A.

Rec fundamentals
Fundamentals of Consulting
REAL ESTATE CONSULTANCY

A.0. Introduction
Real Estate Consultancy
RA 9646 in 2009
implementation in 2010 ,.
Consulting
guided decision.
consultant
established credentials
expert reputation on a certain discipline
Real Estate Consulting Practice
real estate client or stakeholder
unique set objectives, constraints, operational circumstances, and economic realities
real-world operating experience
unsurpassed academic and professional credentials,
successful engagements
in-depth understanding of client requirements
beginning, its evolution, and its underlying principles

Real Estate Principles

real estate consumers, investors, and professionals.
real estate market participants.
REAL ESTATE BODY OF KNOWLEDGE
market for this knowledge.
real estate norms and generally accepted principles.
real estate consultant
know the difference between the land, real estate, and real property
understand the intricacies of real estate assets and markets
informed decisions
Land, Real Estate and Real Property
Physical Improvements
Bundle of Rights
Land
Real Estate
Real Property

personal and business decisions

housing, investment portfolios, and other business activities.
skills
marketplace
real estate professionals: brokers, appraisers, consultants, developers, market analysts,
Investment advisers, financing specialists, real estate attorneys, property managers, and
many other real estate service specialists.
Real estate consultant
duly registered and licensed natural person
for a professional fee, compensation or other valuable consideration,
offers or renders professional advice and judgment
acquisition, enhancement, preservation, utilization or disposition of lands or improvements
thereon
conception, planning, management and development of real estate projects.
market
circumstances, and arrangement
buyers and sellers exchanges goods and services.
real estate knowledge,
knowledge participants
skills and expertise
demand side
real estate knowledge
effective real estate decisions
characteristics of real estate assets and markets
supply of real estate knowledge
variety of sources
college and university degree programs,
propriety school programs
on-the-job training

4 dimensions:
LEGAL ANALYSIS CONCEPTS
MARKET ANALYSIS CONCEPTS
REAL ESTATE SERVICE CONCEPTS
FINANCIAL AND INVESTMENT ANALYSIS CONCEPTS

A. 1.1 HISTORY OF REAL ESTATE CONSULTING PRACTICE

U.S. real estate consulting practice

organization of a society of counsellors in 1953
group of Realtors
National Association of Realtors in 1954.
public need
competent, disinterested, and independent real estate advice and guidance r
qualified experts on a fee basis
integrity and are qualified by experience, training, and knowledge
sound judgment on diversified problems
real estate business.
society's standards
professional practice and code of professional ethics.
Philippines professional consulting practice
inspired by the U.S. experience
Philippines Association of Realtors Boards (PAREB) in 1960
Institute of the Philippine Real Estate Consultants (IPREC) in 1976 - affiliate.

Philippine Association of Realty Consultants and Specialists (PARCS) in 1992.

Philippine practice with licensing regulations,
U.S. -no licensing regulations

History of Licensing

Regulation Act 2728 - Philippine Legislature - 1938 regulate the real estate practice to protect
public interest.
first licensing regulations - July 29, 1939, -Commerce Administrative Order No. 3-6 - licensing
of real estate brokers.
revised by Commerce Administrative Order No. 60-1, - April 28, 1960, requiring written
examinations for real estate brokers and appraisers.
amended by Trade Administrative Order No. 75-1 - include real estate consultants.
1985 codified under Ministry Order No. 39 -Ministry of Trade and Industry - Rules and
Regulations Governing the Licensing and Supervision of Real Estate Salesmen, Brokers,
Appraisers, and Consultants and Realty Service Organizations.

