Posts Tagged ‘First Time Buyers’

What will happen to House Values?

What price professional integrity?

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These are the ramblings of a Chartered Surveyor Housing Expert in south Hampshire, England. They are published as we enter the run in to our General Election 2010.

Let me propose a few facts and then begin to think about how they may interact as we sail through this election and the current recessionary period.

1. The established Planning/PUSH estimate is the need for 80,000 new homes in south Hampshire by 2026.
2. The national and southern divorce rate is high, and increasing.
3. Repossessions remain a current property and social problem.
4. Despite several false dawns, property values are not booming or buoyant.
5. The majority of home buyers still DO NOT take any form of independent home condition or valuation advice.
6. The majority of Estate Agents and Buyers-in-general still pay lip service to Home Information Packs.
7. SAVA/Hometrack are introducing “Probable Value Range” opinions within Home Condition Surveys that can be generated by the newly created Home Inspectors for Home Information Pack purposes.
8. To stimulate savings the Bank of England must increase rates of interest, perhaps sooner than many wish or expect.
9. National and local housing starts are falling as we speak and I expect that rate of building to fall even further as disposable incomes fail to rise in the next couple of years.
10. Lenders continue to offer loans on terms unacceptable to most first time buyers (and others) – who has a 20% to 25% deposit nowadays?

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I have always found that as a cyclical market trough finds its way to us, for even a fully blown recession, the Economists and Housing Experts all say they did not see it coming but expect readers to believe them when they begin to predict what is to come. Well, I say NONSENSE.

Media hypes up published market data and paints a headline along the lines of “House Prices UP for the fourth month in a row” etc…. What they do not appreciate are underlying trends, imperfect consumer knowledge and uneducated actions plus the degree of conflict of interests within the loans/legal/valuation/survey markets. There is even great uncertainty within the Royal Institution of Chartered Surveyors (RICS) who, along with the Council of Mortgage Lenders (CML) are issuing revised protocols and Practice Statements on how to value New Homes.

• Loan Valuers have been told that they must factor out of the deal any sales incentives: this means that most valuations are now falling short of the stated asking prices.
• Loan Valuers are being told that the security of a New Home is its second hand value and that therefore they should ignore any potential “new build premium”. Again this kills any chance of a Valuation being near to the agreed price.
• Loan Valuers often break professional standards and protocol but not inspecting homes to the required standard when a survey has NOT been requested: a cursory viewing but mandatory damp test plus “head and shoulders” loft inspections are ignored. I have personally been told this by many sellers when I have visited for buyer, private survey purposes.

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Moving on – A Chiswick home owner recently contacted me saying that several Estate Agents had stated her home was worth £875,000 over a year ago and that after full refurbishment she would get about £900,000 (in a falling market). She recently got her Mortgage Company to Value her home, the same gentleman who valued it at £875,000 last year, and the valuation was set at £650,000 (over 30% lower than last year). Now, it is possible local values have fallen by this margin but a cursory glance at general values in the district seems to not support such a proposition. Indeed, it seems the Valuer has simply been told to be cautious. This case has the hallmarks of professional negligence and/or conflicts of interest written all over it. This goes a long way to further harm the marketplace and to put back any fragile recovery that may exist “out there”.

Conversely, looking at the market from the stance of a buyer – why don’t buyers take truly independent advice?

The HIP can and and should be a valuable resource for information that can and will help buyers if they choose to look – it is my experience they do not even ask to look at HIPs.

To a Surveyor and independent Valuer the HIP is one of the first things I refer to – position of water and drainage lines – warranty and guarantee documents – planning history with dates – legal issues – a plan to see if boundary disputes may be current – the list goes on………

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Moving on further – South Hampshire is scheduled for a 7% increase in population up to 2026 but it is scheduled to have an 18% increase in housing. Certain areas will have a disproportionate burden to swallow on their doorsteps in that new housing can be expected to lower values in the post-recession marketplace by increasing housing supply. Conversely a high divorce rate will increase the demand for, say, two bedroom homes (and perhaps Flats). These factors, plus any interest rate rises, may create a very complex market in the post-recession marketplace and it is at this time that the near defunct Home Inspectors (trained to complete low grade home surveys to go into HIPs – a product that was removed from the HIP on political grounds) are being encouraged to produce reports that attempt to predict what a home “might be worth” by looking at historic statistics.

I find this very strange indeed. At a time when the function and services of an expert professional Valuer are, or shortly will be, at an all time high, the powers that be are allowing a novice form of Valuer to float onto the market a predictive value report product.

Words fail me….suffice to say that buyers are encouraged to break with established methods, staid thinking, and to commission the services of their local Chartered Surveyor Valuer – somebody who knows the local markets and can be sued if they get it wrong. Why would anyone wish to gambol in the current market conditions? Not taking basic precautionary professional advice will adversely affect your wealth. If you have learnt nothing from this recession – learn this, nobody will help you, you have to help yourself and this starts with your choice of adviser – go independent every time.

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My advice to L.R. in Chiswick? Start proceedings for Valuer negligence.

My advice to the political parties during this election? As I have seen nothing in any political manifesto to change any of what I have discussed above, I suggest you all return to HQ and rethink four subjects – (1) the meaning and definition of connected person within any property transaction, (2) how to get tough with errant Estate Agents on HIPs, (3) the need for housing projects to remains on schedule to create jobs, to create affordable housing in all UK districts and (4) to re-introduce Condition Reports within HIPs, as has been successfully introduced in Scotland (but with a change – to be completed by both Home Inspectors on modern units but experienced Chartered Surveyors if the home is over, say 30 years old).

Decided to SALE and/or BUY?

FIRST TIME BUYER?

