Real Estate Concepts
eBook - ePub

Real Estate Concepts

A Handbook

Ernie Jowsey, Ernie Jowsey

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eBook - ePub

Real Estate Concepts

A Handbook

Ernie Jowsey, Ernie Jowsey

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About This Book

The essential reference tool for all real estate, property, planning and construction students.

Real Estate Concepts provides built environment students with an easy to use guide to the essential concepts they need to understand in order to succeed in their university courses and future professional careers. Key concepts are arranged, defined and explained by experts in the field to provide the student with a quick and reliable reference throughout their university studies. The subjects are conveniently divided to reflect the key modules studied in most property, real estate, planning and construction courses.

Subject areas covered include:

  • Planning


  • Building surveying


  • Valuation


  • Law


  • Economics, investment and finance


  • Quantity surveying


  • Construction and regeneration


  • Sustainability


  • Property management


Over the 18 alphabetically arranged subject specific chapters, the expert contributors explain and illustrate more than 250 fully cross-referenced concepts. The book is packed full of relevant examples and illustrations and after each concept further reading is suggested to encourage a deeper understanding. This book is an ideal reference when writing essays, assignments and revising for exams.

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Information

Publisher
Routledge
Year
2014
ISBN
9781135084424
Subtopic
Finanzas
Edition
1
1 Agency
Andy Dunhill, Jane Stonehouse and Rachel Williams
1.1 The inspection
Key terms: inspection; valuing; marketing; measure; confidentiality
It is crucial that agents inspect a property before valuing it or advising on marketing and they must understand what they have looked at. Make sure you take everything with you to carry out the inspection (e.g. a measuring device, camera, location plan, floor plans if available, appropriate clothes, and keys). When inspecting property always take care (see Concept 1.22).
The following is a suggested general checklist for inspecting property for marketing purposes:
ā€¢ Address ā€“ be exact
ā€¢ Date and time of inspection for future reference
ā€¢ Weather
ā€¢ Location
ā€¢ Surrounding area
ā€¢ Access by vehicles/pedestrians/public transport etc.
ā€¢ Check architects floor plans if available
ā€¢ Draw sketch plan if you do not have one
ā€¢ Measure to RICS Code of Measuring Practice or appropriate local standard
ā€¢ Exterior of the building ā€“ form of construction etc.
ā€¢ Interior of the building ā€“ entrance, common areas, specification etc.
ā€¢ Repair ā€“ general state
ā€¢ Contamination ā€“ be aware of this and know when to involve an expert
ā€¢ Services ā€“ what is available (gas, electricity etc.)
ā€¢ User ā€“ what is it or could it be used for
ā€¢ Town and Country Planning ā€“ what use is permitted or what could be obtained
All of this information will help you to advise your client on the best marketing strategy, enable you to prepare accurate letting or sales details and all other marketing information. If you make an error in your inspection this will flow through the whole marketing process and result in an error in the final transaction. Most organisations have a standard format for taking inspections notes depending on the type of property. The main thing is to adopt a logical and consistent approach to property inspections.
You will need to consider different factors depending on the type of building being inspected. The main categories are office, retail, industrial and residential; however, you may have cause to be involved with others, such as leisure (pubs, bars, restaurants), medical (hospitals, doctors surgeries), etc.
Before the visit make sure you know where you are going ā€“ which sounds simple and obvious but many surveyors have set off ill prepared. Establish whether the property is vacant or occupied. If it is vacant take the usual safety precautions and lock up afterwards. If it is occupied be clear as to why a report on marketing is required. There is nothing worse than going to a property, introducing yourself and explaining the reason for the visit only to find that the people on the ground know nothing about the plans of the owners of the business. It is OK if a relocation is planned but if that part of the business is to close the reception may be hostile. Confidentiality is crucial.
If acting for a receiver/liquidator, special care must be taken, especially where the business has not publicly gone into administration, or whatever is proposed, at the time of inspection. An agent may have to pretend to be there for a different purpose such as fire insurance valuation. There is little more sobering than to carry out an inspection of a property with a full workforce when you know they will most likely be redundant in the very near future, but they do not know.
Research the local market before the visit to see what deals have been done recently and what is currently on the market. An agent should have a reasonable idea of the market for that kind of property in that location because the occupying client will have ā€“ or at least in some cases think they have.
Be certain of exactly what is to be included in the marketing report (boundaries, parking etc.) and the tenure of the property. Drive around the area to get an up-to-date feel for it.
Even if architectsā€™ floor plans have been provided check them carefully. Buildings are often altered during their life. Plans are often for the original design, which may have changed during construction but ā€˜as built plansā€™ were never done or not made available.
It is not always possible to inspect all parts or aspects of a building. Some internal areas may be locked or otherwise inaccessible; make a note of this and refer to it in the report. If a building has had the water drained down for winter to avoid burst pipes that is sensible, but means it is not possible to check whether the supply is working. A property inspection for marketing purposes is not a structural building survey; however, it is crucial that an agent understands when to recommend that a detailed survey is needed.
An agent needs to take note of what repairs or other action should be done in order to best prepare the building for marketing. Sometimes simple and inexpensive redecoration can make a significant improvement and on the basis that first impressions count; a small level of investment can make a big difference.
