Comparative Market Analysis for Real Estate

This assignment presents a comparative market analysis (CMA) for a specific real estate unit. The CMA examines comparable properties in the area, taking into account factors like price, location, condition, and amenities. It analyzes current competitive listings, recent sales data, and provides a suggested market range based on this information. The goal is to determine the fair market value of the subject unit.

ASSESSMENT
Appraise Property (CPPDSM4003A)
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Units of competency
This assessment is your opportunity to demonstrate your competency in the following unit:
CPPDSM4003A Appraise Property
Assessment activities
The assessment consists of short answer questions and a case study.
Short answer questions
• This part consists of five (5) questions.
• Questions 4 and 5 consist of multiple parts.
• Ensure you make reference to your state/territory legislation (where applicable) in your responses.
State/Territory specific resources are located on the eLearning platform which may assist you in
responding to the questions.
Case study
• This part requires that you complete a Comparative Market Analysis.
• Read the case study carefully, paying particular attention to the descriptions provided.
• Complete the CMA using the template provided or a CMA or your choice. If you chose to attach your
CMA separately, ensure it is clearly labelled with your name, unit name and the question number.
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Part A: Short-answer questions
Question1
Explain the requirements in your state/territoryregarding providing price estimates and substantiating the
estimated sale and rental price of property. In your answer, be sure to cover consumer protection
requirements as well as any requirements of your state/territory agent legislation, rules/codes of conduct
(where applicable) etc.
Australian Consumer Law prohibits presenting any misleading and false information of the selling price
estimates by an agent to the sellers or prospective sellers. Particularly, Schedule 2 of the Competition and
Consumer Act 2010 prohibits corporations conduct to display or present any misleading or deceptive
information. Moreover, Sec30(1)(C) of the act states that a person engaged in commerce or trade, or
involved in the transaction of sale or grant or its any possibility, have an interest in the promotion by the sale
of land must not make misleading and false representation about the price payable. Moreover, agent also
needs to evidence the reasonableness aspect of selling price estimates either in written or oral to seller. It is
necessary to disclose the estimates of substantiate selling price in line with the prevailing market
information. Real Estate Agents require constructing Competitive Market Analysis (CMA) which provides
information about the sale of similar kind of properties for the price comparison.
Question2
What criteria should the agent use to substantiate sale or rental price?
As per the legislation, Agents must not mislead any client about the substantiate sale or rental price. In order
to determine the listing price, initially, agent need to assess the value of the property from its most favorable
point to make sure that client is provided with the highest or maximum possible price. Here, agent must
consider the sales price or rent charged in similar kind of properties, infrastructure, land area, land zone,
redevelopment site, space availability, requirement of repair and renovation and other key aspects. Moreover,
they need to determine encumbrances that negatively affect the price and also assess restrictions on
redevelopment subjected to the issues of contamination, environmental issues and others. In addition,
external factors like social trends, local, state and Federal governmental policies, general economy state and
land availability and attractiveness as well. Further, type of property, facilities, bedroom and
accommodation, reason for sale are the factors that must be considered by the suppliers when valuing
property. Agent must work honestly and diligently because seller has no idea of the market price and rely on
agent estimates and also provide market research reports to evident his or her opinion.
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Question 3
Anthony is a local real estate agent for City Property Networks. He has been asked to come back and
further discuss the potential opportunity of listing 94 Watkins Rd Watkinsville. Upon arriving at the
vendors’ home, Anthony gets straight down to business with the vendors. Anthony has been told the
following information from the vendors.
• They prefer Anthony to be the listing agent.
• They do not accept his appraisal of $850,000 for the property.
• They explain to Anthony they need to get their sale price as the bank want to take possession of the
property.
• They need 1,100,000 to satisfy their debts.
• They have offered Anthony $15,000 in advertising money to try get a higher sale price.
Anthony desperately wants to get this listing and hence lists the property at $1.1 million, knowing the
following.
• No home in the area has ever achieved that high a sale price.
