INDUSTRY
Nadine Thomas, Head of Engagement, Insights and Education, REA
Appraisals and advertising: LICENSEE’S OBLIGATIONS TO REFLECT CURRENT MARKET CONDITIONS
A rigorous and factual market appraisal is critical to ensuring buyers and sellers can confidently engage in fair real estate transactions. The Code of Conduct and REA’s Continuing Professional Development (CPD) training material give licensees clear guidance on how to make an accurate appraisal. This guidance also reinforces the need to accurately reflect a vendor’s pricing expectations in the advertised price.
Assessing the current market value of a property is a critical first step for licensees before they sign an Agency Agreement with a vendor. The appraisal needs to reflect the standard of the individual property and the latest comparable sales data. The Code of Conduct sets out the expectations of a realistic market appraisal.
Rule 10.2 – Appraisals and pricing 10.2 An appraisal of land or a business must— (a) Be provided in writing to a client by a licensee; and (b) R ealistically reflect current market conditions; and (c) B e supported by comparable information on sales of similar land in similar locations or businesses. REA’s CPD training material reinforces what this rule means in practice: • Appraisals must be rigorous and factual
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The Real Estate Institute of New Zealand
• L icensees must seek to avoid the risk of over-representing or under-representing the potential market value of land or a business • T he obligation to provide factual market information (comparable properties and sales figures) aims to manage this risk. This guidance reflects how important appraisals are in ensuring people can confidently engage in fair real estate transactions. The Real Estate Agent Disputes Tribunal (READT) emphasised the need for realistic appraisals in a 2015 decision (Decision #). The Tribunal found that the code “... required the licensee to provide the vendor in writing with the licensee’s assessment of the value and quality of the property to be marketed from the realistic experience of the licensee as to the relevant market conditions based on relevant sales information for similar property.” REA has seen an increase in licensees providing an ‘initial appraisal’ or price guide
