Posts Tagged ‘Marketplace’

Why choose an independent House Surveyor? Why choose PROinspect?

To those who have experienced the reasons why a Surveyor can make a big difference to a housing transaction I apologise for wasting your time. For those who look for cheapness and do not care who acts for them may I suggest you slow down and study the advice given below.

Blue sky thinking shouldn't be rushed. Choose your Surveyor wisely.

 

All Home Condition Surveyors should be at least working to a basic level of competence, carry at least the minimum level of insurances and have kept themselves reasonably up-to-date professionally and technically: the latest buzz words being Technical Due Diligence, or TDD.

Therefore, on the face of any one particular housing deal all Surveyors are equal.

WRONG. Some are more equal than others and provide a truly exceptional level of service designed to aid you to a swift and knowledgeable exchange of contracts with you in full control. Some are stuck in one gear and no matter what you want and need you will get what they always do: often this type of Surveyor is difficult to contact and is “protected” from client calls by a host of secretaries and customer services people (try attempting to actually talk to such a beast and you will see what I mean).

If all Surveyors train and generally work to a similar standard why do I need a better standard? Credit Crunch should have taught you what Bankers think of customers and how they cannot even make loans and mortgages on terms that most of us could even dream of finding acceptable. Self-interest is what I am defining: interests of the Bank are more valuable than mere customers interests. The same can be said of a lot of Surveyors.

What you need is a professional adviser who understands you, why you need a survey, what is happening in the marketplace and “know” the home type you are buying. Somebody who understands how most purchasers will not appreciate the mechanics of the chain of things that could go wrong and what can be done to protect their interests.

So what do I do that is over-and-above what the average Surveyor does?

1. I never accept a survey instruction without first personally talking to the client to ensure the product they asked for is relevant to the property and their budget. Other survey product options may be applicable.
2. I visit every relevant web-site that may give free data on the home being purchased so I have more that a cursory knowledge of the building and its history even before I see it. This allows me to easily focus on key issues and so better manage my time on your behalf. I even personalise my Site Notes template to reflect that initial property and risk-management data.
3. Where possible I interview the seller so I obtain detailed information on alterations, service histories, problems and possible disputes. This level of service acts as the eyes of the Solicitor acting for our clients.
4. In preparing your Report I pitch the words I use to my assessment of each clients technical property understanding: in other words I design advice to suit each client, as all clients are different.
5. I make sure you know that once you have your Report I am available to explain things to you, if you need that re-assurance.
6. If you need advice on what courses of action you could take I will advise you of your options.
7. If you need advice upon what Contractors to use I will make recommendations.
8. If your Solicitors or loan source need additional advice or information I can provide it.
9. If you need robust opinion to help re-negotiate the purchased price, just ask.

In other words, for the price of a survey you get a full Consultancy Service thrown in. I will not leave you stranded.

Practical, good communication is just as important to us as it should be to you. Our high service level not only helps you but also the seller because our actions do make the difference between actually buying and dropping out because “it all got too complicated”.

To some, our high service level is difficult to appreciate or understand. To those we have helped by these service standards we have customers for life and we have proved to be life-savers in a world of doom-and-gloom.

House of Horrors OR Home Sweet Home? The choice starts with who you allow to act for you. Do not get misled into requesting a simultaneous loan valuation and private survey: this is not the route to take for several reasons. Call us and we will explain.

Finally, let me provide a few examples of professionals who have been negligent and who cost clients thousands of wasted pounds:-

• Surveyor could not tell if the loft excrement was from vermin or bats: it was the latter and this caused redevelopment to be delayed nearly two years – (= technical incompetence).
• Valuer who over-valued a home by 55% – (= lack of local knowledge and quality control).
• Surveyor who did not detect that a house had been structurally underpinned three times: the effect of this was the client bought at an inflated price and was then denied Insurance cover and cannot now find a buyer at all – (technical and professional incompetence).
• A flooring contractor who laid a solid floor topped with hardwood: both failed and required replacement – (technical incompetence).
• A Solicitor who negligently conveyed a home that the seller could not then dispose of – (technical and professional incompetence).
• A Surveyor who did not know the difference between traditional construction and a home now designated as defective under late 20^th century legislation and is only worth half of what was paid for it – (technical and professional incompetence).

PROinspect have acted as Experts in preparing Court cases or in preparing evidence for Insurers in these and many other such cases. We are as pleased to act for you, an individual, as for acting for a large Company. Our standards do not vary.

