OF A PROPERTY FOR SALE – ANZ NOTE
purpose of this Guidance Note is to provide a general reference to
preparing real estate for sale. The Guidance Note 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 selling
document prior to the placement of the property on the open market.
Status of Guidance Notes
Notes are intended to embody recognised ‘good practice’ and
therefore may (although this should not be assumed) provide some
professional support if properly applied. While they are not
mandatory, it is likely that they will serve as a comparative measure
of the level
performance of a Member. They are an integral part of ‘Professional
Guidance note is applicable to Members involved with most forms of
real estate. However, the practitioner should be aware of particular
idiosyncrasies which may apply to specialised property e.g. rural
holdings, hospitals, nursing homes and other properties of a
specialist nature which these notes do not attempt to address.
to the rear of the Guidance Note is a schedule of various types of
property and an indication of the more specific information which
must be assembled when preparing a particular property use for sale.
Preparation of Property
preparation of the property as covered by this Guidance Note relates
to aspects of both physical appearance and accumulation of
information required to provide the market with an immediate
description of the asset it is considering to purchase. The
for the marketing material should be accurate given the
responsibility imposed by Section 52 of the Trade Practices Act and
preferably, all information should be verified by the Vendor’s
written certification of its accuracy. Matters relating to title
should be requisitioned from the vendor’s solicitor so that
appropriate documents can
be considered and be available for perusal. These could include title
search, zoning certificate and current survey report.
Physical Preparation of the Property
Importance of Physical Presentation
physical condition or state of presentation of the property is
generally speaking, very important in achieving 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
should be agreed with the Vendor and individually tailored to each
Areas Requiring Physical Attention
practitioner 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:
external appearance, which may include cleaning, minor repairs,
repainting or landscaping maintenance;
attention to obvious
maintenance requirements such as water damage, cracking to walls,
repairs to roofing or down pipes, estate road resurfacing and
numerous other possibilities should be noted for discussion.
however do exist where a property hasredevelopment potential and the
“run down” condition of the improvements would have little effect
on the value of the property with the possible exception to a
reduction in price due to cost of demolition or removal. In this
buyers focus would be more on the characteristics of the location and
land itself rather than the condition of the improvements thereon.
Preparation of the Property’s Financial Details
Soundness of Income
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.
Tenancy and Lease Status
preparing a property for sale the practitioner should review a
property’s tenancy and lease status and undertake the following
checklist to ensure that the property is presented in its best
financial position. Be aware of a potential owner occupier who may be
looking for space
to occupy in a partially vacant building.
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
lease the property.
vacancies exist, 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.
that all leases have been signed, stamped and/or registered, and that
a comprehensive set of leases is available for scrutiny by potential
that all personal or bank guarantees have been obtained and copies of
each are attached to the leases.
a resume of the tenant(s) business history, number of outlets and
other available information as this will assist in the purchasers
acceptance of the security.
lease terms are about to expire, endeavours should be made to secure
either new leases or lease renewals over existing tenancies.
the very least enter into correspondence with existing or potential
tenants to provide a positive outlook as to the future letting of
space which may otherwise appear as potential vacancy.
Re-negotiation of Unsatisfactory Lease Terms
there are undesirable lease terms and conditions that detract from
the value or saleability of the property, it is desirable in the
pre-sale period to renegotiate lease terms, which are more
could relate to outgoings provisions, rent reviews or rental levels,
Preparation of Tenancy Schedule
the tenancy schedule with 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;
identify the area leased, eg. Shop number, floor level, suite number
(including trading name);
area leased in square
gross or net rent per
annum (including rate per $/m2 pa);
and expiry dates;
lease rent review
dates and method of rent review ie market rent review or fixed
increase or CPI adjustment;
of recoverable outgoings;
comments in relation
to particular items of variation of a tenant’s lease to the
standard lease, eg. non recovery of certain outgoings;
owns fit-out and if included in sale.