PRIVATE HOUSE SALE?

What should you know and do?

If you are only buying then VIEW a prospective home, open doors and windows and have  a good poke around (do not be inhibited). Walk around the district to take in the flavour of the people etc… You could then get onto the internet to check out the Planning history of the home and if you find that what the sellers told you doesn’t match what is in the Planning Department files then ask for an explanation from the sellers. Indeed there are many self-help measures that can bring your purchase forward at low or nil cost and with only minor effort.

Sellers – how much are Estate Agents going to charge you: never agree Sole Selling Rights terms: always get a positive marketing report from your intended Agents – when will the first newspaper adverts go in, how many adverts, in what newspapers and magazines?

If you have a simple, modern home you could consider making your home the only one in your street that comes complete with a Seller Survey Report to prove it is in good condition and that you are not hiding anything. Scotland, heralded as having a “better” selling system than in England, has the Home Survey that is exactly this, a condition report with Valuation opinion to bring transparency to the deal (in England our survey products usually do not have Valuations).

If you have a Period Cottage that has been greatly improved and extended then why not include all your plans, permissions, reports, certificates, invoice receipts to prove who-did-what, when and whether warranties/guarantees exist? JPEG file uploads is all that is needed. This data will be needed by your purchasers’ Surveyor and Solicitor and so why not place it all up-front, on show for all to see? This saves time and will get the Purchasers’ Surveyor (and perhaps Loan Valuer as well) on your side – this has to be on the positive side and stacks up the chances of a successful, short-term disposal. It proves your positive and serious intentions to not cause problems or delays.

Here are some simple tips to help you onto the right track —–

1. Should a seller complete repairs before they place a home on the market? This is a difficult question but it my opinion a lot of work is done for no real gain and so the generic answer is NO. By all means do low-cost items and splash the emulsion on walls and generally smarten up the place but large expense is usually a waste of time and money. However—–
2. A few things do require serious consideration: PROinspect are great believers in getting Service Engineers to certify the function and safety of your home wiring and heating system (boiler usually).
3. Had a look at a good prospective home but something is wrong – that crack in the rear wall? Should you not bother with an offer? Should you offer to bid but make it subject to survey? OR, why not ask PROinspect to have a quick look at the problem to advise you how to proceed?
4. Found the right home and your bid has been accepted? STOP. Do not let the Sellers Agent send off a mortgage application through their rear office Financial Services adviser. Intentionally separate the loan valuation from your private survey. Why would you want your mortgage source to have the benefit of knowing the homes’ exact condition, they may decline the finance you need?
5. As we come out of recession and Lenders are still playing games with many buyers and “old rules and truisms” have disappeared and so PROinspect recommend that you get your finance arranged first and once your Solicitor says this is verified/certain then at that time, and not before, arrange your private condition survey. By all means TALK to PROinspect at any time to (1) get advice (2) get a survey product recommendation (3) survey fee quote, but do not be overly influenced by anyone acting for (paid by) the Seller.
6. If you have a private survey we would expect to recommend to you the most popular product in England, the Homebuyer Report (used to be called the Home Buyer Survey and Valuation).
7. Remember this – the majority of Agency chains are owned by Banks or Holding Companies that own banks. They recommend each other for mutual benefit disguised behind “private sounding” names nothing like the Agents name and often nothing like the banks’ name. The one thing you can be sure of is that somewhere along the line a commission is being paid OR somebody can be influential with your so-called independent Valuer or Surveyor. The standard  employed whereby potential conflicts of interest have to be declared has been set far too low by R.I.C.S., C.M.L., etc… (the controlling Bodies within Loan and Valuation/Survey industries) and this is exploited massively by the larger Companies and Group of Companies. That exploitation can often go against your best interests and so you need to protect yourself against unknown/unseen exploitation – simply call PROinspect and we will advise you (I alone own my business and I do  not pay commissions to anybody). NB – Some Estate Agents have in-house Financial Advisers and they recommend Mortgage Companies who attempt to gain your private survey work on the back of your loan valuation: do not be fooled by a short term gain in reduced fee cost: commission your survey privately well away from Loan Companies and Agency businesses.

Don’t let ignorance torpedo your purchase or sale:

Remain in the light - ignorance kills house sales

UPDATE as we enter into the CON-LIB world in England:

HIPs have been shelved for the sake of an attempt to gain popularity at a time when cost cutting is king. The EPC (Energy Performance Certificate) remains and you have a right to request and see it BEFORE you commit to a lease or purchase.

This would mean that First Time Buyers have even less information to rely upon when they purchase. It will sound hollow but the only real answer is to HAVE A PRIVATE SURVEY completed. Do not think of it as a luxury, rather a necessity. You would not buy a car without looking at it in detail and so why is property any different? Talk to us and we will advise you on the most cost effect survey product OR whether any short-cuts may be possible, in all the circumstances and your financial budget. CALL US. E-MAIL US.

Sub-tabs here list data about First Time Buyers and Private Sale clients. These are important, special markets who may be acting under budget constraints and with little accumulated knowledge. As such they are at the mercy of potentially cynical Agents and Loan Companies.

Read through our notes and if you remain uncertain about any aspect of how you should proceed with a sale or purchase then simply call us or use the FORM on our Home Page for a request for information.

Why guess or struggle when help is at hand?

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Also included here is advice on why YOU CAN sue an errant Surveyor or Valuer. Too many times I hear people say “you can’t sue a property Professional because they wrap themselves in caveats and exclusions”: This is wrong. These notes will tell you why.

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Buyers of New Homes (not second-hand) also need special assistance as surveying and valuing brand new structures is not the same as for existing buildings. Be “in the know” and protect your investment wisely, from the start.