High fee cost? Well no; we hope we are not cheap but above all we plan to be the best value-for-money. Many say we are safe-pair-of-hands in a wicked world.

Why chose an independent Home Condition Surveyor? It pays to not take the chance that cheap may be beautiful. You need expertise and certainty. We provide professionalism and robust, practical help.

If you have ever had a UK mortgage you will know that often, but not always, you get a copy of a Valuation Report. This report is NOT a survey and never has been. So, what is the status of the Valuation and can you rely upon it?

Let us start with the definition of Value? An assessment of what the general marketplace would bring forward and offer for the purchase of a home. It assumes certain things – that reasonable marketing has already been completed and reflects the state of the market prior to valuation.

Unless the basis needs to be different for a specific stated reason then the general valuation methodology is as follows:-

Analysis the market for similar homes – similar in terms of location, size, construction, accommodation, materials and design plus condition. Rippling out from an epicentre (the location of the home) you then look for nearest match actual sales or the asking prices of homes not sold but are on the market and available to buy. Furthermore, an analysis must be made of  selling prices of similar homes that have sold over the last six months or so. When all this has been done then the data is used to assess the subject home making allowances, both negative and positive, for each material difference.

This comparison method is an imprecise science. Indeed I would describe residential valuations as an art and not a science. When politics, Bank protectionism and potential rogue factors such as Valuer age and brought into the equation it is not at all surprising that the very large majority of UK residents remain confused over what is a survey, what is a valuation and what do I need if I am buying.

Some of the below listed factors can be both helpful or troublesome in any individual case as often we need to be protected from our ignorance. However, I for one believe that the Valuation Industry has fallen well short of educating the public on what a simple Valuation is.

So where does confusion set in?

(1) It is not a survey. No home Valuation can be termed a survey. A Survey is a detailed assessment of the risks affecting, and the condition of a home based upon a reasonably comprehensive inspection of all the component parts of the structure.

(2) No bid from a special purchaser can be reflected as this would be a special case and not general market value.

(3) It assumes that both seller and potential buyer act knowledgeably and prudently. However, this is not my own experience of over 35 years of acting for sellers and buyers.

(4) Special rules can apply. For example – if the home to be valued is brand new it is nowadays determined that the loan worth of a new home is based upon its value as if the home was second-hand (not new). It is the same principal as buying a car – in theory once purchased the car is not new and is instantly worth less.

(5) Many Developers (selling brand new homes) provide incentives for you to buy their products. Discounted this month! Cash-Back deals! Carpets and Curtains included this month! No mortgage payments for a year! No Fees purchase! You know the sort of thing. The Valuer must have knowledge of such matters and ignore the time limited benefit of such incentives. This means a possible down-valuation of the property is about to land on your doorstep. This is standard UK Home Valuation policy and procedure.

(6) Another theoretical problem is that the Loan Valuer is valuing for loan purposes: he is not valuing for YOU. This may seem rather a strange thing to say but if I bought a home and asked a Valuer his opinion of “value to me” he would ask me why I am buying. I might say that the home is next door to my parents house and it has special value to me. In this example I might be prepared to pay a premium, something extra to market value. Such a definition would be termed “special value to me” and is not market value.

(7) Market trend analysis problems. A Loan Valuation is prepared by a Valuer acting for a Loan Company assessing the worth of the property for loan purposes. If the Loan Company knows, fact or perception it does not matter, that values are about to fall, then Employer instructions to that Valuer would be to be cautious: perhaps even to down-value most cases in order to ensure customers do not go into negative-equity and perhaps be at risk of defaulting on the mortgage. By this method the Bank is protecting itself from its customers and such business methods are a potent resource it is armoury. These market and company pressures can get out of balance. The worldwide credit-crunch showed us the power of perception and protectionism by Banks and Finance Houses. The customer always came second to Bank profits.

(8) In theory you could get differing opinions of value, based on the same assessment methods (see later comments), depending on whether your Valuer is a Mortgage Company Valuer or your own employed Valuer (as well as whether your home is brand new or second-hand).

Indeed such Loan Company policies can, collectively, actually influence market value. Lets assume you own a non-standard home form with very few similar houses like it. The demand for your home may be quite restricted if loan finance is in short supply. All it would take is for the Loan Companies to come together and agree to not lend above, say 50 per cent of valuation, or if your Flat is over the lower five storeys in a block, if your home is constructed in a certain way, etc….