Other Sources of Income
of other sources of income should be summarised.
naming / signage
These can be provided
either in the form of past actual outgoings or budgeted outgoings and
preferably a combination of both.
outgoings budget should identify each item of
together with the annualised amount of past actual outgoings and
future budgeted outgoings.
Trends can be
established and analysed if several previous years’ outgoings are
This document will
provide the Member with an opportunity to address problem tenants
with the vendor to ascertain the impact of arrears on the expected
achievable price and/or a program of back rent collection prior to
placing the property on the market for sale.
Every effort should
be made to minimise arrears prior to the property being offered to
the market otherwise the poor record of tenant payment could have a
negative effect on price and marketability.
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 after tax payment
earning potential. This is a specialist area requiring input from
accountants or quantity surveyors specialising in this subject.
situation will require Foreign Investment Review Board approval in
Australia and Overseas Investment Commission in New Zealand.
Marketing Strategy and Budget
Target Market Determines Marketing Strategy
target market determines the marketing strategy. For smaller
properties there is a greater reliance on brochure mail out,
enquiries from advertising and signboards. The larger properties
require greater emphasis on direct presentation of the property to
identified prospective purchasers.
Discussion with Vendor
marketing strategy requires discussion with the vendor in relation to
the recommended marketing campaign / procedure and associated costs.
on the marketing strategy adopted, costs may be incurred in relation
to a combination of the following;
brochure / video
production and cost of circulation;
cost of producing a
comprehensive information memorandum;
cost to the
preparation and erection of signage;
mailing and courier
cost of other
specialists consultants advice (if required);
cost of auction venue
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.
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
Decided in Consultation With Owner
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;
dollar value of the
timing of sale;
requirements of the
complexity of the
requirements of the vendor;
state of the market.
method of sale will generally comprise one of the following main
calls for expressions
are also other methods which may apply e.g. international tender,
minimum sealed bid, informal tender and declared minimum price
tender. The Member would adopt the most appropriate method of sale
having determined market demand and target market.
four primary methods of sale are described hereunder:
method of sale requires an opinion of price. Pricing a property for
sale may be unacceptable to the vendor in a rising or falling market.
However, providing a price estimate allows the market to judge the
vendor’s expectations and determine whether or not the vendor is
option of private sale allows flexibility in sale terms and
conditions and allows each party the opportunity to negotiate to its
best advantage. There is no exclusivity afforded to any purchaser.
However, the process may be prolonged if the vendor is unrealistic on
Popular at Lower End of Market Public Auction
method of sale remains popular at the lower end of the market. It may
be less suited to larger investment properties but this will depend
on your markets’ practices.
is less popular with off shore investors whom may not have the
ability to attend or the market knowledge necessary to give
confidence to bidding at auction. In all cases, purchasers have
already procured finance are required to undertake their enquiries
prior to auction and therefore bid unconditionally. The benefit of
the auction system is to provide
a sales outcome to achieve the maximum price through competitive
Outcome within Defined Time
auction system can provide a sales outcome within a defined time
period on sales terms acceptable to the vendor, usually an
unconditional contract, with 10% deposit and settlement in 30 to 60
days depending on the common practice adopted in your state.
Seen as Fairest for Estates and Forced Sales
system is also seen and recognised by the courts as the fairest
method for property disposal, especially for deceased estates and
as mentioned there are potential purchasers that are either
uncomfortable with the auction process or are unable to bid under an
may have the ability to pay a higher price with the opportunity to
vary the contract in a minor way. The practitioner’s judgement as
to target market and level of competition for a property is therefore
vital to the successful outcome of an auction.
Confidential Offer Public Tender
Public Tender process allows purchasers to submit a confidential
offer without fear of it being disclosed to competing parties. Offers
are in the form of an unconditional contract prepared by the vendor’s
solicitors and are accompanied by a refundable deposit. Tenders are
and remain open for acceptance by the vendor for a set period of
time. The time period for acceptance is determined having regard to
issues like expected level of competition and complexity of the
offering. The time frame enables vendors to compare offers, seek
clarification or any variations to the terms of an offer, and extract
the highest possible purchase price from the marketplace.