Be very much aware of potential for alternative use to increase value; however, consider whether planning consent, if required, can realistically be obtained. Sometimes the interest of the owner is best served by splitting the property into two or more separate packages to be sold or let separately, and this should be spotted during the inspection.
Further reading
RICS (2011) UK Commercial Real Estate Agency Standards, RICS, Coventry, section 3.3.
www.isurv.com (accessed 02/12/2013).
www.rics.org/uk (accessed 02/12/2013).
1.2 Reporting to the client
Key terms: report; client; market; valuation; marketing plan; Energy Performance Certificate
The following is a suggested format of the main areas to be covered when reporting to a client. Most firms will have their own standard format to follow.
Introduction
Set out clearly what you understand your instructions are and the clientā€™s objectives in the marketing of the property concerned. This is to avoid future confusion or dispute. There will be occasions where your client needs to sell or let quickly. A common example is where a company goes bankrupt and you are instructed by the administrators/receivers to dispose of the surplus property assets/liabilities of the company.
Description
Describe the building and detail the areas. The amount of detail required will depend to some extent on the nature of the client you are reporting to. Some will want full details, others less so. You may be reporting to a client that either has never seen the property or has not done so for some time and is located a long way from the property.
If what you are looking at is part of a multi-occupied building you should make it clear what is and is not included in your clientā€™s interest, and hence your report. You should identify, for example, location, the form of construction, specification, areas in need of repair etc. This should be supplemented by a suitable location plan and photos where appropriate.
Strengths and weaknesses
Identify the strengths of the building that you will be able to focus on in your marketing. You should also identify the weaknesses but try to suggest appropriate solutions. For example, a lack of car parking in a city centre office building can be helped by acquiring some long term contract spaces in a nearby public car park, but you need to do some research. A client does not simply want to be told that they have a poor building. You need to be proactive, focus on the strengths and provide constructive solutions for the weaknesses. You will certainly need this when responding to enquiries about the property during marketing.
Recommendations
Following your appraisal of the building you may consider it appropriate to make some recommendations before marketing commences. This may include undertaking repairs to make it ready for occupation. Some simple but effective cleaning and decoration can have a significant effect especially with residential and office property. The first impressions of tenants/buyers can be crucial.
In some cases it may be worth considering obtaining planning consent for a different use or the carrying out of alterations in order to maximise value. If you are dealing with secondary property you may wish to consider recommending that your client uses one of the standard short form leases. The Law Society has one, as does the Royal Institution of Chartered Surveyors (RICS). Check their respective websites for the latest version. These should keep costs down for all concerned.
The market generally
You should be able to give a good indication of the strength, or otherwise, of the market for that type of property in that location at that point in time and where you see it heading during the marketing period. This will influence the potential time needed to secure a transaction, the strategy to be adopted, the likely terms of any deal etc. If the market is improving time is on your side and you should be able to generate a high level of interest and negotiate a good deal for your client. If, however, the market is in decline you need to be realistic and ensure that your client appreciates this. If you ask too high a price/rent you may miss the market and end up following it down, but never quite reaching a low enough level to do a deal.
Valuation ā€“ rent or capital
You must give a very clear recommendation of an appropriate asking price/rent/premium in the case of a leasehold interest allowing for a negotiating margin. In most cases buyers/tenants like to feel they got a reduction or negotiated you down. There are times when quoting an asking price/rent at a relatively low level (but not in a misleading way) can be a very effective tactic. The aim is to generate a high level of interest and then seek best offers. This is likely to work with a property where you anticipate a high level of interest, and sometimes where the market is uncertain and it is difficult to value. It can also work in a slow market where the low starting price suggests a good deal can be had. This tactic can generate the interest, which is key. Any valuation recommendations must be realistic and not inflated as a tactic to secure an instruction.
Marketing plan
It is good practice to provide full details and costs of your marketing plan at the reporting stage. If, however, you are not certain to receive the instruction then it may be more appropriate to be brief and provide full details later. It is not always sensible to give away all your ideas until you have got the job. This will include your strategy, advertising proposals, draft marketing particulars etc. All of this must be agreed with your client before marketing commences.
Energy Performance Certificate
You must explain the legal requirement to obtain one of these before an agent is permitted to market a property. It is the responsibility of the landlord/client to obtain the Energy Performance Certificate (EPC), but most agents will have contacts with suitable assessors to do the work.
Fees
You should set these out clearly. Fees may be:
ā€¢ a fixed sum;
ā€¢ a percentage of the rent/price;
ā€¢ a minimum fee;
ā€¢ incentive-based to encourage the agent to secure a higher rent/price, i.e. the percentage may increase above a certain level.
Other costs
Depending on the marketing plan there are normally other costs that an agent will wish to incur and which they will intend to charge to the client on top of their fee for negotiating the transaction. Such costs may be advertising in magazines, boards etc. If any such costs are to be incurred by the agent and then recharged to the client, it is a legal requirement in the UK for the agent to obtain approval first, and it is good practice to set out these costs fully in adva...

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