Purpose

1) The purpose of this Guidance Notes are to provide a general reference to preparing real estate for sale and lease. It addresses the steps taken in preparing property for sale prior to the actual commencement of marketing proper. It covers the period of preparation of the physical state of the property for sale together with any required financial or technical information bought together in a marketing document prior to the placement of the property on the open market.

2) This Guidance Notes are applicable to credited estate agencies and any person associated with the accredited estate agencies (AA) involved with most forms of real estate. However, they should be aware of particularities which may apply to specialised property and other properties of a specialised nature but which are not necessarily addressed in these Guidance Notes.

Preparation of Property

3) This relates to aspects of both physical appearance and the gathering of information required to provide the market with an immediate description of the asset for sale. The information assimilated for the marketing material should be accurate and preferably, should be verified by the Vendor's written certification of its accuracy.

Physical Preparation of the Property

4) AAs shall at all times act in the best interests of the client and in accordance with the client’s instructions.

The physical condition or state of presentation of the property is generally speaking, very important in determining the highest possible price. A positive first impression is essential to maximising value, as the buyer is aware that a well-maintained property will not require maintenance expense in the early period of ownership. Pre-disposal planning should be agreed with the Vendor and individually tailored to each property’s need.

5) The AA should identify areas requiring physical attention, list items of physical deterioration, poor state of repair or areas of untidy appearance and discuss these with the vendor with the objective of rectification. Issues may include:

• Improving the external appearance eg cleaning, minor repairs, repainting or landscaping maintenance.
• Obvious maintenance requirements such as water pipe damage, wall cracks, etc.

6) The AA should note that where a property has redevelopment potential and its “run down” condition would have little effect on its value, the buyers focus would be more on the characteristics of the location and land itself rather than the condition of the improvements thereon.

Preparation of Financial Details

7) The most critical issue in preparing property for sale where it is an investment is the soundness of the income produced by the property. The length of leases, tenant profile and terms and conditions of the leases, including building outgoings, are all issues of paramount importance to the investor.

8) The practitioner should review a property’s tenancy and lease status and be guided as follows to ensure that the property is presented in its best financial position:

• Fully leased property is the most attractive to the broader investment market. If vacancies exist, and the vendor can allow the time, it would be prudent, in order to maximise the selling price, to delay the sale to lease the property.
• The owner should be advised of the chances of re-leasing the premises, expected market rental level, and time frame for re-leasing the property.
• Ensure that all leases have been signed, stamped and registered, and that a comprehensive set of leases is available for scrutiny by potential buyers.
• Ensure that all personal or bank guarantees have been obtained and copies of each are attached to the leases.
• Provide a resume of the tenant’s information as this will assist in the purchasers acceptance of the security.
• If lease terms are about to expire, endeavours should be made to secure either new leases or lease renewals.
• Check the lease documentation (if available) to ensure that the tenancy schedule presents an accurate record of the leasing status of the property. The tenancy schedule should include at least the following vital information:
  • Description to identify the areas leased; eg. floor level, unit number etc.
  • Name of lessee(s)
  • Area leased
  • Gross or net rent per annum (including rate per $/m2 pa)
  • Lease commencement and expiry dates
  • Lease rent review dates and method of rent review ie market rent review or fixed increase etc.
  • Tenant’s share of recoverable outgoings
  • Comments in relation to particular items of variation to the standard lease, eg. non-recovery of certain outgoings
  • Who owns the fit-out and if it's included in the sale
• Details of other sources of income should be summarised. These could include:
  • Car parking
  • Naming /signage rights
  • Licence agreements
  • Telecommunication agreements/licences

9) Purchasers of commercial, retail and industrial properties often require information on both building and plant and equipment, depreciation allowances in order to assess the property’s earning potential. This is a specialist area requiring input from accountants or quantity surveyors specialising in this subject.

10) Overseas purchasers may require government’s approval for the purchase.

Marketing Strategy and Budget

11) The target market determines the marketing strategy. For smaller properties, there is a greater reliance on brochure mail out, enquiries from advertisments and signboards. The larger properties require greater emphasis on direct presentation of the property to identify prospective purchasers.

12) The marketing strategy requires discussion with the vendor in relation to the recommended marketing campaign/procedure and associated costs.

Depending on the marketing strategy adopted, costs may be incurred in relation to a combination of the following:

• Media production
• Advertising costs
• Website/Internet/E-mail
• Brochure/video production and cost of circulation
• Cost of producing a comprehensive information memorandum
• Cost of the preparation and erection of signage
• Mailing and courier costs
• Photography costs
• Travel expenses
• Cost of other specialist consultants advice (if required)
• Cost of auction venue (if required)
• Auctioneer’s fee (if applicable)

13) The marketing budget for a sales campaign will depend on the marketing strategy recommended. There is no direct correlation of the size of the marketing budget to the property but generally the larger the property’s dollar value, the greater the marketing budget. There should be a schedule of the agreed marketing strategy, as to which newspapers or chosen modes of advertising were agreed to, including the agreed dates, costs and the length of the advertising campaign.

Method of sale

15) The method of sale is decided in consultation with the owner and is determined as part of the marketing strategy. A recommendation as to the method of sale is based on the following factors:

• Potential competition
• Dollar value of the property
• Target market
• Competing properties
• Timing of sale
• Requirements of the vendor
• Complexity of the property
• Confidentiality requirements of the vendor
• State of the market

 16) The method of sale will generally comprise one of the following main methods:

• Private treaty
• Public auction
• Public tender
• Calls for expressions of interest

 Marketing Materials and Tools

17) The marketing strategy and budget will determine the extent of marketing material but in most cases, the marketing tools available to the AA will consist of a combination of:

• Signage
• Advertising
• Brochure /video presentation
• Property information memorandum
• E-mail
• Internet
• Website

18) The information memorandum is the most comprehensive marketing tool and addresses the following aspects of the property:

• Location
  • Accurate description of the property’s location
  • Proximity to public transport and amenities
  • Quality of surrounding development including description of surrounding uses
  • Benefits of the location to the particular property; eg. a high profile site has a considerable volume of passing traffic, an elevated site has unrestricted views etc.
  • Ease of ingress and egress
  • Photograph
• Title Description
  • The full legal description should be inserted in the document with a photocopy of the title document if possible. Title description would give details of the lot, litho plan together with land area and dimensions. This information provides the purchaser with an accurate identity of the property being acquired.
• Building Description
  • This description can be brief or comprehensive depending on the nature of the asset being sold. Obviously a detailed description gives the purchaser a better understanding of the asset being acquired. Items for mention include, date of construction, date of additions or refurbishment, extent of built area, building materials and finishes, services etc.
• Land Description
  • This provides the purchaser with an understanding of the physical nature of the land, street access, services and particular features of the site, whether beneficial or adverse, which allows for a full understanding of the nature of the land being acquired.
• Tenancy Information
  • Of more relevance to an investment property, the tenancy profile information and tenancy schedule give a full break down of tenancy information. Income, Outgoings and Financial Analysis complete the picture for the purchaser.
• Financial Details
  • Information as described under the heading “Preparation of the Financial Details” would be provided in the information memorandum.
• Property Plans
• Statutory Information
  • Current zoning/Permitted development
  • Details of specific approvals obtained and certifications of any completed development
  • Detail of any external issue that is likely to affect the value of the property; eg. road lines

Commencement of Marketing

19) Prior to the commencement of marketing, a due diligence review of all information to become public needs to be conducted to ensure accuracy. The commencement of marketing which may be confirmed by formally placing the property on the open market, press release, or the appearance of the first advertisement offering the property for sale signifies the conclusion of the preparation of the property for sale.