Q 1: Can we recommend an agent?
A: We always recommend our clients select their agent based on the few key points below.
Look for an agent which has sold properties in your street or area recently. You can find these by taking note of for sale signs in front of properties similar to yours which have sold within less than 3 months since going up.
This means the agent has achieved expectations by selling in a standard 3 month campaign. Ask them what they achieved to be sure it was a good price. These agents should also have names and numbers of those who missed out on the property who remain looking and now may be more motivated by missing out.
Select an agent who has been around or in the area for a while, this should ensure they have some experience and a reasonable list of prospective purchasers on file which are interested in the area, this shows that they can’t have had too many unhappy vendors.
Select an agent you are comfortable with, someone you feel will follow your opinion, views and instructions. You are the boss after all. Many dissatisfied vendors report to us that they felt like they could not say anything to their agent once the agreement was signed, and in some cases felt compelled to take and offer they did not want as they felt bullied into doing so and just wanted to end the bad relationship.
Remember a standard agency agreement is 3 months and no sale, no commission for the agent. Be aware that the last four weeks of the agreement will bring with it a degree of pressure.
Naturally we recommend a Pre-sale report, as $300 is a drop in the ocean to help avoid the above when considering the agents commission you will be paying. Let’s say on $1,000,000 @ 2.2% the commission equates to $22,000.
Q 2: What is the difference between an Agent and a valuer?
A: Agents are not (independent) valuers, they are commissioned based marketers working for your business. An agents opinion should be no higher than the highest possible price they believe they can realistically achieve for the subject property and their client.
Remember you are not paying an agent for their opinion, you are paying them for achieving the required result, yet unfortunately in some cases you end up paying them for not achieving it, a very different task from a valuation.
Should you be particularly pleased with an agents opinion ask them to put their highest possible price in writing and have it co-signed by the Principal or Licencee of the agency, this will offer you some increased level of peace of mind, but may have no impact on a valuers conclusion or view.
Q 3: Why do Agents and valuers opinions differ?
A: In almost every property transaction someone will pay above or someone will pay below what is considered fair market value, if economics where the sole reason for transactions, property would rarely exchange unless the assessment of fair market value was an exact science. Properties do exchange as the human factor exists with situations, along with the emotional factor both of which cause the large swings seen in above and below fair market value exchanges. Our duty as independent valuers is to attempt to minimise these swings, yet due to emotional and situational factors, properties will always exchange regardless of what is considered to be fair market value.
A valuers sole duty day to day is assessing property and providing a qualified independent outcome or figure with accuracy being the priority. A valuer has a fixed fee for their services, it is in the valuers best interest to provide the most accurate outcome possible, they have nothing to be gained by providing a very conservative or over inflated outcome.
Should a client be dissatisfied or believe another valuer may hold another opinion more inline with theirs, we always recommend they seek a further 2 independent valuations to address their concerns, many do this when selling via 3 or more agents opinions.
Upon selling, prospective sellers will often meet 3 or more agents to gauge a variety of views and opinions. A client had 3 agents, offering 3 differing opinions on his property, this drove him to further agent opinions, 7 in all, which resulted in ranges from $750,000 to $1,500,000. Remember opinions will always differ from person to person.
Q 4: Why was the figure lower/higher than I expected?
A: The assessment of market value is commonly established via evidence, this can be comparable sales evidence, rental evidence, yields, cost/summation etc, all of which need to be adjusted to the base date/valuation date. Furthermore as in most situations opinions will differ from person to person, the key variables in differing opinions in the assessment of property often comes down to the evidence/information at hand as at assessment date and the interpretation of this information. Once the evidence has been established and reviewed, adjustments are often made for market movement.
Most client opinions are based on something or should be, it might be a previous valuation, an Agents appraisal, a recent comparable sale or even a respected friend or acquaintances opinion. If the inspecting assessor has been forewarned of any pre established opinion and its basis, they can review the merit of the evidence upon inspection and make comment, where required, upon differing views and opinions.
It is important to note: A client has enlisted an independent valuer for an independent opinion only.
Q 5: We have recently spent more than $500,000 in additions and renovations, why has our total improvement value breakdown only come in at $300,000?
A: We use the breakdown of value in our Pro-forma reports (Short form) for equitable purposes only. This is to say a property may be considered land value only, yet we will use a depreciated breakdown value as to indicate a value, whether it be minimal or not. It is noted in cases people will purchase a property with a significant improvement value of $1,000,000 or more and yet proceed to demolish and start fresh. In this case it may be viewed the property was land value only and no improvement value was necessary.