These types of thing have happened in the past. Financial Regulators have failed to stem the tide of Bank Power and must accept some element of blame for the consequence – Credit Crunch.

Summary? What do we need to remember in this less-than-transparent world?

• A Valuation is not a survey.
• Some Valuations will assume things different to your own circumstances.
• Loan Company Valuation policies may adversely affect the Valuation by hamstringing the Valuer.
• Never assume that because a Bank will lend to you that the property must be in good condition.
• Where a valuation variation/discretion may be exercised nearly every time that discretion will not be in your favour (it will be in favour of the Banks).

One final thought . A scenario has been highlighted to me by various hits upon my own website (worried buyers or home owners) and by my experiences with preparing Expert Witness reports for Court work. The average age of a residential Valuer is very high in some countries. I do not know the statistic but would guess that it is around the 58 to 60 years old level in England. This means that many residential Valuers are nearing retirement age. As such, it is alleged, they do not want to adversely affect their pension or employment status-quo. This, allegedly translates to over-cautious valuations, often very significantly below market sustainable values therefore limiting the loan available to you and damaging the demand for that type of property.

Just to complicate matters further the UK Valuation industry is about to let loose a new form of Valuer – somebody who analyses market data and says that the value could be between X and Y. Plus, some loan valuations are to be produced by automated means, a further extension of market data analysis rather than an assessment based upon a human actually inspecting a property. These matters will further confuse us as we come out of the current UK General Election and Economic downturn but I will not analyse these matters here (another day, another article and another Valuation!).

I have inserted this reference page as much confusion reigns in the marketplace about what is, and who does, a detailed house valuation or survey.

Need a detailed House Inspection Survey? A Structural Survey?

It is easy to lapse into jargon that not everybody can understand. Also some clients ask for the wrong survey option EG: Many clients ask for a Structural Survey (a Level 3 product) but in fact they mean something else.

What the client wants is a Building Survey (a Level 3 product), perhaps with a Market Valuation (a Level 1 inspection product): somebody has told them that they need a full Structural Survey and so that is what is requested.

The key is to know what drives the need for a survey. This is why PROinspect place such high emphasis on one-to-one talking to all clients. If we understand why you need a report and what that report is going to be used for then we can recommend the best and most relevant survey product.

Many years ago House Surveyors did basically three services – Valuations (level 1), Homebuyer Reports (level 2) and top-of-the-range Structural Surveys (level 3). This became very confusing because Structural Surveys were also being completed by Structural Engineers, Chartered Surveyors, Chartered Building Surveyors, various differing forms of Engineer etc….. Often each version of a Structural Survey was completely different and the Public were highly confused.

The main Controlling Bodies eventually came together and decided enough-was-enough with the result that nowadays these Professionals offer the following services (related to House selling/purchase):-

Structural Engineers – Forsenic diagnostic reports on structural movement including load-bearing calculations. Often described as “you know you have a problem, now let’s analysis it”.

Chartered Surveyors (PROinspect) – House Building Surveys (condition reports) on the very large majority of UK housing. Can include Market Valuations.

Chartered Building Surveyors – Usually highly detailed Building Surveys but in circumstances where exposure of foundations etc… may be required (or other “further investigations”). Can include repair costings but generally cannot provide Market Valuations.

Various differing forms of Engineer – Without wishing to be too elitist such persons usually offer only a diluted or partial service.

Home Inspectors – Most cannot or could not complete a Building Survey or Valuation. These complete Level 2 survey products alone.

Most UK Buyers, Owners and/or Sellers use Chartered Surveyors for survey requirements.

By the way, don’t get confused about qualifications: the professional heavyweights have FRICS after their name. AssocRICS and MRICS are valid qualifications also but these persons may have limited experience compared with FRICS members of the Royal Institution (RICS).

You can check Surveyor qualifications at this website RICS.

Don’t think that you get decent advice in a full Building Survey. A well crafted level 2 Survey Product will give you what you want to know about the presence of defects and the effect they have on property value; what a level 2 product may lack is some of the finer detail in terms of extensive explanatory comments. Don’t forget you can always call your PROinspect Surveyor if you want additional advice: we don’t charge extra for talking to you!

ARCHIVE ARTICLE FROM NEW YEAR 2009:

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What is Value?

I got a new iPOD Touch for Christmas. 16GB. 3,500 songs 20 hours of video. It really is brilliant, stylish and both functional and user-friendly. How did I live and work without it?