REALTY SERVICE IS A PROFESSION:

DOJ Opinion No. 113, Series of 1995 - realty service is a profession, limited to Filipino citizens.
Department of Trade and Industry,
now under the Professional Regulation Commission (PRC), - effective in July 30 of 2009
RA No. 9646 - Real Estate Service Act of the Philippines (RESA).
"It is an Act Regulating the Practice of Real Estate Service in the Philippines, created for the
purpose a regulating the Practice of Real Estate Services and Appropriation of Funds and for
Other Purposes.
Section 42, Article V of RESA, Professional Regulatory Board of Real Estate Service (PRBRES)
with Professional Regulation Commission (PRC), - Implementing Rules and Regulations (IRR)
RA No. 9646, July 21, 2010.
A.1.2 REAL ESTATE CONSULTING PRACTICE

Consulting - giving of objective and independent expert advice to a client, before decision is
made on real estate matter.
systematically researched and validated, engaging the services of other specialists.
consultant, with his broad experience and knowledge in real estate,
decision-making process -most sophisticated problems in real estate field.
consultant's relationship with client = more confidential and professional
Realty consulting - professional basis.
Relationship of Valuation to Consulting
real estate consulting include macroeconomic analyses, microeconomic analysis or combination
of both.
consultants - distinguish between market value and investment value.
Market value value in the maketplace.
Investment value specific value of goods or services to investor
individual investment requirements or objectives.
Public Practice of Real Estate Consulting
Legal definition of real estate consultant Article I, Sec. 8, g(1) of R.A. 9646 –
duly registered and licensed natural person
professional fee, compensation or other valuable consideration,
professional advice and judgment on:
(1) acquisition, enhancement, preservation, utilization, or disposition of land or improvements
thereon;
(2) the conception, planning, management and development of real estate projects."
Consultancy - completely detached, well considered advice harmonized with the interest of the
person seeking advice.
characteristics of professional real estate consulting:
1. documented with reasoning in a written report (as supported by an oral report), and for an
agreed fee.
2. separate and distinct
service he sells is the product of his mind - right experience and judgment, supported by facts.
3. advice means considered judgment arrived at after careful investigation and deliberation with
the client,
4. The consultant treats each client on problem individualistically. conclusion and opinion
applied to particular client or problem at hand.
5. consulting success - extent of acceptance and utilization of his services by the client,
consulting services specific studies:
1. Highest and Best Use (HABU) studies
2. Location analysis
3. Site selection analysis
4. Market analysis
5. Feasibility studies
6. Development planning
7. Disposition planning
8. Evaluation of proposed transactions
9. Acquisition planning
10. Cost-benefit studies
11. Cost studies
12. Investment analysis
13. Risk analysis
14. Forecasting
15. Portfolio design and review
16. Technical analysis
17. Marketing assistance
18. Zoning assistance
19. Impact analysis
20. Property management review
21. Neighborhood/community analysis
22. Opinion testimony
23. Conflict management
24. Financial planning
Problems and Issues Addressed in Realty Consulting
consulting practice
subject to licensing regulations
scope of work
prescribed standards and ethics,
professional fee basis,

answer diversified questions related to real estate problems and issues

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? Should I keep, sell or rent it?
5. Should the property be developed? When?
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 condemnation action?
10. How should I resolve the conflict involving the property?
Specific Consulting Cases
Real estate problems and objectives - come from property owners, tenants, lenders, and
administrators.

client will ask the consultant for advice on objectives and alternatives, and how the client will
decide about such problems as:
1. Acquired asset.
foreclosed on a partially completed residential condominium project.

2. Liquidation.
required to dispose of an estate that includes several large properties.

3. Development planning.
purchase of a large tract is concerned
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
what are the most desirable way to acquire the tract.

4. Management planning.
acquired an income-producing property.
what the rent should be or how to draw up leases.

5. Development assistance.
convert it to a medical building. They need
help in selecting the architect, builder, and management
arranging the necessary financing.

6. Investment advice.
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.
interested in acquiring a luxury apartment building
for conversion into a residential condominium.
guidance to the value and physical soundness of the building,
the tenant policies that should be adopted,
the amenities that should be provided,
pricing of the converted units, and
the kind of investment return that can be expected.

8. Impact analysis.
seeking advice regarding the economic impact of proposed zoning revisions,
property tax revenue, employment, and business development.

9. Management assistance.
suffering from high tenant turnover.
stabilizing the tenancy without reducing rents.

10. Sales consulting.

wants to know
whether he should sell the property or not or
enter a joint venture for development or develop by himself.

11. Use study.

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.

requires new quarters.
Should the building be adequate for just the bank, or
should it provide additional office space for rental to other businesses?
If additional space is provided, how much should there be, and how should it be designed?

