What is a market appraisal?

What the rules require

Rule 10.2 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 says an appraisal of land or a business must be provided in writing to a client by a licensee, must realistically reflect current market conditions, and must be supported by comparable information on sales of similar land in similar locations.

Three things follow from that. It has to be written down, not said at the kitchen table. It has to reflect the market as it is now, not as it was or as anyone would like it to be. And it has to be supported by sales evidence you can see.

Rule 10.3 deals with the harder cases. Where there is no directly comparable or semi comparable sales data, the licensee must explain that to you in writing. A lifestyle block with no neighbours like it, or a house with an unusual title, can fall into this.

What is in one

• The sales the estimate rests on, with the address, the sale date and enough detail to see why each one is comparable.
• How your property differs from those sales, and which way each difference pushes.
• An estimate, usually expressed as a range rather than a single figure.
• Where comparable evidence is thin, a written explanation of that.

What an appraisal is not

It is not a registered valuation. A valuation of land for members of the public can only be produced by a registered and certified public valuer under the Valuers Act 1948. The Real Estate Authority warns that very few licensees are also registered valuers, and that licensees must be careful not to use the word valuation incorrectly.

It is also not a promise. No one can commit in advance to what a buyer will pay. The appraisal is evidence and judgement about a likely outcome.

How to read the one you are given

Read the sales, not the headline number. Check that they are recent, close by, and genuinely like your house. If one appraisal sits well above the others you have had, look at which sales are carrying the difference and how recent they are.

Ask which sales are pulling the estimate up and which are pulling it down, and what would have to be true on the day for the top of the range to be reached. An appraisal you can follow from the sales through to the number is doing its job.