Check the price before you sign: an independent value for the agency, rent roll or book you are buying.

An agency purchase valuation tells you what the agency, rent roll or client book you plan to buy is worth at a stated date, separately from the asking price. It tests the income you would actually be buying, how much is likely to stay after settlement and what it costs to service, and shows how retention clauses and deferred payments change the price you really pay. The fee is fixed by the revenue of what you are buying: $1,495 + GST under $2 million, delivered in 2 business days. Delivery time starts once payment and all required information have been received.

Is the asking price supported by the income?

An asking price may rest on a rule of thumb applied to a revenue figure. A valuation starts further back: which income is genuinely recurring, how much of it is likely to survive a change of owner, and what it will cost you to service.

There are two figures worth keeping apart. Market value is what a hypothetical willing but not anxious buyer and seller would agree at arm's length. The ATO's guidance says it does not reflect attributes of value to one specific purchaser that other buyers do not have. Value to you can be higher, for example if your team has spare capacity in the same suburbs or the same insurance lines, or lower, if you expect to lose clients during the handover. We report market value, and can show value to you separately and labelled, if you ask.

What due diligence questions should a valuation answer?

business.gov.au advises buyers to independently collect and check the financial information about a business, including its past three to five years of financials. For an agency, the questions are specific to how it earns its income.

• ·Rent roll: does the schedule reconcile to the trust account and to the income in the accounts, is there a signed management agreement for each property, and which managed properties are listed for sale?
• ·Insurance brokerage: what brokerage income and fees come from each insurer and each client, what is the renewal history, and who holds each relationship?
• ·Mortgage broking book: what trail income comes from each lender, what are the loan balances, how fast is the book running off, and what clawback exposure sits on recent loans?
• ·Advice practice: what ongoing fees do clients pay, how long have they stayed, and which adviser looks after them?
• ·Marketing, digital or creative agency: which revenue is under retainer, what notice periods apply, and how much comes from the top few clients?
• ·Recruitment or labour hire: how are billings split between placement fees and contractor margin, and which consultants generate them?
• ·Travel agency: which corporate accounts and supplier income agreements produce the income, and do they transfer?

What should you ask a real estate agency seller for?

Trust account records are among the most reliable evidence a rent roll has. In NSW, licensees that received or held trust money must have their trust accounts audited for the audit period ending 30 June, with the audit lodged by 30 September. In Victoria, estate agents must have their trust accounts audited each year for the period 1 July to 30 June. Ask for the recent audit reports and any exceptions the auditor raised, along with the rent roll schedule exported from the trust accounting system, managements gained and lost, and arrears and vacancy reports at the valuation date. Licensing and the transfer of management agreements are questions for your lawyer.

How do retention clauses and clawbacks change what you pay?

An agency deal may not pay one fixed sum on one day. Part of the price may be held back for a retention period, reduced for each client or management lost in that window, or paid later as an earn-out.

The effective price is the headline price, less clawbacks for clients lost in the retention period, plus or minus settlement adjustments, with any later payments counted in today's money. A deal with a lower headline price can cost you more if its retention terms are lighter. Our report can set out how the terms on the table move the effective price; Earn-outs, retention clauses and clawbacks in agency deals explains our approach. What a clause means is for your lawyer.

What do you pay for that may not transfer?

Some of what makes an agency valuable sits with people. Landlords may be loyal to one property manager, insurance clients to one account executive, and marketing clients to a founder's creative reputation. If those people do not come with the business, part of the income may not either.

A valuation for a buyer asks who services each client, whether those people are staying, whether the seller will give a restraint and help with the handover, and how losses after earlier ownership changes played out. Whether a restraint is enforceable is for your lawyer; we reflect your lawyer's view in the risk the valuation prices.

What does the report contain?

The structure follows what the ATO expects of a valuation report for tax purposes: the purpose and scope, what was valued, the information relied on and its source, the valuation date, the definition of value, the methods with reasons and a cross-check, the assumptions, any missing information, and a declaration of independence. A suitably qualified business valuer signs it, and it follows the guidelines of APES 225 Valuation Services. We value; we do not advise you whether to buy.

What does a purchase valuation cost?

The fee is fixed in writing before work starts and is banded on what you are buying, not on the price you are paying.

The band is set by the annual revenue, excluding GST, of what is being valued: a rent roll's annual management income when the rent roll is valued on its own, an insurance or mortgage book's annual recurring income when the book is valued on its own, or the agency's total annual turnover when the whole agency, or shares or units in it, are valued. A business on exactly $3 million is Medium, and one on exactly $10 million is Large. Add-ons: +$495 per retrospective (past) valuation date, and +$795 per additional entity. Delivery time starts once payment and all required information have been received.

• ·Market valuation for tax purposes (guide), Australian Taxation Office
• ·Buy an existing business, Australian Government (business.gov.au)
• ·Real estate trust accounts and audit requirements, NSW Government
• ·Auditing estate agents trust accounts, Consumer Affairs Victoria