the preparation of the market appraisal reports. It is essential that the report is proof read, infographics look well, text is justified, report has a good flow and reads well. We have a template market appraisal document for second hand properties, but we do not for the two key schemes OL & LG. I often ask my colleagues to review market appraisal reports before issuing to clients to ensure a fresh pair of eyes have looked over it.
Explain your analysis and interpretation of comparable evidence.
Firstly, the agent needs to search for comparable evidence. They will need to record comprehensive details.
Collate evidence in a schedule or matrix
Adopt a common measurement or comparison standard
Adjust quantitatively and qualitatively using the hierarchy of evidence and other key considerations (including the valuer’s own knowledge and experience)
Analyse to form opinion of value
Stand back and look to sense check the final valuation figure
Report their opinion to the client
How have you explained the terms of a lease & leasehold and their impact on value?
Lease
No upward rent reviews for 5 years would negatively affect value.
Leasehold
Any leasehold of less than 70 years can start to significantly affect the value of the house when compared to a like property with a longer lease. If you have too short a lease, the property can decline in value even if property prices in your area are generally rising. The length of the leasehold in LG is 775 years & MVG is 999 years so this does not affect the value negatively.
How have you inspected as part of an appraisal?
1) TOE is not required for MA.
2) I inspected the apartment internally and externally (including garden), and I took detailed room descriptions. I noted key information, i.e., type of flooring, lighting, heating, fireplaces, phone/TV points, alarm panels, intercom units, appliances, and any special features.
3) I measured the property.
4) At a market appraisal appointment, I bring a marketing menu, list of recent sales for the branch, for sale listings, photography slip, BER slip and how to prepare your property for the market document. I asked the client questions about potential legal issues that could impact on the market appraisal.
5) I advised the vendor that the market conditions were particularly good and that her property would attract a variety of buyer profiles. We discussed fees and how to prepare the property for sale.
6) Once back at the office, I researched comparable sales and prepared the market appraisal report. I issued this to the client. The report outlined the recommended selling price in writing to the client, along with the AMV (required by PSRA). The market appraisal also included a marketing strategy, estimated completion timeframe and current market conditions.
How have you gathered information relevant to market appraisal?
Keeping up to date with market trends by reading Daft/ My Home Reports, Newspaper, SCSI newsletters.
Analysing supply in the area based off number of units available for sale and seller sentiment.
Analysing demand in the area based off selling prices achieved in comparison the asking prices,time on the market, buyer sentiment.
Collecting comparables from price register and local agents.
How have you prepared terms and conditions of engagement?
PSA Letter: • Parties • License • Nature – sole or joint • Services provided • Duration • Termination • Effect of termination • AMV • Fee • Outlays • Deposit • AML • Indemnity • PII • Complaints handling procedure • Conflict of interest declaration • Additional Terms of Business
Swords – explain how you provided a market appraisal.
This is a new homes development of medium density 2,3- and 4-bedroom houses on the outskirts of Swords. In preparation for a pitch to win this instruction, I inspected the individual unit plans, layout and garden sizes. I reviewed the development plan and took note of outdoor spaces and facilities, i.e., a multi- use sports pitch, commercial centre and creche were being built on site. I prepared an analysis on market trends, recent sales in the area and comparable schemes, assisted on a marketing strategy and prepared a pricing schedule which was reviewed by senior management and submitted to the client. I attended the pitch presentation with two colleagues, answered queries raised by the client and we won the instruction.
Swords - What informed your advice on the market, pricing and marketing?
Market: High demand from FTB’s & trade up in the area, not many trade down or investors. Majority local demand, and also buyers that are priced out of the city centre area.
Pricing: HTB incentive is very popular amongst potential purchasers, market demand for houses within the HTB price limit of 500k. Lots of comparables available in the area. Particularly new builds.
Marketing: Daft & MyHome Premium adverts, digital marketing, Swords Express bus and bus stops.
Swords - Did you win the new work – why do you think you did?
Yes we did win the instruction.
We provided a very high standard of service as we spent a significant amount of time researching the market. We dedicated an experienced team to preparing market appraisal reports. I inspected the individual unit plans, layout and garden sizes. I reviewed the development plan and took note of outdoor spaces and facilities, i.e., a multi- use sports pitch, commercial centre and creche were being built on site. I prepared an analysis on market trends, recent sales in the area and comparable schemes, assisted on a marketing strategy and prepared a pricing schedule which was submitted to the client.
How have you prepared client reports based on interpretation of locational market trends?
