Real estate agent valuations
Like professional practices, real estate agents often have little or no productive tangible asset base. What they do often have however is a rent roll. This intangible asset can be potentially valued in its own right and this can be a key area of dispute, see Nettler and Nettler (2007).
Another potentially contentious component of value is the market salary for the owner operator; see court cases Corbon & Klousner (2015) and Scott & Scott (2006). The valuation also needs to consider whether commissions paid to the owner are at market rates or consistent with practices of the agency.
Key valuation components include the schedule of properties sold and commissions earnt, commission rates paid to staff and owners, location and terms of the leased premises, dependency on sales agents and local markets, the outlook for the local residential and or commercial property market (see the Queensland Market Monitor), the economic outlook (RBS Statement on Monetary Policy), and if the real estate agent holds a franchise agreement, assessing the terms of the agreement including length, termination details and service fees.
A sample of twelve rent rolls advertised for sale infers an advertised price to income ratio range of between 2.1 and 3.3 with an average of 2.9..
Examples of real estate agent valuation engagements include the valuation of a 50% interest in a real estate group providing buying, selling, renting and holiday leasing services, the valuation was required for matrimonial purposes and the valuation of a real estate business to assist in the exit of shareholders.