Specific purpose reports such as our full form reports do not breakdown value as the emphasis is on the single figure for a specific purpose, unless specifically instructed. In other situations the improvements may be considered inadequate, over capitalised, or in limited supply and in turn a premium may or may not be paid, once again opinions will differ.
Other issues related to this question come down to cost/price. Price does not equal value. Home renovators often believe additions and renovation will increase their market value, unfortunately most of the time this is not the case when you factor in costs. Professionals, suppliers, tradesmen and even your close friends will rarely be the ones to tell you they think you are spending too much, you are most likely to hear the more favored lines like “The place looks great” or “Worst case scenario you should get your money back”.
DIY can be more costly than using a tradesman and renovations can cost more than double the price of a new home per square metre. The most appropriate renovations or additions for a particular property are often assessed by the state of the surrounding properties. It is true there is the perfect purchaser for every property, unfortunately the regularity of the perfect property being available at the perfect time for the perfect purchaser rarely meet. When and if they do, they are the exception, not the rule. A valuer must value to a time frame and that specific market, unless instructed otherwise.
If you are worried about the above, and that a future valuation may not share your view, which for various reasons cannot be settled by actually testing the market and selling the property, enlist the valuer prior to the work commencing to conduct an ‘on completion’ valuation.
Q 6: But the agent said?
A: Agents are not qualified valuers, a conflict of interest exists when it comes to expressing their opinion for any other purpose than the sale of property. The Office of State Revenue, the Australian Taxation Office, the Valuer General, the Courts along with Banks and Financial lenders will not accept an agents opinion, not just because they are not qualified, the odd agent might have been at some point, but as the purpose is a clear conflict.
When an agent is attempting to fulfill their duty by achieving for their vendor the highest possible price, they will often select sales evidence based on achieved price not market value or comparability, to help justify an asking price. In many cases without reviewing or disclosing all sales in between which may be more relevant. To the unsuspecting prospective purchaser an asking price might seem reasonable based on these carefully selected sales.
The above question is only asked by a motivated client with purpose being the main issue: The motivation being the valuation was too low or too high for their purpose and financial loss or gain, based on a pre conceived figure obtained from an agent. It is no surprise the question is never asked if the figure is above or below expectations dependent on the purpose of the valuation.
Pre-purchase reports are rarely questioned at all regardless of outcome for obvious reasons.
Pre-sale reports are only questioned when the figure is below that of expectations, to which we advise a client is not bound to sell the property at our outcome.
Stamp duty reports are only questioned when the figure is above expectations, as this will increase the duty payable.
Capital gains tax reports are only questioned when the figure is below expectations, as this will increase the capital gains tax payable.
Mortgage security reports are only questioned when the figure is below expectations, as this will reduce the amount a lender will lend on the property.
Land valuation objections are only questioned when the figure is above expectations, as this will increase the land tax payable.
Litigation, Family law etc reports are all only questioned when outcomes conflict with expectations either way.
All of the above have clients motivated by financial gain or improvements on one level or another, with expectations commonly gained through non impartial sources. A valuation is not a negotiation, as many clients experience with agents and the selling process.
As mentioned above it is not in our interest as valuers to displease or dissatisfy a client with our outcomes, as many regardless of the understanding of the process and our duty may never use us again, nor recommend us. We are very aware of this and aim to please and do all we can in providing our service to the best of our ability, catering for our clients needs along with remaining completely impartial and clinical in our final outcomes.
We do offer our buyers agent and parties advocate services and reports, however much like agents opinions, the views expressed in such services are not excepted by third parties such as those above as the conflict is clearly bias toward the client.
Q 7: Why should I indicate my opinion of market value?
A: This is a question often asked and rightly so. The question has been put more directly as if to ask, why if I am paying you to establish the market value should I be doing your job for you or risking my view impacting upon your outcome? When assessing a property, a key step is to review comparable sales evidence, these searches require search or entry questions, one of which is price range and radius.
A search of 2 bedroom units in the past 12 months in a highly unit populated area may produce over 200 irrelevant sales all of which can be briefly reviewed, but at a significant cost to the client with each sale taking say 10 minutes of assessment, equating to over 33 hours prior to leaving the office to inspect the property.
Furthermore the assessment of this many sales cannot help but be affected or produce an average figure for an area not assessing the true characteristics of the subject property as an individual and unless the property is the average, this will prove inaccurate for the purpose.
Having said this, it is not mandatory and some clients have absolutely no opinion to which we are happy to proceed regardless.
Note: The above hypothetical questions and answers are to viewed as a guide only with, each question and answer having regard to specific existing situational aspect which will always differ form individual situation to situation. | 
