Posts Tagged ‘Home Buyers’

Let me grab your attention……….

Which of these is the most astonishing statistic or comment (all are true)?

• Only about 1-in-10 home buyers get a private survey completed.
• Only 28% of Listed Buildings are insured: 55% are under-insured.
• 25% of all land is not “registered” despite registration starting in 1925.
• UK Housing stock is the oldest in the developed world.
• Only 1% of our housing stock is EPC Rated “A” or “B”.
• In 2001 new house building fell to its lowest level since the war.
• Social demographics reveal that although one-person-homes made up 19% of total housing stock in 1971, this stat increased to 31% last year (2010).
• Houses (NOT flats) represent 82% of the dwelling stock in England.

To me, two statistics leap out of the screen and shout at me:-

As a Surveyor I just do not comprehend why 9 out of 10 homebuyers do not get unbiased, independent Survey opinion. Surveys have proved to save buyers money (typically a x5 saving in relation to fee costs, perhaps a great deal more).

As a home owner and residential Surveyor I also find it staggering that only 1% of our total housing stock is reasonably good in saving energy or reducing carbon emissions.

It may surprise some readers that the trends towards desktop valuations, as opposed to visit-the-home-and-produce-a-real-valuation, is rapidly gathering pace such that soon buyers will not have anyone look at their purchases unless they can be educated NOW and elect to pay for independent opinion (always separate the loan/mortgage valuation from the private survey – these are two separate matters and only one is a “survey”; the survey should be completed after the Loan Valuation and loan offer is received, in writing ).

At any one time the forces and influences that combine to determine value or worth of an asset are shifting. Today we are entering a period of years whereby carbon footprint and energy performance profile will assert themselves and create a valuation premium.

Like it or not we will all need to far better understand the process of home buying and just what actually creates value.

All the usual candidates remain: a “top five” may look something like this–
1. Location
2. Condition
3. Size
4. Features
5. Modernity (in some cases)

However, word is out NOW that two new candidates are in the top five listing. These are:-
• Carbon footprint to build, plus
• Carbon and Energy footprint to live in.

These factors create “sustainability” and that state may help save our planet and help us save money (energy costs) into the long term future.

Fit-in-Tariffs and RHI (Renewable Heating Initiative) are just two examples of current schemes whereby the Government will underwrite an annual income to you if you change away from, or significantly reduce your consumption of, fossil fuels.

A Home Valuer must nowadays consider and reflect upon whether your home was carbon neutral in its creation and also whether it has a zero-carbon in-use footprint. Did non-sustainable trees and resources need to be expended to produce the home AND/OR can the home produce energy savings (or even create an energy flow into the national grid – an income stream) by clever design, systems and gizmos?

From now onwards these latter mentioned matters will rise and rise and create a new slice of home value leaving your own existing outdated home on the floor as far as “worth” is concerned. This process will be slow but would be kick started if loan and mortgage rates were switched to be lower if your home actually sold energy to, rather than used energy from, the national grid. Differentiation in favour of green homes cannot now be too far away.

Beauty, they say, is in the eye of the beholder. Buyers looking at identical homes, but where one has a Government backed 25 year income stream attached to it and will probably sell for a higher capital sum will be considered more valuable today. For buyers to see the worth of such new initiatives means they must understand what is happening around them and this can only start by education: reading this article marks the start of that process.

So: Read the EPC (Energy Performance Certificate) on the home you wish to buy (this remains a mandatory document on any sell or letting in England). Find out how, and at what costs and future benefits, you could improve the structure and its services to create income and higher value/worth. Plan how and when you could achieve this.

Take energy seriously and take extra value from it.

Independent thought and action rely upon professional integrity and a genuine belief that the “client should come first”.

I passionately believe this is true and it drives my thinking and how I conduct my life. Recently I have self produced a YouTube video so I express my thinking to a wider audience. I invite you to take a look and give me some feedback.

To access the video click this link — http://www.youtube.com/watch?v=8n5Cj5yliRI

I emphasis that as a Chartered Surveyor I am heavily regulated and abide by a Ethical Code: it is not the words that are important here as it is my believe in such matters that counts – others seem, at times, to stand for a lesser code and these are the Surveyors who get into trouble and I find myself working against them in Court.

Typically I work for Buyers but increasingly Sellers are requesting surveys. the latter to flag the home has no serious faults OR to define exactly what is wrong and so begin to manage the damage to saleability and potential purchasers expectations. As stated above I also, increasingly, work against Surveyors and Valuers when cases of alleged negligence raise their ugly heads.

So- nothing is more important to anybody involved in housing than receipt of unbiased professional advice: your own surveyor or valuer should only receive a fee or commission from YOU and nobody else (often behind the scenes commissions are paid by Surveyors/Valuers for the initial introduction from an Estate Agent – an action that I strongly object to).

Remember – a loan valuation is not a survey and you are advised to separate out the private survey from the loan valuation: why would you think that a simultaneous survey and valuation could ever be in your best interests – THINK, you are telling the loan company what is wrong with your home and they may, as a result, not issue the finance you need.

The most popular form of UK survey product is the R.I.C.S. HOMEBUYER REPORT (and Valuation) but remember the stat – only 1-in-12 home buyers take any independent professional advice on purchases.

The choice is yours: buy with good advice behind you or take a serious gamble.

Take my advice – call me find out what are your survey options – the call will cost you next to nothing and you might just save yourself a lot of money or a giant headache.

Stuart Parrett +44 (0)1489 896 174 or 078 3636 3040.

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).

Firstly, let’s dispel a myth: if you ask an Estate Agent to give you a Valuation what do you get? They call them a Free Market Appraisal and some might not put that opinion in writing. Why? Because what you get is simply an opinion: it is not a professionally binding opinion and liability does not stem from that opinion (you cannot sue them).

Secondly, let’s dispel another myth: if you request a Loan Company mortgage Valuation what do you get? One – the valuation is prepared for loan purposes and the sum quoted may be lower than market value for in-house Loan Company reasons unrelated to your needs. Two – if you are buying a brand New Home the chances are that in this post-recession world the loan company will have instructed their Panel Valuer to down-value your purchase because the security offered (the new home) is in its re-sale value when it is not “new”.

Football in the sun: before the rain.

Valuations can be needed for Court purposes eg: divorce settlements, Probate and Capital Gains tax purposes, Tax Planning purposes, to advise of whether alterations may be wise and economic, for sale or purchase etc……. The circumstances that surround the request may lead us to consider other market and property aspects that alter our opinions of worth.

So, what is the definition of market value?

The only way to get a professional opinion of value, one where you can sue the Valuer if he/she is wrong, is if you request that report yourself. The wise purchaser does this via either a request for a private valuation or asks for a private survey that includes an opinion of market value. The most popular form of survey product can fits this description is the R.I.C.S. Homebuyer Report (for details see elsewhere on this site).

PROinspect can provide Market Valuations. We would need to inspect the property and complete market research, including a analysis of price-paid data (that is historic) and take into consideration the market and the property.

Why would you need a professional opinion of value? This depends on why you need advice and whether you agree that independent opinion is of worth. Some might say that a Loan Company valuer can provide an impartial opinion – conversely, the credit-crunch has told us that millions of mortgagees are out of pocket because of the Banks and of home buyers had taken advice from professionals outside of the Estate Agency and Loan Company then perhaps the hole they are now in wouldn’t have been so deep.

If you believe that a Sellers’ Estate Agent and your own Loan Company place your best interests over their own then you do not need PROinspect.

If you don’t believe this then use the CONTACT FORM to ask for help and advice once you believe the time is right for you. Initial advice is free so what have you got to lose?