• There are four (4) homes within two (2) minute drive that are currently on the market for less money
and larger overall property size.
• The past three (3) recent sales for properties like this were all sold for $839,000.
Anthony says nothing to the vendor about their overestimated price expectations pricedifference and lists
the property for $1.1. Million. What has Anthony effectively done wrong and what impact will this have?
What should he have explained to the vendors during this appointment?
In the given case, Anthony had listed the property at the value of $1.1 million as per client instructions which
was excessively overpriced because none of the property in the area had ever achieved such price. Even
property with larger size is available at less prices and recent sales of 3 similar kind of properties was sold
just at a price of $839,000. However, Anthony was legally obliged to provide correct price estimate with
evidencing documents. As Anthony already conveyed the client the correct value of $850,000 but seller did
not accepted his appraisal hence, he is not in breach subjected to the valuation.
In the case, seller had no idea of the correct market value hence, it was the duty of agent to be honest
and diligent even if seller has high price expectations of $1.1 million, hence in such case, at the time of
appointment, Anthony had informed or adviced client the correct value and evidenced the estimates with the
similar properties value in the area through presenting CMA report, then he should not accept listing.
However, as in the mentioned scenario, Anthony accepted listing appointment therefore; he is bound to be
loyal and uphold price integrity by do not quoting property at price below the listing price.
Question 4
(a) List two (2)client requirements that might apply to presenting information on a sale or rental price to
a client (i.e. requirements that the client may state for the appraisal).
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 Agency agreement between client and Agent
 Listing the property for sale
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(b) List two (2) agency requirementsthatmight apply to presenting information on a sale or rental price
to a client (i.e. requirements that the agency places on the appraisal).
 Valuation of property by verifying land area, zone, site of redevelopment, Building
restrictions and others
 Competitive Market Analysis report that provides information about the sale of similar kind
of properties that helps in price comparison
Question 5
Once you have completed a sales or rental price appraisal for a property:
(a) How would you obtain feedback on the suitability and sufficiency of your appraisal in order to
incorporate suggestions for improvement?
After preparing appraisal for the property, agent needs to obtain feedback from various parties to assess the
suitability and sufficiency of appraisal. In this regards, they can obtain feedbacks from active rental
consumers as well as landlords. Customers who are living in the rental properties are the excellent source of
feedback for price valuation to assess the suitability and sufficiency. It is because; they directly compare the
prices when they are looking for a suitable property in the area. Thus, agent can gather information from
customers and record details regarding the property that is in direct competitions with agent’s rental product.
It includes address, price, timing, quoted rental price, negotiated price, and property style. Feedback can be
getting from the customers via seeking comments, checking documentation, quality assurance data,
questionnaires survey, regular meetings and team meetings. Agent also needs to monitor advertisement to
assess new rental opportunities and access necessary websites for rental valuation. Through the help of
feedback assessment, agent being a valuer can incorporate suggestions for improvement
(b) How would you need to maintain these agency records, with due regard for client confidentiality
and legislative requirements?
Agents need to create a database series containing information about the physical property location and
information about sellers, tenants, purchasers and others. it is the most important requirement to maintain all
these records confidentially to prevent it from the unauthorized access. In this regards, agent need to comply
with Privacy Act for the collection, usage, storage and disclosure of information so as to maintain sensitive
information confidentially. It can be done through keeping database electronically in software packages that
are password protected. Database includes information about sales price, rental values, type of property,
method of disposal, purchase trends, average selling and letting time, demand and supply, vacancy factors
and others. In any circumstance, it is the liability of the agent to not disclose any information without the
informed consent of the client.
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Part B: Case Study 1
You are now required to complete a Comparative Market Analysis (CMA) from the information provided in
the description below. Your CMA must be completed professionally for presentation to a client. You will be
required to:
• Describe the current market conditions for unit sales in the area.
• Calculate the median unit price in the area (all types of units).
• Describe whether it is a buyer’s or seller’s market (all types of units).
• Calculate the average selling time of units in the area (all types of units).
