ELEC3&PROFCOR8.PRELIM.WEEK2.pptx

PUBLIC PRACTICE OF REAL ESTATE CONSULTING Realty Consulting: Definition and Coverage of Consulting Services Real estate consulting is generally defined as the provision of advice, guidance, and support in real estate matters, on a fee basis by qualified professionals, who subscrib...

PUBLIC PRACTICE OF REAL ESTATE CONSULTING Realty Consulting: Definition and Coverage of Consulting Services Real estate consulting is generally defined as the provision of advice, guidance, and support in real estate matters, on a fee basis by qualified professionals, who subscribe to a suitable code of ethics. It is the giving of competent and objective (disinterested and unbiased) advice and judgment on Realty Consulting: Definition and Coverage of Consulting Services Legal definition of real estate consultant (as defined under Article I, Sec. 3, g(1) of R.A. 9646 Real Estate Service Act of the Philippines) is a “duly registered and licensed natural person who, for a professional fee, compensation or other valuable consideration, offers or renders professional advice and judgment on: (1) the acquisition, enhancement, preservation, utilization, or disposition of Realty Consulting: Definition and Coverage of Consulting Services Consultancy is a form of professional service that answers the need for a completely detached but well considered advice harmonized with the interest of the person seeking advice. The characteristics of professional real estate consulting are: 1. Consultation advice and opinion are documented with reasoning in a written report (or supported by an oral report), and for an agreed fee. 2. The consulting service is a separate and distinct undertaking, completely distinguished from that of a broker, appraiser or an agent; the service he sells is the product of his mind out of right experience and judgment, supported by facts. 3. In consulting, advice means considered judgment arrived at after careful investigation and deliberation with the client, never given off-the- The characteristics of professional real estate consulting are: 4. The consultant treats each client or problem individualistically. His conclusion and opinion are not generally applied, except to the particular client or problem at hand. 5. The consulting success is measured by the extent of acceptance and utilization of his services by the client The consulting services may involve any of the following specific studies: 1. Feasibility studies 13. Highest and Best Use (HBU) studies 2. Development planning 14. Location analysis 3. Disposition planning 15. Site selection analysis 4. Evaluation of proposed transactions 16. Market analysis 5. Acquisition planning 17. Marketing assistance 6. Cost-benefit studies 18. Zoning assistance 7. Cost studies 19. Impact analysis 8. Investment analysis 20. Property management review 9. Risk analysis 21. Neighborhood/community analysis Problems and Issues Addressed In Realty Consulting Any one or more of the above services are sometimes informally provided by real estate brokers, appraisers, real estate managers, mortgage bankers, and dealers, incidental to their main service relation. However, they are considered consulting practice subject to licensing regulations when rendered in accordance with a scope of work covered by prescribed standards and ethics, and on a professional fee basis, and not when the services are rendered for salary, commission or profit. Problems and Issues Addressed In Realty Consulting Consulting services answer diversified questions related to real estate problems and issues from the standpoint of any party to a proposed transaction. The following questions are examples of the subject of consulting: 1. What is the most appropriate mode of disposition of our acquired assets? Who are the prospective buyers? 2. What impact will a pending change in the community have on my property? 3. How can I improve the income from the property? How well is my marketing program performing? 4. What events are likely to affect my property? Problems and Issues Addressed In Realty Consulting Consulting services answer diversified questions related to real estate problems and issues from the standpoint of any party to a proposed transaction. The following questions are examples of the subject of consulting: 6. How should I market the property? What is the fair price for the property? 7. What costs and benefits will result from proposed development? How can I get permission to develop the property? 8. What impact on the community will the proposed use have? 9. How much compensation must I expect from a Specific Consulting Cases Real estate problems and objectives that can be the subject of consultation may come from property owners, tenants, lenders, and administrators. In most instances, the client will ask the consultant for advice on objectives and alternatives, and how the client will decide about such problems as: 1. Acquired asset A guaranty company has foreclosed on a partially completed residential condominium project. 2. Liquidation The trust department of a small bank is required to dispose of an estate that includes several large properties. 3. Development planning An investor planning the purchase of a large tract is concerned about how the property should be developed, what use or uses should be contemplated, how development should be timed, how the finished product should be marketed, and the most desirable way to acquire the tract. 4. Management planning A small investor has acquired an income-producing property. He is uncertain about what the rent Specific Consulting Cases 5. Development assistance The owners of a vocational training center wish to convert it to a medical building. They need help in selecting the architect, builder, and management and in arranging the necessary financing. 6. Investment advice An owner of a substantial landholdings in a distant province wants to know whether to sell or hold the property, the tax consequences of a sale, and how to go about marketing the property if he decides to sell. 7. Conversion services A newly formed limited partnership is interested in acquiring a luxury apartment building for conversion into a residential condominium. It seeks guidance with regard to the value and physical soundness of the building, the tenant policies that should be adopted, the amenities that should be provided, the pricing of the converted units, and the kind of investment return that can be expected. 