Posts Tagged ‘Spare Bedrooms’

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.