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| Sam's Word |
One of the most frustrating parts of an Estate Agents’ work is losing an instruction to market a property due to a competitor misleading the prospective vendor on price. As the market becomes more competitive, particularly with low levels of stock and activity, this practise is becoming more prevalent. Often the same old brands are responsible. Over valuing a property, or inflating the price, usually serves to have an adverse affect on the successful marketing, as opposed to achieving the strongest possible price. Furthermore, it can lead to inflation in the road where the property is situated, meaning prices are mixed, which can confuse property owners and buyers. It also leads to closer scrutiny from surveyors working on behalf of mortgage companies. This is likely to weaken actually achieved prices.
Buyers are savvy
In some cases with properties in sought after areas or those that have unique features, it is possible to fetch ‘what somebody is prepared to pay for it’, but those occasions are rare, particularly in a choked market. Most buyers now have access to land registry ‘sold prices’, plus a wealth of supplemental information from the web. To put it simply, buyers are more ‘savvy’. Valuations correctly provided should be based on actual sold prices within the proximity of a quarter to a half a mile in a built up location, taking into account any additional features; such as configuration, extensions and quality of specification. This is, incidentally, how surveyors reach their conclusions in reporting back to mortgage companies, so it’s likely the property will be down valued if ridiculously inflated anyway. This is half the reason why surveyors and Estate Agent opinions are so far apart and they’re two separate professions that often will not share the same view.
Reputable Estate Agents provide realistic valuations
Reputable agents that act professionally will prove the validity of the prices they estimate, but in some cases, no matter how much evidence is produced to a prospective vendor in support of a valuation, that prospective vendor is more than likely to vote instructions with their wallet first. They will instruct the company that tells them what they want to hear, that their property will achieve the high price they desire, rather than that something lower is in fact realistic to achieve a sale. The experienced, knowledgeable and honest Estate Agent is losing ground to competitors unfairly on this basis. Corporate Estate Agents are often blamed for encouraging vendors to sign up to sell properties at an unachievable price, due to targets set or commissions paid for achieving volume of instruction.
Waste of time
Usually once the instruction is made and the contract is signed for the agent promising a high and , there is no chance of getting the opportunity to sell the property as it should have done without lost time. The agent who has won the instruction can spend wasted viewings during the early process and weeks then even months later suggest a price reduction to achieve the sale. It happens week in and week out. The party that truly suffers is the vendor, who can experience delays that can seriously hamper their own progress. They could lose a dream property they are pursuing and it can cause miscalculation of finances, which can affect their personal financial position.
Time to share
The practise has been annoying throughout my career, which has compelled me to write this blog. Whilst recently the topic has come to mind due to working on a property we valued strongly at £1.1m. The actual value that might have been achieved with reasonable negotiation was around £995k, but £1.1m was still a distinct possibility. It was a fair valuation and we set it to win the instruction. Another agent quoted a far less realistic £1.4m, whilst slating our agency in the process for being independent and not having the specific tools to find the buyer in any event. Well, I don’t see any difference in our capacity to market the property, although they have 20+ branches throughout London. We use the same, if not more, number of Internet property search portals and it’s rare that multi-branch, inter-linked offices share applicants/buyers! We also happen to be very good at what we do and have excellent local knowledge and connections, and we know how to pitch a property to suitable potential buyers.
Mystified
Recently, I was left mystified when our Sales Manager received a telephone call from a vendor that he had visited two weeks before requesting a viewing. He presumed she was not on the market, but she was, with another agent. Enquiring as to why he was not instructed, he was told the vendor had received three valuations, but she had decided to go for the middle one. Ours was the highest, by an additional £5000.00. The vendor received an asking price offer on the second day of marketing and regretted instructing the middle agent.
Help yourself, before we help you
Ultimately there is enough information now available to give you a grasp on the value of a property on-line. Allow an hour to research it before inviting the (experienced, knowledgeable and honest) agents in, to ensure you maximise the price and save valuable time.
**New Office of Fair Trading guidelines are being introduced to govern the aggressive marketing tactics of Estate Agents, which will hopefully arrest misleading practises experienced by the general public. This is another step towards cleaning up our industry, which we hope will make for an altogether more pleasant experience when it comes to selling your home.
Sam Samuel, MNAEA CRLM, March 2013
Introduction
Spring? Sorry it doesn’t actually feel like the season of spring and whilst we are experiencing seasonal activity, it’s not enjoyed the same without the sun. The elongated winter season is probably affecting most activities in commerce, but I’m pretty sure we’ll all be enjoying warmer conditions soon. Look at it positively, that sun is up there behind the overcast clouds, so technically the rays are still there, albeit weak. Frozen in fact!
During this quarter we take a brief look at the budget, not wanting to overload you with information you will doubtless be aware of. We also consider the lack of stock available for an increasing list of buyers and the impact on house prices and how mortgage lending is being eased. In lettings we ask have rents have finally reached the top? Our property of the week is a refurbishment project for a property in Chislehurst.
Enjoy your read and Happy Easter.
News in Brief
Rightmove said the average new asking price is £239,710 – 1.7% higher than last month and just beating the previous record in March 2008 of £239,655.
