What are the differences between an agent (broker) and a property valuer (appraiser) and who does what and how?

Lots of confusion arises, especially amongst first-time real estate buyers, when it comes to dealing with brokers and valuers. 

However, it not that complicated. Here is what you need to know:

The terms

Depending on your language area there are various different terms describing one and the same role. 

A valuer may also be called appraiser or (chartered) surveyor. The latter implies a professional qualification which, depending on laws as well as professional standards of the respective market, individual or the valuation company may or may not be common. 

It is also common to refer to them as real estate valuer, real estate appraiser or real estate (chartered) surveyor. In some countries real estate may be called property and in some both uses are common. 

An agent might be called a broker (in the USA also often Realtor). Since agents obviously also exist in areas outside of real estate they may also be referred to as real estate agent or real estate broker. Saying property instead of real estate is also common in different geographies. 

There are residential agents (usually dealing with single houses, apartments or multi-family buildings and commercial agents (office, retail, logistics, hotels etc.).

An agent who solely focuses on finding real estate according to the search profile of the client might sometimes refer to themselves as house hunters or asset sourcers. 

Nice to know

In Portugal a real estate valuer is called avaliador imobiliário or avaliador de bens imobiliários and an agent agente imobiliário

In Germany real estate valuers are called Gutachter (usually regulated), Schaetzer, Bewerter or Immobilienbewerter and agents Makler or Immobilienmakler. 

In France a real estate valuer is called évaluateur or évaluateur immobilier and an agent is referred to as agent immobilier.

Legal and regulatory

To the displeasure of many market participants legal and regulatory frameworks for real estate professionals differ a lot between countries. 

For valuers either respective public authorities or at least banks have established rules and regulations which cover formal qualifications for valuers as well as key concepts and binding guidelines for the preparation of valuation calculations and the respective reporting. Naturally the tightest knit regulations are found around valuations of private residential for bank loans and fund valuation in order to limit risks to consumers and the financial system. 

In Portugal the main body regulating bank and fund valuations is CMVM and it not uncommon to apply IVSC (international) or TEGoVA (European) standards. The largest international organisation governing real estate professions and particularly valuers is the Royal Institution of Chartered Surveyors (RICS). RICS is the world’s major institution to set, assess and promote professional and ethical standards in the field of real estate.

For agents the legal framework is usually rather thin. This can be explained by their role which is usually focused on marketing, communications and coordinating different experts alongside the transaction process. In Portugal agents obtain their licence via application to IMPIC, IP (the Institute of Public Procurement, Real Estate and Construction). You will be able to tell if an agent is properly licenced by requesting their licence number (AMI number).

Nice to know

Often, private individuals place a lot of trust in the sales agent when being on the buyers side. However, it is good practice to keep in mind that an agent who is instructed and paid by the seller will act in their best interest. 

Therefore, it is often a good idea to instruct your own specialist who acts in your interest and limits your risk exposure. 

The tasks

The main goal of a valuation is to determine an objective value of an asset. This is often: 

• To determine a mortgage value
• For a potential seller to understand what they would sell for
• For an investors balance sheet
• For a buyer to assist in the bidding and understand risks and returns

In order to remain objective and indepent it is most common that valuers charge a fixed fee payable upon delivery of the valuation report rather than a commission that is dependent on a transaction. 

The main goals of an agent are:

• To sell when they act for the seller
• To facilitate the purchase when they act for the buyer
• To browse the market and identify a building when they are instructed with asset sourcing
• To lease a unit when acting for the owner
• To find a unit, negotiate or re-negotiate lease terms when acting for the tenant

Depending on the respective goal an agent will pursue the highest or lowest possible price for their client. 

Nice to know

Whereas a good valuation is based on past transaction evidence (lease and sale terms of comparable properties) it might not reflect recent or temporary market movements. However, an agent would be able to translate those into their work immediately.

Depending on the circumstances, this will often mean that the value stated in a valuation is below the asking price of a property.

The reporting

Typically, a valuer concludes their work with production of a valuation report. Ideally, this report covers all important aspects that led to the result, such as location, the building itself, tenancy, costs, rental income etc. 

Depending on the use type and purpose of the valuation the applied methods and verifications may be:

• Comparison method
• Cost approach
• Income approach and multiplier
• Discounted cash flow and yield profile

An agent’s work may include a short version of a valuation or estimate, but usually is more focused on a marketing plan and their practical tasks around the transaction. 

Nice to know

Whereas valuers and agents will usually have knowledge around legal, technical and environmental issues, it is good to keep in mind that those areas a better covered by respective specialists, for instance lawyers or construction engineers. 

Both, valuers as well as agents will usually be able to refer to the respective specialists where appropriate.

How valuers and agents work together

Ideally, they don’t. This might sound like a contradiction in a process that becomes smoother, safer and faster with an increase of service integration. 

However, since the valuer works to produce independent and objective advise whereas the agent is determined to move the needle towards the (usually monetary) interest if their client, these two work best without interfering with each other. 

Moreover, in many countries laws as well as regulations exclude mixing valuations and transaction advise to avoid potential conflict of interest. Whereas some workarounds can be found and sometimes make sense in the area of commercial advisory, it is not recommended in more consumer-related markets like private residential. 

Nice to know

Valuers fees are usually a much smaller fraction of a property’s value than agents fees. Rather than the transaction price a valuer would usually quote based on time, effort and provided liability.

A valuers’ fee is typically a fixed amount whereas agents typically charge a success-based percentage of the sales price or rent they achieve for their client.