• Please note that all the properties listed may not be comparable, so be selective about which properties
should be used in your report.
• Please put an asterisk against your most direct comparable properties.
• Provide a suggested selling price expressed in a 5% price range.
• You may like to use the template provide below to produce your CMA however this is not compulsory,
you may use your own format.
Subject property: Unit 30 ‘Fairview’ 15 Dunmore Terrace, Elsewhere.
Two-bedroom unit in a medium sized high-rise complex that is five years old. The complex is established
and has a resident manager. The unit has two bathrooms and has very generous double-sized bedrooms.
The unit is owner-occupied and is in excellent condition.
The complex has a lift and overlooks the river, although it is not absolute river frontage. The subject unit is
on the 6th floor and has a highly sought North Eastern aspect. This is a desirable feature in units in this area
and the aspect will carry a premium price. The unit also has a double car lock up garage (side-by-side).
This is also very popular with buyers in your area. The complex has a pool and a half tennis court and
intercom security.
Other units currently for sale in ‘Fairview’:
• Unit 18: Two-bedroom unit on the 4th floor. It has similar river views and aspect. It has an identical floor
plan and a double lock up garage. The major difference between the two units is that this unit has been
rented for three years and is not in good condition. It would need to have new carpets and be repainted.
The unit could easily be redecorated for about $3,000–$4,000.
List price: $455,000. It has been on the market for two weeks.
• Unit 31: Two-bedroom unit on the 6th floor. This unit faces south west and has stunning mountain
views. However the aspect is considered by local owner-occupiers to have a less desirable aspect.
The unit is slightly smaller than the subject unit and has a two-car tandem lock-up garage. It is in
reasonable condition.
List price: $430,000. It has been on the market for four weeks.
Similar strata unit complexes in the area with similar outlook and facilities:
• Unit 17 Montana Court, 25 Dunmore Terrace, Elsewhere
Two-bedroom unit in a well-maintained complex a hundred metres away. The two-bedroom unit is
three years old and on the 8th floor. It has similar finishes to the subject unit and is in good condition.
It has excellent north easterly river views. The second bedroom is slightly smaller than the second
bedroom in the subject unit. It has a two-car tandem lock-up garage.
List price: The property is to be auctioned. It is one week into its auction campaign. Buyers are indicating
a price around $475,000–$480,000 at this stage. Your CMA estimate was around $480,000–$485,000.
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• Unit 1 Montana Court, 25 Dunmore Terrace, Elsewhere
Two-bedroom unit on the ground floor. It has a very private courtyard, however only limited river views.
This unit has the same floor plan as the unit on the 8th floor and is in good condition. It also has a
two-car tandem garage. The courtyard is considered a valuable asset as it has direct pedestrian access
and visitors do not have to go through the buildings foyer.
List price: $470,000. On market for one week and has rejected an offer of $460,000.
Sales recorded over the last six weeks:
• Other sales in ‘Fairview’, 15 Dunmore Terrace, Elsewhere:
– Unit 38: 2 bed room unit, 7th floor, northern aspect, identical floor plan, good condition, double car
garage. Sold for $470,000. Listed at $470,000. Sold in five days.
– Unit 11: 2 bed room unit, 3rd floor, western aspect. Slightly smaller floor plan, moderate condition,
tandem garage, sold for $434,000. Listed at $440,000. Sold in two weeks.
– Unit 40: 3bed room unit on 10th floor. North eastern aspect. Luxury appointments and in excellent
condition, 2 car side-by-side garage. Sold for $580,000. Listed at $585,000. Sold in six days.
– Unit 32: 3bed room unit on 8th floor. North eastern aspect. Good condition. Smaller than unit above.
Two-car side-by-side garage. Sold for $512,000. Listed at $520,000. Sold in 21 days.
• Unit 4 ‘Regal Court’ 27 Dunmore Terrace, Elsewhere
2bed room unit with northern aspect. Older unit without an ensuite. However very large. Needs kitchen
and bathroom refurbished. Single car garage with good storage space. Listed at $420,000. Sold in
seven days for $415,000.
