If you too are thinking of profiting from a real estate transaction, it’s time for you too to get to know everything of importance appertaining to Zero Report. What, then, is it about? What is important to know on the subject? Who does the report serve, and what is its function? It places at your disposal comprehensive information on the subject, enabling you to examine the real estate proposal on the agenda in the best possible way.
How the report began – the Sales Law
What, then, is Zero Report and what is behind it? Well ,in the past it was customary to demand payment as per a predetermined schedule. However this modus operandi did not prove itself. There were quite a few cases where buyers were drawn into bankruptcy, and left penniless – both without money and without property. In order to prevent such a situation from repeating itself, the legal system resolved to find a way to help buyers examine the contractor’s financial ability in depth. This decision led to the Sales Law, a law that sets guidelines for bank accompaniment; and over the years various adjustments have been made, in line with the development of the sector.
Who is behind the Zero Report?
If we get back to the present, we will find that the bank requires the developer to commission a real estate appraiser on its behalf (on behalf of the bank). The appraiser issues Supervision Report No. 1 at the very start of construction, with the numbers progressing as the construction stages progress. However, prior to the Supervision Report No. 1, there is Supervision Report 0, which is intended to enable the bank to approve the project before it starts, a fact that explains why this is such an important report, and it should be made clear that not only the bank may demand it, but any financing entity too.
What does the Zero Report include?
As stated, the Zero Report is required to determine the feasibility of a project; therefore, among other things, it must include the total construction costs, the final value of the project, the value of the land; and it can even determine what revenues the project will generate. Additionally, each test takes into account a variety of variables that may deflect the initial assumption, both in terms of construction costs or in terms of the value of the property. It is important to point out, that it does not matter if it is the construction of a hotel, a Tama-38 renewal project, or the construction of a small office complex. The report will always include the same variables; it maintains a fixed format, leaving no room for surprises.
Getting acquainted with the figures and sections in the Zero Report
As already explained, every Zero Report contains the same sections. Want a glimpse of it? The report indicates who is behind the request to submit the report. It describes the current status of the project, including the necessary financial scope. It presents an appraiser’s opinion, and it includes supplementary information about the property, its legal status (such as approved rights), a selection of relevant documents (such as agreements, lease contracts, etc.), a detailed description of the plot (facades, subdivision, borders, etc.), planning status (including purpose, designation of building rights, building outlines, cash flow for obtaining a building permit, etc.), a planning model (including technical specifications, a mix of apartments, etc.), real estate location, a series of estimates, a market survey and of course, a host of calculations relating to the feasibility of the project, including expected returns, cash flow, expenses, etc.
How is Zero Report relevant to you, as investors?
It should be understood that the Zero Report is not only important for the bank, but also for purchasing groups, developers and private investors. Through the report, it is much easier to assess if there is any point in investing. It makes it much easier to quickly examine a series of real estate investments. It facilitates appraisal of the economic feasibility in an informed manner, and so on. Hence, if you are
about to make an investment of some sort, it is definitely worthwhile to make sure that there is a Zero Report there in the background, and you should also ask for proof of this. It should also be made clear that when clinching a real estate deal involving significant sums, the word “unpleasant” has no place in the equation. It is important to understand that if the Zero Report is good enough for the bank (for it to release a loan), it should be good enough for you, although it is always advisable to conduct as many preliminary checks as possible as well.
Mutual interest
There can be no doubt that banks and investors are aware of the great importance of drawing up a Zero Report. Thus, the bank can know if it is economically sound for it to grant a loan, and the potential investor can ensure that he is not taking a risk. One can also not ignore the fact that for the developer and/or contractor they would also be better off investing in a Zero Report. Why? Firstly, it constitutes a significant marketing tool. If the report shows matters in a positive light, it will be easier to attract investors. Moreover, even if the report indicates economic inefficiencies, it is still important. It is better to know as much data as possible in advance, before risking falling into the undesirable situation of bankruptcy.