13.Conflict resolution.
property owner and a lessee cannot agree on the rental to be paid over the next ten years of a
lease
seek a consultant
ascertain the fair market rent by agreement or
establish a procedure
reach a rental amount without doing to court.

14. Needs assessment.

requires larger offices.
what would be the best office location.

15. Location analysis.

wants to know
where to locate a distribution center
analysis of the alternative sites realistically available to the client and for each site,
an assessment on delivery times, toll fees, expected growth patterns within the market area,
delivery expenses, and
the tax structures of each competing locality.

16. Property taxes.

required to pay all of the real estate taxes.
determine whether the taxes being charged are excessive.

17. Neighborhood analysis.

concerned about undesirable changes in the neighborhood.
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.
offered an income producing property
know what risks are involved,
what after-tax cashflow 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.

needs to expand a plant
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 it's 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.

20. Use study.

optioned a parcel of land suitable for development
wants advice on the type of development best suited to the parcel,
the likely pricing of the units built, the probable rate of sales, and
trends that are likely to affect the success and failure of the project.

21. Redevelopment planning.

wants to consolidate streets and sites in an old downtown warehouse district in order to create a
high-rise office and hotel site.
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.
wish to sell others wish to enter into joint ventures.

22. Portfolio review.

want to know what changes they should make in their portfolio
to prove its overall performance without increasing investment risks.

23. Cost-benefit studies.

wants to know whether the anticipated benefits justify the revenue sacrifice being contemplated.

24.Forecasting.
what effects current trends in abiding construction, office space design, local business patterns,
and area population characteristics will have on their investment.
know how long they should hold the property and
what will eventually become of it.

Consulting Abilities to provide advice and Assistance to Clients

solutions -as diverse as the problem that confront real estate owners and users.
problem - individualized treatment.
consultant - special knowledge and skill = investment analysis, operations research, statistics,
construction management, real estate economics and finance, and income tax planning.
broad experience and good judgment - consultant

Clients can benefit from the consultant's ability to:

1. Analyze property values and facilitate transactions
2. Evaluate management performance
3. Conduct research and forecast investment outcomes
4. Formulate plans to achieve objectives
5. Identity and define threats and opportunities
6. Investigate markets and plan developments
7. Draw model of investment scenarios
8. Negotiate and arbitrate between parties
9. Provide expert testimony
10. Train others to provide real estate services
12. Understand and simplify complex situations

As specialist, consultant, - special skills - advisory service, under a specific engagement for a fee
As generalist, consultant - advisory service, art of orchestrating, and coordinating the various
special skills in real estate development, marketing, finance, taxation, town planning, land-use
regulation, Economics, etc.
consequences.
specialist's skill - ability to perform about precisely the same series of actions or steps,
Consultancy, - skillful combination of art and science.
economic characteristics of land and variations of the client objectives and investment standards,
= require unique and different actions.

A.1.8 LICENSING REGULATIONS

Qualification for Real Estate Consultants

Qualifications for Consultant's License –
at least ten years’ experience as a license real estate broker or
five years’ experience as real estate appraiser,
pass an examination for real estate consultants given by PRC
possess the other qualifications under Section 14 of Rule Ill of the implementing Rules &
Regulations (IRR).

Rule on Conflict of Interest –

not be contingent or dependent upon reporting of pre-determined findings or recommendations to
be made.
within the fourth (4th) civil degree owns not less than twenty (20%) percent propriety interest in
the property subject of consultancy,
disclose such interest before accepting the consultancy engagement.
Violation of the rule on conflict of interest - ground for revocation of a real estate consultant's
license.

Continuing Professional Education –

Section 36 of Article IV, PRBRES, AIPO PRC. = CPE
primary purpose of the CPE =
maintain the high standards and advancement of the real estate profession and for the realty
service practitioners
keep abreast of the development affecting their interest and of the Industry.