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Featured property
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Property News
- Asking prices are now 1.2% higher than this time last year, and compared with the lowest March asking price of £218,081 in 2009. London, as usual, tells a slightly different story. Although seeing an astonishing 9% rise since this time a year ago, sellers are dwindling, down 12% on March 2012. Asking prices for properties new to the market have shot up to hit an all-time record high for March as a result, further boosted by buy-to-let investors “piling into the market”. Most of these investors are from overseas and some would argue they are creating an artificial bubble. Most recently the London Assembly requested that Boris Johnson investigate the impact of development by overseas investors, which caused an angry response from property developers asking the London Mayor to ‘butt out’. Whilst we are short of affordable properties for low paid workers and many are priced out of London, any interference by the London Assembly to control the situation is likely to handicap the housing market and economy. Already Local Authorities already have planning laws in place to control development from overseas investors and in most cases a percentage of any new housing developments has to be set aside for social housing anyway.
- 2013 started with the best figures for mortgage lending in five years. According to the Council of Mortgage Lenders, a total of 38,300 loans were advanced for house purchase in January – the highest for the month since 2008 when 47,800 loans were advanced. The January performance came despite a marked drop from the month before when 45,900 loans were advanced. However, it was up 11% compared with January last year when there were 34,600 loans for house purchases. First-time buyers and home mover activity both rose. However, remortgage lending was 23% lower than the year before, and despite the rise in first-time buyer mortgages, these were still less than half their 2007 level.
- There were 15,900 loans for first-time buyers – 18% down from December but 24% up from the previous January, and the largest January total since January 2008, when there were 17,700 first-time buyer loans. It means that in January, first-time buyer loans accounted for 42% of all house purchase mortgages. Notably, they were still having to find large deposits, with 80% LTV loans the norm, but were buying cheaper properties. Home mover activity rose only slightly year on year in comparison, up 3%, but a 16% fall from December.
- Rents are nudging up across England and Wales by just 0.1% in February according to LSL Property Services, the company behind a couple of national chains – but they were still 3.3% higher than the previous year. Despite the monthly drop at a national level, rents grew on a monthly basis in half the UK’s regions. The strongest monthly rental inflation was a 1.8% rise in Wales, followed by the North-East where rents were 0.9% higher than in January. London’s rents also returned to growth – rising by 0.5%. The fastest falls were in the North-West at 1.3%, followed by a 1.1% drop in the East of England and a monthly fall of 0.7% in the South-West. Only one region saw rents fall on an annual basis: the average rent in the South-West is now 1.2% less than a year ago. Rents in London showed by far the fastest annual growth, rising by 6.2%. The South-East saw the next biggest year-on-year rise of 3.3%, while in Wales rents were 2.9% higher than last February.
Sales
Following a strong end to 2012, expectations in sales have been curtailed by the lack of property available to the market, a common observation by applicants registered looking for property. Our rankings have moved out slightly to 23rd out of 99 agents for new instructions, but we remain within the top 10 for our ‘click through rate,’ which is testament to our high standard of presentation for properties, mainly thanks to our professional photographer.
We continue to drive for more stock and believe we offer a highly competitive service at a competitive rate. What’s more, the level service is on a par with some of our larger competitors.
We have a structured and consistent marketing campaign that will attract more sellers and we will continue to strive for excellence in our service delivery.
There are a lot of regulations, you’ll be pleased to learn, mainly already part of The Property Ombudsman (TPO) guidelines, designed to apply pressure on the ‘rogue agents’ of our industry. The Office of Fair Trading and Advertising Standards Authority are now going to closely police Estate Agents ‘aggressive and unfair practices’. During our quarterly Regional Meeting with the West Kent National Association of Estate Agents branch, we learnt of these practises about to be heavily outlawed. The strongest sign yet of an attempt to clean up the industry, which will only improve the reputation of Estate Agents, smeared by a few. A bit like the reputation of a certain football club (see our Twitter profile @edwardashdale if you’re in any doubt who we mean), but that’s another story! The regulation compels agents to seek as much information as possible about the property to be marketed. For instance if a flat is available in a block 80% buy-to-let or social housing, this detail must be divulged to the buyer. There are several other regulations placed on agents, but the most cumbersome and controversial is being aware of the lease covenants or restrictions when marketing leasehold properties. The new regulations compel agents not to mislead potential buyers or omit detrimental information about a property, which will promote total transparency for buyers and tenants. New focus will also be put on the aggressive canvassing tactics used by agents, in the form of door knocking or ‘call me urgently’ compliment slips. Customers of Estate Agency services may finally begin to have a better experience. It was encouraging to learn in our usual Director’s meeting that plans required to ensure we meet with new regulations were minimal.
Estate Agents inflating valuations to win vendor instructions remain an issue, as noted in our recent blog post in edwardashdale.blogspot1.co.uk. We always want to achieve the strongest price and the view that agents value low to achieve a quick sale is a myth, it’s simply not true. To get a decent overview, three valuations should be obtained and always spend a couple of hours researching house prices within the vicinity before inviting agents in for valuations.