Just before Christmas I also began to consider moving home again. My wife and I had seen another home that we both liked and it set our minds to thinking……….

One result was that I had a chat with a local Agent about our own home. That Agent naturally asked about what we were looking for. I thought for a moment and then realized this was difficult to express. Yes, we had a budget “top price” we could afford, we wanted something nice but after that I realized that I couldn’t give much more guidance. When we saw the right house it would shout at us. Why?

It’s a bit like the iPOD: we have basic needs at the practical level but above that and anything extra is a luxury; for us, it doesn’t really matter if it has only 4GB or 32GB, 2 bedrooms or 4. I could use my computer to upload daily selections of differing songs to my iPOD so why is it so important to have your entire library to choose from? Do I really need something that is not essential?

I love housing: I genuinely have a passion for inspecting for defects and then briefing the potential buyer (or seller). I have a passion for picking up the scent and being able to diagnose whether the evidence is serious or not. But, when it comes to my own home, provided I can relax without wind, rain and neighbours interfering with my life then I am happy. So, why must I have “detached” or “two spare bedrooms” or “three reception rooms” etc….. They are not essential.

What I am defining is that the value we all place on housing is different as we have differing needs, standards and aspirations. We assign differing values to all those components that make “a home”. What one may see as valuable may not be the same generally within the marketplace.

So…..when Valuers, Estate Agents and others are assessing your home for “market value’ what are they really assessing?

Professionally the answer is :  “market value” is the best price reasonably obtainable on an unconditional basis for cash consideration on the date of valuation (Report date if not specifically stated) assuming a willing seller; prior to the valuation date a reasonable period for proper marketing (to agree price and terms) and for the completion of the sale has elapsed; that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation; that no account of any additional bid by a purchaser with a special interest be considered.

There may also be caveats about the Assessor assuming that the condition of the building is reasonable, that those areas not seen, covered or otherwise inaccessible are free from serious disrepair, that good title can be shown and there is nothing strange from a condition, legal or lease point-of-view: the list is endless.

But, at the end of the day please remember three things:-

(1)    that we all have differing needs, expectations and plans that come together in differing assessments of worth, plus

(2)    that history repeatedly tells us that Mortgage Lenders do not have the ability to accurately assess the true worth of any particular home or the credit-worthiness of any particular individual.

(3)    Although most of us are not bothering to study the HIP and Energy Performance Certificate upon our intended purchase we do so at our own peril in that 2009 may be the precursor year that sees energy costs (carbon footprints) begin to alter the established structure of house prices. To a small extent this process has already started but I am suggesting that a threshold will one day arrive after which poor energy performance seriously penalises the value of your investment.

The old adage is correct – Value is that sum an individual is prepared to pay. But, as most purchasers still buy with a mortgage, the availability of finance could increasingly define value – eg: if differential mortgage rates where introduced according to carbon-footprint assessments then those poorly performing homes would be hit hardest. You have been warned.

Value is therefore not something that can be religiously assessed in relation to comparables sales – so much “per bed-space” or “per metre floor area” etc……

Valuation is an Art, it is not a science –

The latter is a good means to achieve a guide price assessment only. Is this why Estate Agents are termed “Negotiators” rather than Valuers? It is not a function of qualifications but, instead, more akin to levels of experience; knowing how to assess an individuals needs and discovering what such a person is prepared to bid for a home that meets those needs in various disjointed or incomplete ways.

Therefore the best Valuers and Negotiators and those who can analyse the market most effectively but also analyse people the best. Mortgage finance terms and any other “influences” then distort those opinions.

I can give my opinion to a client but that client must then assess whether to ignore my advise, or not. If they do ignore it then what will be the cost of that override decision? Also remember we do not all act rationally, all the time. Provided an individual can assess property and market risks, and put up with all the nonsense thrown at them by Lenders who seek to tick boxes rather than assess the person individually, then all should be well at some point in the New Year as a new equilibrium establishes itself.

At some point common-sense must re-enter the marketplace. Sellers marketing at realistic prices and buyers’ Lenders assessing risks in a more practical, human manner rather than the tick-a-box route to insanity that prevailed for the majority of 2008.

Estate Agents have a major part to play here and Sellers need to trust their appointed Agents to get it right. Those that place a home on the market at inflated prices are doing us all a disservice, a matter than often rebounds badly; part of the 2008 spiral of loss-of-confidence.

I do hope this new equlibrium comes about sooner rather than later, for all our sakes.