Selling Agents Rental Appraisal

Have a hypothetical...

client who signs a contract to purchase a property based on a 450 pw rental return from the selling agent.

Finance gone unconditional, building and pest passes without a hitch

So contracts locked in

Client goes to get a property manager who says 380 p.w. is what they can get.

Noting part of due diligence but moreso the question is aimed is.... what is peoples experiences with selling agents being accurate with rental appraisals
 
.... what is peoples experiences with selling agents being accurate with rental appraisals

You have to bear in mind that if a REA has a sale pending on getting finance approval which itself is dependant on getting a good rental appraisal figure, then the selling agent will 'lean' on his property management department to get a 'good' rental appraisal figure.:rolleyes:

Just before Christmas I was buying a unit and had a selling agent ask me "What figure do you want the rental appraisal to say?":eek:

As with everything else - do your own DD on comparable rentals in the area.
 
I have found they are not accurate and I will normally ignore there estimates.

My last purchase the rental appraisal given by the selling agent was 20 % under what the market rent was for that property.

Cheers,

Fourex.
 
I reguarly call agents to get a written rental appraisal of the property they're selling a client. It's a requirement of quite a few lenders for loan applications.

70% will refer it to their property manager who will give an appraisal they're willing to sign off on. These ones are certainly the most "honest".

30% will simply write it themselves. In many cases they'll ask if a particular figure is okay. Occassionally they'll ask me what I need it to say and on a few rare occasions I've had to write it ang give it to the agent to sign because they're lazy.

In all cases, it's an appraisal to get the finance approved, not to get the sale - that's already happened. In each case, there's little chance of any real recourse on the estimate.

You should generally ignore the selling agen'ts advice on rental estimates. As you rely on your own research for the purchase price, the same applies to the rental return.
 
I recently received an ambitious rental appraisal from a selling agent. On the day I looked at the property he verbally appraised it at $240 p.w, than put $270 p.w on the written appraisal!

I didn't mind though - looks better for the banks and I knew it was a ridiculous amount given comparable properties in the area.

I wouldn't put much faith into a selling agents rental appraisal.

Cheers,

Jamie
 
I reguarly call agents to get a written rental appraisal of the property they're selling a client. It's a requirement of quite a few lenders for loan applications.

I am glad you wrote that because I have had rea wanting to give me these and thought there must be something like this going on.
 
what is peoples experiences with selling agents being accurate with rental appraisals
The agent who I signed my first contract with was really good. A fast talker who mislead me with the rental return.. a unit with 2 car parks, 1 of which was supposed to be rented seperately, thus increasing the rent.. lucky for me I got a copy of the rental agreement before the contract went unconditional and found that both car spaces were included on the lease..

I took my hat off to him, and since then haven't trusted anything an agent has told me until I've seen it on paper and known it's legitimate.
 
We were only talking about this last weekend. We were out looking through properties for another investment and the suggested rental returns were completely unrealistic in most cases.
 
LOL - call me skeptical, but I only ever belive something told to me if it already fits in with what I already know, or they can show pretty substansive corroboration.

I have actually found a number of REA's who have said along the lines of "I am not allowed to give a rental appraisal....but personally I think it would have to rent for at least $x much money" - usually way higher then actual. I think this is their way of covering their butts.
 
I usually find an selling agent's rental appraisal to be about 20% above the achievable figure for a similar property. I knock the 20% off to be realistic and find it's pretty accurate.
 
A couple of times when I've been looking I've had my existing PM do a drive by rather than rely on the selling agent's estimate
 
I had a selling agent's PM quote a rent $20 higher than what they had just renewed the lease at! In actual fact I turned around and got it rented for that amount. Not a bad increase for one fortnight.
 
If the bank requires a valuation for finance purposes, the valuation almost always contains a rental figure. Not sure if the lenders rely on it or not, but the one I give is realistic. When I am inspecting a tenated property I usually ask them what rent they are paying and when it was agreed.

cheers

RightValue
 
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