Our mortgage broker has been able to place 100% of the potential buyers we have introduced with excellent mortgage deals, including a Buy-To-Let investor who has now re-financed an entire portfolio as a result of the favourable rates obtained.
Lettings
Overall, since 2007 rents have increased significantly and, in most cases, up to 23%. Food for thought if you have a tenant that has occupied a property for five or more years, but with a decent tenant looking after the property as if it was their own home and rental payments regularly on time it really is ‘better the devil you know’. However, I get the feeling we have reached a ceiling based on affordability. Whilst demand levels remain unprecedented with most properties still having ‘block viewings’ at the first available opportunity for access, tenants are already spending two thirds of their income on paying rent. Ultimately more residential property fit for letting of all types and sizes is urgently required, otherwise we may continue to see rent rises.
Part of the OFT and ASA’s new remit, which similar to the regulations highlighted in sales is designed to sheriff the cowboys and unfair practises letting agents get a bad reputation for. Now, letting agents have to disclose full charges to tenants for administration and references. So they are unlikely to be charged the extortionate rates many letting agents have got away with in the past. Or at the very least tenants can decide if to view that property or not with that agent. We wonder how some landlords would react if they were aware of what their letting agent was charging tenants?
Landlords Feature – Inventories
Landlords are still attempting to include ‘additional damage’ to check-out reports without any photographic or written evidence to support it, according to the Association of Independent Inventory Clerks (AIIC). Landlords are keen to keep part or all of the deposit and charge tenants for additional costs to repair or decorate a property and are looking to add new damage to check-out reports, which were never recorded at the check-in. In one case, there was a landlord requesting a balustrade on a long sweeping staircase be treated with a new French polish because it had just a couple of light scratches. Whilst this had been French polished before check in, the balustrade in a house with four sharers inevitably shows wear after a 12 months tenancy. The landlord requested the inventory clerk change the check-out report to enable the tenants to be charged, when this was clearly a normal wear and tear issue.
Landlords, agents and tenants have different expectations when it comes to fair wear and tear issues. There is a distinct difference between fair wear and tear and actual damage – for example; carpet tread will flatten over time where there has been foot fall, but cigarette burns, stains or soiling is actual damage and requires charge, not necessarily the full amount of replacing the carpet either! Wear and tear is part and parcel with rental properties, just as it would be with any property. The best way landlords and agents can ensure that the property’s condition is fully recorded, is by having a comprehensive inventory in place at the start of any new tenancy, and have a thorough check-in and check-out report completed. The most common damage found in rental properties includes iron burns on carpets; cigarette burns; soiled marks on baths and UPVC window sills and frames; heat damage to polished wooden furniture; and stiletto heel imprints on wooden floors and vinyl. For more detailed advice you can contact Marie – Luminous Inventory Services on 07792 383 929 or email marie@luminousinventory.co.uk
Budget
The Chancellor of the Exchequer, George Osborne MP, delivered his annual Budget Statement in March. There were no shock announcements for the landlord community. Unfortunately, the speech didn’t grant the reform of Capital Gains Tax (CGT), Stamp Duty Land Tax or Energy Saving Allowance that we were hoping for, but there was good news for home buyers as George Osborne took the Budget as an opportunity to unveil a Help-to-Buy Scheme. The scheme will be available to all buyers of new build properties, including first time buyers and those looking for support to step up the property ladder. It offers two levels of support. The first offers an equity loan for those who can afford a mortgage and who can provide five per cent of the deposit. The government will offer the remaining 20 per cent contribution to the deposit. This loan will be interest free for 5 years and can be repaid when the property is sold and the only constraint is that the property cannot be worth more than £600,000. There is an argument that those more ‘well off’ may take advantage of the scheme in order to gain another property.
The second level of support is the Mortgage Guarantee in which buyers will have access to high loan to value mortgages to help more tenants to buy their own homes. Help-to-Buy will launch in April 2014 and will be available for an initial period of three years. The National Landlords Association has welcomed the new scheme and hopes that it will encourage a fair and balanced housing market. Ultimately, increasing the supply of property is imperative to getting the country’s finances moving. Encouraging a diverse housing stock is central to this and the Government’s Help-to-Buy scheme should free up some of those trapped in rented property towards the owner occupied market. However, more targeted measures are needed to address the chronic shortage of housing across all tenures. Had the Government decided to offer Capital Gains Tax Rollover Relief for landlords, they would have enabled capital gains reinvestment that could have provided more housing for rent in an increasingly pressured market. They should have also agreed a stamp duty holiday for lower end properties, which is also hampering the evolving nature of the property market.
On a positive note for the rental market, the significant increase in funding for Build to Rent will be welcome. This is an acknowledgement of the evolving and increasingly important role of the private-rented sector in the UK’s housing market and this should prove a decent initiative to providing more good quality affordable accommodation for rent.
Recent Testimonial
GD (vendor) “Wow! You have arranged so many viewers you must be paying people to view my home. You have sent more people to view my house than all of the other agents”
Property Tip
When conducting a viewing ensure that the curtains and blinds are open throughout the property, or where necessary turn on the lights to ensure maximum brightness, and ensuring any other occupants are out of bed!