Used where Propriety is Paramount
by Public Tender is the formal step beyond Expressions of Interest.
It is used in situations where propriety is paramount eg. Government
offering property for sale and where the best price is generally
uniform terms and conditions. It is used in the case whereby a
property is likely to be keenly sought by a number of purchasers.
An Initial Calling Expressions of Interest
involves a sale method incorporating an initial calling for
Expressions of Interest with suitably qualified parties identified
from this initial stage either being subject to direct negotiation
following closing of the Expressions of Interest or invited to
participate in a further closed bid to determine the most acceptable
method provides the following;
greater reliance on
due diligence in assessing the property prior to offer;
International market acceptance due to the opportunity to participate
in the first stage of the process with limited time and costs
flexibility in terms
offered can often influence the purchase price. Expressions of
Interest allow variations to a standard contract of sale enhancing
the prospect of maximisation of price to the vendor;
information to the invited bidders.
Two Staged Process
two staged Expressions of Interest process works as
property is offered publicly to the investor market, and interested
parties are invited to submit by a nominated date an Expression of
Interest form confirming their interest, capability and price range;
from the Expressions
of Interest, suitably qualified parties are selected and invited to
submit, on a due date, a formal bid. Final bids would be in the form
of a contract. The highest bidder (having regard to conditions and
capability) is then accepted by the vendor and the balance of deposit
Preparation of Disclosure Material
Due Diligence an Integral Part of Preparation For larger properties
in particular, due diligence has become an integral part of an offer
to purchase and subject to the outcome of this activity will
determine the purchasers
preparedness to proceed to an unconditional contract. The due
diligence package is now an integral part of the preparatory work for
preparing property for sale.
the vendor is unwilling to address this issue before sale, and
extended selling period is almost certainly assured.
Extent and Complexity Varies
extent of material exhibited generally becomes more significant and
complicated as the property’s value increases.
due diligence information should include all relevant information
relating to the property that is likely to impact on the purchaser’s
decision to proceed to settlement.
Recommended Prior to Marketing
Diligence information is often assembled after commencement of
Marketing. As this process has gained particular relevance (and could
potentially de-rail the transaction) it is recommended that
preparation of the due diligence material be undertaken prior to
marketing. The Member then has the opportunity to advise the owner of
any adverse issues that could effect both the potentiality of sale
and achievable price. It is important to address these issues prior
to sale than them becoming an insurmountable obstacle to settlement.
It is better
that all detrimental issues are dealt with prior to offering the
property for sale.
Due Diligence Items GN 3
is a list of Due Diligence items that are appropriate for inclusion
in a “due diligence package”:
Documentation - copies of easement documents and easement plans
identifying the location of any easements on the property, the
grantee, and requirements of that easement on the property and the
Leases - copies of
all leases on the property or part thereof.
Encumbrances - all
encumbrances on title should be disclosed and relevant evidence
Contamination - a
contamination report from the relevant State Government Department
showing the status of the property. If the status indicates the
property is contaminated or likely to be contaminated it is important
to undertake further testing to provide a contamination report,
including the extent of the contaminants and the cost of clearing the
site. It may be necessary to undertake decontamination work
(remediation) prior to marketing the property.
Heritage / Land Use
Issues - if a property is subject to a Native Title or Waitangi
Tribunal claim, information regarding this land claim must be
provided. If the property is listed as having some heritage
significance, information relating to this must be identified and
provided. It is
advisable to include any local government registration as this could
have an impact on future dealings with the property.
Main Roads / Local
Government - Any requirements by either of these authorities for road
widening, truncation or dedication must be identified and information
Flood Information - a
flood report from the relevant local authority should be provided
showing any history of inundation of a property due to flooding.
Outgoings - an
audited report on previous years’ outgoings together with the
current year’s outgoings budget is important to provide an accurate
General Rates and
Land Tax Assessment Notices –it is important to include the most
Information – both Building and items subject to Depreciation
Allowance should be scheduled to provide the purchaser with knowledge
of possible deductions against income for tax purposes.