• Montana Court’ 25 Dunmore Terrace, Elsewhere
– Unit 27: 2bed room unit with ensuite in modern complex 100 metres from subject unit. 7th floor,
good condition. Very good uninterrupted river and city views with northern aspect. Two-car side-by-
side garage. Listed for $480,000, sold in five days for $478,000.
– Unit 32: 2bed room unit in same complex, 9th floor, excellent northern river views. Moderate
condition, two-car side-by-side garage. Listed for $485,000, sold in 21 days for $482,000.
Area profile
The area Elsewhere is very popular with unit buyers. It is only 5 minutes from the city and 10 minutes
from the university. It appeals in particular to young professionals who work in the city and enjoy the
lifestyle of the river, restaurants and the facilities available in the botanical gardens and the university
that are all close by.
One of the greatest assets of the area is the public transport system. Buses service the area to the city
and university every 15 minutes and two railway stations are only a short stroll from the unit complexes.
This saves young commuters about $200 per month in parking fees in the CBD.
There are no separate statistics for two and three bedroom units in the area. However over the last
six months, unit prices have risen by 15%. As a result of strong buying activity there are very few units
available for sale, with only around 5 units a month selling in the area. The average selling price of units
is $447,500.
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Comparative Market Analysis
Prepared by: Jonathon Hurst CMA date: 8th March 2018
Property: Unit 30 Fairview 15 Dunmore Terrace, Elsewhere
Client: (The name of the client withheld for privacy)
Market overview:
Currently, there is a steady demand in the area for the homes with the direct river view which is the most
desirable aspect that can carry a premium price. The market in Elsewhere is a seller’s market where there
are number of buyers coming with their interest to invest in the property near to the river as it is found
attractive. There is very limited number of units available for sale and young professionals greatly demand
the homes to enjoy river lifestyle, restaurants, and facilities in botanical gardens. The average selling time
in the area is 11 days and median price is $475,000. Considering the rising demand, we would like to
recommend the following comparative market analysis as follows:
Current
competitive listings
Price Date listed Comments
Unit 18 $455,000 2 weeks 2 bedroom, 4th floor, double lock up garage
Only exception is the cost of repairing and
redecoration in the cost of $3000-$4000
Unit 17 Montana
Court, 25 Dunmore
Terrace, Elsewhere
$475,000–
$480,000
One week Two bedroom, well maintained condition, 8th
floor, Excellent north easterly river view, 2
car tandem lock-up garage
Property
sold/rented: List price:
Selling
price/
Rental
price
Percentage
difference
Time on
market
Comments:
Unit 38
Fairview’, 15
Dunmore Terrace,
Elsewhere:
$470,000 $470,000 Nil 5 days 2 bed room unit,
7th floor, northern
aspect, identical
floor plan, good
condition, double
car garage
Unit 11
Fairview’, 15
Dunmore Terrace,
Elsewhere
$440,000 $434,000 -1.38% 2 weeks 2 bed room unit,
3rd floor, western
aspect. Slightly
smaller floor plan,
moderate
condition,
tandem garage
Unit 40,
Fairview’, 15
Dunmore Terrace,
Elsewhere
$585,000 $580,000 -0.86% 3 bed room unit on
8th floor. North
eastern aspect.
Good condition, 2
car side-by-side
garage
Unit 27 Montana
Court’ 25
$480,000 $478,000 -0.42% 5 days 2 bed room unit
with ensuite in
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Dunmore Terrace,
Elsewhere
modern complex
100 metres from
subject unit. 7th
floor,
good condition.
Very good
uninterrupted river
and city views with
northern aspect.
Two car side-by-
side garage
Unit 32 Montana
Court’ 25
Dunmore Terrace,
Elsewhere
$485,000 $482,000 -0.62% 21 days 2 bed room unit in
same complex, 9th
floor, excellent
northern river
views. Moderate
condition, two car
side-by-side garage
Suggested market range: $482,000-$506,000
END OF ASSESSMENT
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