I am required to provide a market analysis and related price review on all units in Lancaster Gate and Opera Lane developments for the client on a quarterly basis. This market analysis focuses on Ireland, Cork city and specifically the apartment market in comparison to the housing market. The funders are based in the UK and read the Irish newspaper headlines about shortage of supply and the significant price increases across the country. By providing a comprehensive appraisal of the marketplace, the funders are able to make informed decisions.
House market: SUBURBAN LOCATIONAL TRENDS
The Housing Market can be divided into 2 sectors.
1) Semi-Detached/Terraced affordable housing and 2) Large luxury houses
The area achieving all the headlines within the residential property market today is mainly attributed to the affordable 1st time buyer house types. This demand is mainly focused on houses priced between €250-400,000. In all markets outside of Dublin, prices have increased in the affordable housing sector by over 14% year-on-year.
Apartment market: CITY CENTRE LOCATIONAL TRENDS
Presently supply of the new apartment market in Ireland is high end luxury units, which are out of most purchases reach. Traditionally apartments in Ireland were purchased by small private landlords as “buy- to-let investments”, however, in recent times there has been a mass exodus of these investors due to: Legislation has become complex and changing/ Taxation / Rent controls implemented by Government (rent pressure zones)/ Slow dispute resolution process by RTB.
As a result, within the last 2 years 93% of new build apartments purchased were by PRS. PRS institutional investors are still active within the apartment market and according to Sherry Fitz 2021 PRS report, €340million was transacted in the first quarter of 2021. The concern within this area presently is our government interference in the marketplace and instead of planning a long-term strategy, they are reacting to situations in a’ knee-jerk’ fashion.
How have you explained your knowledge of investment proposals in a site’s location?
Location
What infrastructure is in the area, local schools, community centres, whether the site is in a SDZ/ zoned for residential units, planning considerations, Environmental assessment. Local employment and job opportunities.
Site
Identify what property types (apartments, susburban houses), density, size, style.
Investment potential
Cost of build, rents achievable, PRS potential? high demand area? local competition?
Explain your price reviews on one of the schemes you mention.
Westmill
1) The developer advises that we can release a new phase of units in the development.
2) Please prepare market appraisal and pricing on the new units and provide the GDV.
3) Collate the list of units and their attributes, i.e. house types, total area, orientation, garden dimensions and any other detail that would influence the value e.g. overlooking green space.
Considerations
4) Review the previous phase pricing and consider if the market has improved or retracted in that time period.
5) Review the demand for housing – level of enquiries, whether there is a cancellation list waiting for these units, economic outlook.
6) Review comparable properties in the area and their values.
7) Is this a final phase, where you may be able to push prices a little? If you push prices in the middle of a scheme and get it wrong it can be difficult to pull the prices back in the next phase.
8) Consider the developers requirements & preferred sales velocity i.e. do they want a quick sell with high numbers sale agreed in a short time period or would they prefer slower sales at a higher price point.
9) Consult with colleagues for their input and recent experience with launch day sales and price points.
10) Value each unit either on an individual basis (if they have very different attributes) or else by house type with slight variations (if they are mostly the same product but with slight variations i.e. orientation).
11) After putting a price on all units, review the GDV and consider would this figure be in line with the developer’s goals?
12) Submit the pricing report to the developer and provide reasoned advice on why you came to this conclusion. Also include the pricing strategy if it had not been discussed at the outset.
How have you advised on the likely availability and conditionality of finance for the local market for both the construction period and for prospective future customers?
While working in sherry FitzGerald, there was a financial services side of the business that we referred all finance queries and leads towards.
In recent yeats, Irish mortgage rates have become far more competitive ranging from approx 2.1% to 3% which is extremely competitive. LTV for FTB’s is 90% and, 2nd time buyers 80%. The central bank will lend 3.5 times the combined income to the purchasing party. The above limitations in lending criteria have put a cap on the spending power of these purchasers. The central bank has undoubtedly protected the system, however the macroprudential rules have lacked agility and variation over the past 5 years. It is hoped that the macroprudential rules will loosen over the coming years.
How have you advised on the application of suitable statistical and mathematical techniques to identify long term market and financial trends in the locality of a site?
Artificial intelligence, big data, and data analysis are the technologies likely to have the biggest impact on the real estate industry in the long term. So, how exactly can we apply data science to real estate?
1) Property Price Indices (shows historical and current market trends)
2) Automated Valuation Models (harness data to produce an estimate of a property’s market value)
3) Time Series Forecasting (A number of analytics providers e.g., HouseCanary and Real Estate Foresight use data science methods to make predictions of future real estate performance. They use some of these statistical methods to forecast the path of GDP, inflation, interest rates.