8. Impact analysis A city planning board is seeking advice Specific Consulting Cases 9. Management assistance An apartment development in another city is suffering from high tenant turnover. The owners ask for assistance in stabilizing the tenancy without reducing rents. 10.Sales consulting The owner of the vacant lot in an urbanizing area wants to know whether he should sell the lot, enter into a joint venture for development, develop the lot himself, or exchange all or part of the lot for another property. The Practice and Regulation of Real Estate Consulting ( Module 1 ) 2018 Real Estate Consultant’s Comprehensive Course 1.5 11.Use study The owners of a downtown loft building that has been vacated by its principal tenant need to know whether the building should be demolished, left vacant, or rented on a temporary basis while redevelopment of the property for other uses is awaited. 12.Assessing space needs A bank requires new quarters. Should Specific Consulting Cases 13.Conflict resolution A property owner and a lessee cannot agree on the rental to be paid over the next ten years of a lease that contains a series of renewal every two years. The property owner and lessee seek a consultant mutually acceptable to help them ascertain the fair market rent by agreement or establish a procedure by which they can reach a rental amount without going to court. 14.Needs assessments A growing law firm requires larger offices. Each of its ten partners seems to have a different opinion about what would be the best office location. 15.Location analysis A distributor of bottled drinking water wants to know where to locate a distribution center in relation to the total expected market area. This will require an analysis of the alternative sites realistically available to the client and for each site, an assessment of delivery times, toll fees, expected growth patterns within the market area, delivery expenses, and the tax structures of each competing locality. Specific Consulting Cases 17.Neighborhood analysis. The owner of an apartment complex is concerned about undesirable changes in the neighborhood. She wants to know whether she should keep or sell the property and whether it should be sold as an apartment complex or converted into condominium units and then sold. 18.Evaluation An investor has been offered an income-producing property and wished to know what risks are involved, what after-tax cash flow is to be expected, how sound the property is, how the purchase should be financed, and what advantages and disadvantages would be associated with rehabilitation. 19.Facilities planning An industrial company needs to expand a plant and wants to know what it can expect to get for the plant in the market, what it would have to pay for a suitable existing facility at another location, how much it would cost to acquire a site and build a new building, what its moving costs are likely to be, where suitable sites are likely to be available, where a suitable facility might be rented, and what the after-tax implications of these various possibilities would be. Specific Consulting Cases 21.Redevelopment planning A group of investors wants to consolidate streets and sites in an old downtown warehouse district in order to create a high-rise office and hotel site. All of the investors agree that a plan should be worked out to close the streets, create larger parcels, and subdivide the more usable properties after demolishing the buildings. Some of the investors wish to sell; others wish to enter into joint ventures. 22.Portfolio review The owners of a large collection of the office buildings, hotels, apartment complexes, and industrial properties want to know what changes they should make in their portfolio to improve its overall performance without increasing investment risks. 23.Cost-benefit studies A community that is contemplating the offer of a property tax abatement in order to attract a new downtown hotel wants to know whether the anticipated benefits justify the revenue sacrifice being contemplated. 24.Forecasting The owners of a downtown office building wonder Consulting Abilities to Provide Advice and Assistance to Clients The solutions that real estate consultant presents and the methods by which he reaches those solutions are just as diverse as the problems that confront real estate owners and users. Each problem requires individualized treatment. To be really helpful, the consultant needs special knowledge and skill in such fields as investment analysis, operations research, statistics construction management, real estate economics and finance, and income tax planning. But it is the broad experience and good judgment of the Clients can benefit from the consultant’s ability Analyze property to: and facilitate values transactions Evaluate management performance Conduct research and Forecast investment outcomes Formulate plans to achieve objectives Identify and define threats and opportunities Investigate markets and Plan developments Draw model of investment scenarios Negotiate and arbitrate between parties Provide expert testimony  Is the consultant a specialist? Yes and no. As a specialist, he possesses, and renders under separate assignment or engagement, particular skill or skills, such as in brokerage, appraisal, town planning, architecture, or engineering. As a consultant, he possesses special skills in rendering advisory service, under a specific engagement for a fee, in the real estate service practice and industry. However, in the practical application of the consultant’s advisory service, the consultant applies his skill in the art of orchestrating and coordinating the various special skills in real estate  The principal difference between the real estate specialist and the real estate consultant lies in what might be called consequences. A specialist’s skill is based on his ability to perform about precisely the same series of actions or steps, assignment after assignment. The outcome of efficient execution of a predetermined series of steps is the sought consequence, market value as in the case of an appraiser. Consultancy, on the other hand, is a skillful combination of art and science. Especially Licensing Regulations History of