Market Appraisal Flashcards
What is a market appraisal?
An appraisal of the likely price parameters at which a client may market a property interest.
They consider issues such as timing, marketing approach and the market conditions.
They often incorporate an element of hope value and forecasting.
They are not Red Book valuations.
What is the difference between a Red Book valuation and a market
appraisal?
Market Appraisal:
- informal (undertaken by anyone)
- indication of achievable price
- assessment of local market, transactions and marketing plan
- hope value/forecasting
- no fee
Valuation:
- formal (qualified surveyor)
- Market value
- reliance to client
- PII cover
- fee
Which appraisal technique/method for a standing asset vs a site?
Comparable method for standing asset, residual appraisal for site.
Why is a market appraisal not a formal valuation?
Because it wouldn’t fulfill the criteria of a Red Book valuation and no reliance would be extended.
What is the key RICS guidance?
Professional Statement: UK Residential Real Estate Agency 2017 (Blue Book)
Outline the key points of the Professional Statement: UK Residential Real Estate Agency 2017 (Blue Book) relating to market appraisal
- Competence
- Staying up-to-date with legislation and market conditions.
- Reasonable skill and care, using relevant and accurate evidence.
- Maintain accurate records and comply with data protection laws.
Which part of the Red Book excludes market appraisals?
Red Book Global - PS1 - Compliance with standards where a written valuation is provided
How can market conditions affect property prices?
- Rising or falling market
- Sub-markets - varying resiliency to price changes
- Long-term supply and demand
Why are market appraisals important for the client’s financial planning?
Understand likely achievable price should they sell/let.
Enables planning investments, asset management, financing and risk management.
How is comparable evidence adjusted for property characteristics?
Adjustments are made based on identified differences with the subject property.
Various data sources, including local market data, property portals, sales records and professional knowledge to determine adjustments, based on what prospective tenants/purchasers will pay for different characteristics.
Outline the key points of the Professional Statement: UK Residential Real Estate Agency 2017 (Blue Book)
Advice on:
- securing instructions
- conflicts of interest
- client money protection
- financial crime controls
- ending instructions
Mandatory when advising on buying/selling freehold/long leasehold residential properties.
What are some key points from the Blue Book?
- Act in client’s best interest.
- Avoid conflicts of interest, client money protection, and AML responsibilities.
- Clear and transparent agreements.
- Truthful and accurate advertising and promotion. Estate Agents Act 1979 compliance.
- Disclosure of material information to potential buyers/tenants.
- Put offers forward promptly.
- Disclosure of financial incentives.
- Lettings guidelines - tenancy agreements, referencing procedures, deposit protection, and landlord and tenant obligations.
Limitations of market appraisals?
- Not Red Book valuation - less rigorous / accurate
- No PII so no reliance
Why are market appraisals carried out?
- Wanting to sell a property because of DD (debt or divorce)
- Death (probate)
- Indication of value (assess financial position)
- Assess whether to move or improve
What is your duty of care as a real estate agent?
- Exercise skill, care and diligence
- Best endeavors to achieve the best outcome for client
- Maintain confidentiality
- Not appoint a sub agent without permission
- Ensure staff are trained and supervised
- Act within experience/competence
