Monday, May 13, 2019

What's the difference between a land appraiser and a R/E agent? שמאי לעומת מתווך?

So here's a comparison I like to give to describe the difference between a R/E agent and an Appraiser.

a foot soldier v.s. a general commander in the army.

A soldier "knows the terrain" personally. He's walked it back and forth thoroughly. That's a lot like what a real estate agent is. They generally pick a particular radius of expertise (whether it's a neighborhood or a city) and just focus on knowing everything that's going on in that neighborhood. Checking out exclusive listings of other agents or private sellers, walking around the neighborhood handing out flyers and talking with people. And if they last in the business long enough they've seen houses being sold through the entire "sale cycle", from the beginning of putting it on the market until many months or years later until it's sold.

The land appraiser is quite the opposite. He relies mostly on all pertinent data available to the property and the land. He's less interested in whether the property has been remodeled or it's directions of air and sunlight and more interested in the stats - i.e. size of property legally, potential building rights, price per square meter in comparison to the average among the properties in the area. This allows a שמאי to be more versatile than an agent in that he can appraise any land anywhere in the country if he does enough due diligence in founding out all the details necessary.

שמאים actually have by-laws prohibiting them from how they can advertise themselves (see תקנון שמאי מקרקעין - אתיקה מקצועית and סעיף 2 there), whereas Real Estate agents have no such limitation. As a result the general public is more familiar with מתכווים than שמאים.

Additionally, while מתווכים are prohibited from officially giving appraisals of value for Real Estate it doesn't stop them from using indirect language such as "free consultations, estimations, etc" which essentially leads the general public to think it's the same thing anyway.

Below is a freehand list of pros and cons of a שמאי.

Appraiser Pros:

  • has a comprehensive understanding of the property, i.e. building rights, legal and illegal structures, future building plans that can affect the property positively or adversely
  • is the exclusive capacity for deciding on R/E value in Israel. anything relating to the govt (Municipality taxes or payments to the מינהל) must go through a שמאי only and therefore any appeal to be counter-argued requires you to get a שמאי
  • extensive education and training (14 tests + 1 year of intership). This is in comparison to the single test taken by מתווכים which focuses on a very limited scope of laws pertaining to land and contract law.
  • versatile to any location in israel
  • has accepted methods for calculating values that are not "real" in the market. e.g. calculating the land value component of a property that has a structure built on it, or calculating the percentage of the market value that derives from potential building rights versus the percentage derived solely from the current structure per se (this last one is needed often in issues pertaining to payment to the Tax Authority for Capital Gains Tax מס שבח).
Appraiser Cons:
  • doesn't have personal knowledge of the sales data beyond what's saved or recorded in רשות המסים. Basing his values over the aggregate average values of  transactions without "knowing" the neighborhood or houses themselves
  • isn't accustomed to give much weight to various subtle or psychological amenities in a property that a potential buyer might give, such as general sense of aesthetics or "feel" of the property. 
  • Has no good method for quantifying the value of boutique properties that have no real comparative transactions. Particularly in "trendy" or "artsy" kinds of properties, the data itself gives way to large degrees of variance, and makes it very difficult to assign a particular value with any degree of certainty. The large mansion with the helipad on it's roof can go for $10 million or $15 million, depending on the unique dispositions of the buyer and seller.
  • similar to the above, the שמאי is entirely based on the data of past transactions. as such, it's really the market itself which is determining the values. The Achilles heel for a שמאי is in markets where the rise or fall is happening so fast that past sales do not contribute to understanding what the property can be sold for today.

Agent Pros:
  • A good agent "knows" the neighborhood. the people, the stores, the schools, etc. he may be aware of particular advantages to potential buyers that can increase the properties added-value.
  • The agent is offering sales and marketing services (for seller) or negotiating skills in regards to the purchase price.
Agent Cons:
  • The commissions nature of the agent and more importantly the desire to secure "exclusive rights" from the property owner create a vested interest for the agent to suggest a market value that may not be objective.
  • No training in understanding Building Plans or Permits. Agents selling or buying properties do not know how to check for illegal structures or expansions that in theory should not be given value (on the assumption that eventually the עירייה will discover the illegal building and demand it's destruction and/or give fines to the owner).


Hope this helps. Pls feel free to comment if i've missed anything.

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