Licensing Regulation Act 2728 was passed by the Philippine Legislature in 1938 authorizing the Secretary of trade and Industry, then Secretary of Commerce, to promulgate administrative orders to regulate the real estate practice, under its police power, to protect public interest. The first licensing regulations were issued on July 29, 1939, under Commerce Administrative Order No. Licensing Regulations The realty service practice regulations were revised by Commerce Administrative Order No. 60-1, issued on April 28,1960, which provided for the first time the licensing of real estate appraisers by requiring written examinations for real estate brokers and appraisers. The regulations were later amended by Trade Administrative Order No. 75-1 that extended the specialization of real estate practice to Licensing Regulations In 1985, the realty service practice regulations were codified under Ministry Order No. 39 (issued by the then Ministry of Trade and Industry) entitled Rules and Regulations Governing the Licensing and Supervision of Real Estate Salesmen, Brokers, Appraisers, and Consultants and Realty Service Organizations. Licensing Regulations REALTY SERVICE IS A PROFESSION: DOJ Opinion No. 113, Series of 1995 In answer to queries as to whether or not a foreigner may be accredited as a realty service practitioner, the Department of Justice issued an opinion that a realty service practice is a profession, which is limited to Filipino citizens. Licensing Regulations After several decades being governed by the Department of Trade and Industry, the real estate service practitioners will now under the Professional Regulation Commission (PRC) effective 30 July 2009 by virtue of R.A. No. 9646 otherwise known as the Real Estate Service Act of the Philippines (RESA) “An Act Regulating the Practice of Real Estate Service in the Philippines, Creating for the Purpose a Licensing Regulations Pursuant to Section 42, Article V of RESA, the Professional Regulatory Board of Real Estate Service (PRBRES) after the review and approval by the Professional Regulation Commission (PRC), adopts, issues, promulgates the Implementing Rules and Regulations (IRR) to carry out, administer, and enforce the provisions of R.A. No. 9646 on 21 July 2010. QUALIFICATION FOR REAL ESTATE CONSULTANTS  Qualifications for Consultant’s License – Among other qualifications, an applicant for a real estate consultant’s license must have at least ten years experience as a licensed real estate broker or five years experience as real estate appraiser, and must pass an examination for real estate consultants given by the Professional Regulation Commission (PRC). The applicant for the licensure examinations must possess the other qualifications at the time of filing of the application for the  Rule on Conflict of Interest – As provided for in the RESA under Section 35 of Article IV, the Code of Ethics & Responsibilities, the engagement of a real estate consultant must not be contingent or dependent upon reporting of pre-determined findings or recommendations to be made. Also, when the consultant or a relative within the fourth civil degree owns not less than twenty percent propriety interest in the property subject of consultancy, he must disclose such interest before accepting the consultancy engagement.  Continuing Professional Education – Under Section 36 of Article IV, PRBRES shall develop, prescribe and promulgate guidelines on CPE upon consultation with the accredited and integrated professional organization (AIPO) of real estate service practitioners, affiliated association of real estate service practitioners and other concerned sectors, and in accordance with such policies as may be have been prescribed by the PRBRES, subject to the approval by the PRC. The primary purpose of the CPE is to maintain the high standards and advancement of the real estate profession and Education, Experience, Standards Of Practice And Ethics: Necessary Background For Consultants  As required by the law, the consultant should have a college degree on Real Estate Service. In order to be admitted to the licensure examination for real estate consultant, a candidate shall, at the time of filing his/her application, establish to the satisfaction of the Board that he/she possesses the following qualification: A citizen of the Philippines A holder of a relevant bachelor’s degree from a state university or college, or other educational institution duly recognized by the CHED: Provided, that as a course leading to a Bachelor’s Degree in Real Estate Service is implemented by the CHED, the Board shall make this course as requirement for taking the “licensure examination; and; Of good moral character, and must not have been convicted of any crime involving moral turpitude: Provided, that an applicant for the licensure examination for real estate consultants must show proof that he/she has at least ten (1) years experience as a licensed real estate broker or an assessor, or as a bank or  For the consulting service practice, the BTRCP, under BUREAU ORDER NO. 03, S. 2006, has prescribed a syllabus, based on the syllabus outline recommended by Realtor Domingo D. de Vera in 2000. In January 2011, The Philippine Association of Realty Consultants & Specialists, Inc. (PARCS) has made representation to PRBRES for the adoption of this syllabus for real estate consultant’s comprehensive course for licensure examination. The consultant must be analytical and intellectually curious  The consultant’s experience, exposure and track record produce the kind of professional image in the business community that leads to the enhancement of his stature of competency and credibility to wider clientele. His experience in the various fields of real estate is all-important, but may not necessarily draw all the answers and solutions to all real estate problems. As a necessary consequence of professional practice, and in order to assure the protection of public interest, consultants (like licensed appraisers and certified public accountants) must develop and observe standards of professional practice and ethics. PARCS has been the proponent of a Uniform Standards of Professional Realty Consultants Practice (USPRCP) as adopted by the BTRCP for real estate consultants practitioners. In January 2011, this USPRCP has been submitted to PRBRES for implementation.