By Bruce McGechan, CVA — Fealty Business Valuations · Last reviewed 14 September 2026
A free appraisal is a customer acquisition cost. The broker earns nothing for producing it and a commission if you list and sell, so the appraisal is the pitch for the listing.
There’s nothing sinister in that, and most business brokers I’ve dealt with are competent and honest people, the problem is structural.
This page is for information only. It isn’t legal, tax, or financial advice. Talk to your lawyer, accountant, and a qualified valuer about your own situation.
A business broker earns a commission on a completed sale, usually a percentage of the price plus an upfront marketing or engagement fee. No sale, no commission.
The appraisal sits at the top of that funnel. It’s the document that turns a conversation into a signed agency agreement, and it’s given away because giving it away works.
Nothing about that is hidden. Brokers will tell you the appraisal is free, and the reason is not hard to work out.
The first is optimism while the listing is still being won. A higher number makes a more attractive pitch, and the incentive to produce one is obvious to anybody who thinks about it for a minute. I’ve no evidence about any particular firm and I’d be uncomfortable accusing one. I’d be just as uncomfortable assuming it never happens. Read What’s the difference between a business valuation and a broker appraisal?
The second is the conversation that comes later. Once the business is listed and the market has been quiet for a few months, the price comes down to meet the buyers. By then you’ve signed, you’ve paid the marketing fee, and switching brokers means starting again.
The third is the one people miss, and it isn’t about optimism at all. An appraisal reports the enterprise value, the value of debt and equity together, which is a larger and more appealing figure than the equity value you’d actually receive. Nobody is being dishonest by quoting it. It’s the number the broker was asked for.
Under valuation standards a valuer has to be independent of the transaction and has to record that independence in the engagement letter. It’s a written condition of the work, and a peer reviewer can check it.
The practical test is whether the fee moves with the answer. Mine doesn’t, and a fixed price is the plainest way I know of saying so: $4,900 plus GST for an internal non-litigation transaction, whatever the valuation concludes.
Compare that with a fee that only exists if a sale happens at a price both parties accept.
Business broking generally falls under the Real Estate Agents Act 2008, and licensed agents are bound by the conduct and client care rules that come with it. Those rules cover behaviour, disclosure and the handling of client money. They don’t prescribe how a business should be valued or which approaches must be considered.
For valuers the position is stranger. New Zealand has no statutory credential at all, so anyone can offer a value opinion. What separates a business valuer from a business appraiser is a voluntary credential, a CVA, ABV, CBV, CFA, or CAANZ Business Valuation Specialist, and the published standards that come attached to it.
The Fair Trading Act 1986 sits behind everything as a backstop against misleading conduct. Proving a case under it, two years after you sold your business at the wrong price, is cold comfort.
If you’re going to list with that broker anyway, the appraisal is part of the service and the incentive is aligned with yours. You both want a sale at a good price.
If you want a market read rather than a defensible number, the same applies. No third party has to accept the figure.
The moment somebody who didn’t choose the appraiser has to live with the number, the incentive becomes their problem as well as yours.
That’s a co-shareholder being bought out, a spouse in a relationship property matter, a family member taking over the business, or IRD looking at a share transfer. Each of those parties has their own adviser, and the first question that adviser asks is who produced the figure and what they stood to gain.
Do you earn anything if I transact?
Which of the three approaches did you consider, and why did you set aside the ones you didn’t use?
Is this figure enterprise value or equity value?
What professional standard does this report follow?
Would you sign this as an expert witness?
The answers tell you what you’re holding. A broker who says “I’d earn a commission, I used the market approach because that’s what I know, and no I wouldn’t sign it in court” has given you a completely honest and completely useful reply. You now know what the document is for.
Are broker appraisals deliberately inflated?
I wouldn’t put it that way, and I’ve no evidence for it about any individual firm. The incentive runs towards optimism at the listing stage, that’s all. Treat the appraisal as a market opinion from an interested party and weigh it accordingly.
Is it still a conflict of interest if the broker doesn’t charge me?
The absence of a fee is what creates it. Free work has to be paid for somewhere, and here it’s paid for by the commission that follows a listing.
Can I get a second opinion on a broker appraisal?
Yes, and it’s often worth it before you sign an agency agreement. An independent valuation will tell you the equity value, which is the figure you actually receive, and whether the market evidence behind the appraisal is thick enough to rely on.
Are business brokers regulated in New Zealand?
Generally yes, under the Real Estate Agents Act 2008, which covers conduct, disclosure and client money. That regulation doesn’t extend to valuation methodology, and there’s no statutory credential for business valuers at all.
Fealty offers fixed-price independent business valuations. The fee is the same whatever the conclusion, and you know it before the work starts. See pricing and what’s included.
About the Author
Bruce McGechan, CVA — Fealty Business Valuations
Bruce McGechan is a Certified Valuation Analyst (CVA), credentialled by the National Association of Certified Valuators and Analysts (NACVA), and a Certified M&A Advisor. He has valued 90 privately held New Zealand businesses across many sectors. Based in Palmerston North and working nationwide, he prepares independent valuations for shareholder buyouts, succession and pre-sale planning, and relationship property and shareholder disputes. His work applies NACVA professional standards to New Zealand conditions — local transaction evidence, NZ tax settings, and the thin-market realities of owner-operated and mid-market companies.
Talk to Bruce: 021-245-8881