Education Experience, Standards of Practice and Ethics: Necessary Background for Consultants
college degree on Real Estate Service,
1. citizen of the Philippines
2. holder of a relevant bachelor's degree - Bachelor's Degree in Real Estate Services -
requirement
3. good moral character,
not have been convicted of any crime involving moral turpitude:
show proof = at least ten (10) years’ experience as a licensed real estate broker or an assessor, or
as a bank or institutional appraiser or an employed person performing real property valuation, or
at least five (5) years’ experience as a licensed real estate appraiser.

A.1.4 PROFESSIONAL FEE ARRANGEMENTS AND ENGAGEMENT:

FIXED FEE, MODIFIED FEE, PERFORMANCE FEES

nature of the engagement,

relationship with the client,
expertise of the consultant
problem involved,
the amount of time required,
complexity and importance of the problem involved.

long experience and exposure to diversified real estate problems - factored in the fee
arrangement acceptable to the client.

typical fee arrangements:

1. straight or fixed fee = scope of an engagement is clearly quantifiable,
fee tends to be a lump sum amount.
data available,
the expertise required and
the time needed to complete the engagement.

2. modified fixed fee - modification of the straight or lump-sum fee

based on a specific time and expense arrangement, coupled with a retainer fee.
work on a time and expense basis

3. performance fee - type of bonus or incentive payment,

supplemental to a minimum fee payable whether or not the transaction goes through, plus or
against a performance fee.

base his fee on the following considerations:

1. Intricacy of the problem
2. Urgency of the engagement
3. Professional skills required
4. Savings affected
5. Time expended
6. Personnel employed
7. Results obtained
8. Responsibility fee, or profit
personal opinion of the consultant
importance or weight he gives to the different considerations enumerated above.
9. personal and business relation of the consultant with the client,
never accept an engagement fee = wholly contingent basis, nor share his fee with a broker

Defining and Establishing the Consultant-Client Relationship

consulting
relationship establishes the responsibility of the consultant to his client
client's responsibility to furnish what the consultant needs in order to fulfil the consulting
engagement.

consultant's responsibility to the client:

1. Know and understand the client's business in relation to the subject of consultation
2. Open the mind of the client as to the general nature of the client's problem and the relevant and
related estate aspects that may require third-party specialists
3. Guide the client in defining the issues involved in the problem. Suggest alternatives, and
recommend solutions after adequate analysis and study, including necessary consultations with
other specialists.
4. Implement the engagement and render the report in accordance with generally accepted
standards of consulting practice and ethics and with the contract of consulting engagement.
5. Assist the client implement the decision or alternative action recommended as may be required
the contract on the matter.

Client's Responsibility.
1. client is willing, ready and qualified to seek and accept professional advice.
No ulterior motive to use his function subjectively
2. client - data and information must be made available promptly to reduce the cost and time of
obtaining the same from other sources.
3. Confidentiality of the report, in whole or in part, - client and the consultant - maintaining
strict confidentiality of the report,
4. Necessary degree of trust and honestly, to avoid guesswork in obtaining information.
client - furnish needed materials in a straightforward and sincere manner
6. Compliance to the terms and conditions of the consulting engagement, - provision on cost and
expenses, and payment of progress and final billings,

Defining the Client Problem, objective and Needs

Considerable effort and imagination

client's immediate problems and needs and his long-term goals and objectives.
situation examples todistinguish between the immediate problem and the long-term goals of the
client.

1. Immediate problem - distressed property, a proposed project, land use conversion, highest-
and-best use analysis of an existing property, or expanding an existing residential subdivision.
current or immediate problems must be hurdled first

solution of the immediate problems - effect to the long-term goals of the client.
short-term decisions - affect long-term goals (and vice versa), give rise to unexpected new
problems:

2. Long-range goal problem require more complex analysis

more imponderables and assumptions
constant revisions in many aspects of the feasibility studies made.
big tract of property of long-term mixed-use development - involve solving current collateral
problems
sponsoring zoning ordinances,
encouraging public infrastructures and utilities,

3. Cash flow and accounts receivable level

very sensitive assets t
affect both current and long-term prospects.
cognizant on his client's long-term goals.

The consultant's understanding with the client

recommend and appoint third-party specialists needed in the engagement.
socially responsible
financially sound
investment desirable
not detrimental to the community
respect of the community
reputation for professional integrity
distinguishing marks of the consultant's practice.