Certificate – inclusion of this document confirms absolutely
Council’s approval of the completed development at the time of
Approvals - any
related approvals to the site for development or other future
Other Reports - any
other property reports that are relevant to the property and are
likely to influence the purchaser’s interest in the property and /
or the sale price. This should include a full copy of building plans,
any relevant site or soil reports, building structure
services reports, engineers reports, etc.
Other Issues –
refer GN 3 Performing Due Diligence for guidance on other issues
which may be applicable in certain circumstances.
the type and size of the property will influence the amount of
relevant information. For instance, a residential house is unlikely
to have any leases encumbering the property and much of the other
information detailed above will probably not be appropriate.
Marketing Material and Tools
Budget Determines Extent
marketing strategy and budget will determine the extent of marketing
material but in most cases the marketing tools available to the
Member will be a combination of:
brochure / video
Due Diligence Material
due diligence material would normally be at an accessible location
for inspection by prospective purchasers.
could be the vendor’s agent’s offices or vendor’s solicitor’s
information memorandum is the most comprehensive marketing tool and
addresses the following aspects of the property:
Location Issues to be
of the property’s location;
proximity to public
transport and amenities;
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
inclusion of a quality photograph highlighting the key aspects of the
property is one of the strongest marketing tools available. The
photograph should be digital to allow greater flexibility.
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, registered plan, parish and county together
and dimensions. This information provides the purchaser with an
accurate identity of the property being acquired.
description can be brief or comprehensive depending on the nature of
the asset being sold.
a detailed description gives the purchaser a better understanding of
the asset being acquired.
for mention include, date of construction, date of additions or
refurbishment, extent of built area, style of architecture, building
construction methods, materials and finishes, services and
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 enable a full understanding of
of the land being acquired.
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.
as described under the heading “Preparation of the Property’s
Financial Details” would be provided in the information memorandum.
of floor plans and elevational drawings is desirable if available.
addition to the financial information provided on an investment
property there is usually the inclusion of council rates and tax
section of the report would cover such aspects as:
status of existing
uses and prohibited uses;
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.
land resumption due to road widening.
information memorandum for larger properties, particularly of an
investment nature can incorporate information on trends in rental
values, property yields, competing property, comparable sales and
economic factors which may affect the future likely returns of the
property. This, however, is at the discretion of the agent and
client. In any event it is prudent for prospective purchasers to make
their own enquiries.
Commencement of Marketing
Conclusion of Preparation
to the commencement of marketing a due diligence review of all
information to become public needs to be conducted to ensure
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.
notes have been prepared for general guidance. It is acknowledged
that various State Governments have similar but not always identical
legislation and consequently the practitioner is required to be aware
of relevant legislation and local customs in applying these notes eg
many of the items set out under headings such as “Preparation of
Financial Details” and “Preparation of Disclosure
are covered in Victoria in the Vendor’s Statement, prepared by the
vendor’s solicitor pursuant to Section 32 of the Sale of Land
Act.The vendor’s solicitor will generally liaise with the vendor
and the appropriate authorities in collating the material.
Nevertheless the practitioner should be familiar with the above
prescription in Preparing Property For Sale and should not deviate
from scrutinizing the process to ensure that a comprehensive
professional and successful outcome is facilitated.
Type Specific Information Required in Preparing Property for Sale
• Supply / demand
and air conditioning performance criteria and maintenance details
of fixtures and fittings
• Trade area statistics and demographics information
rental and turnover rent history.
counts and other pedestrian traffic statistics
potential of the existing centre
mix in regard to attraction to shoppers and a proportional
of anchor tenants, national chain specialty shops and sole traders.
transport and carparking interface
heavy vehicle movement and access
and clear span dimensions
• Trading history
• Projected performance
of FF & E together with ownership and age
facilities and profit centres, eg. food and beverage, conference
• Demonstration suite
and fittings package
of common property
• Street appeal
and physical condition
for re-characterisation and/or extension
• Town planning
and other layouts/plans
approved development material