Tales from the Front Line

Caveat Venditor

by Philip Harvey
on May 5, 2010 in Country Search

I received a call this afternoon from a vendor desperate for some impartial advice. The agents had been at it again, falling over themselves to secure her instruction but ultimately confusing her with their conflicting advice. Initially they were trying to be accurate and professional, however in their desire to secure the instruction in the face of competition from other agents the mask of professionalism slipped giving way to unabashed “buying” of the instruction by suggesting higher and higher possible figures veiled by the suggestion that they could generate competition.

Generally we find that owners are well aware of the likely value of their properties and disabusing them of long held, if amateur, assessment is a high risk strategy. Far from delighting them with the promise of greater wealth it will more often than not cause anxiety and stress, especially if the opinion changes after an initial assessment or differs from that of other professionals.

Valuing non-commoditised country property is notoriously difficult; rarely are two houses the same, in the same location or sold under identical market conditions. Ultimately many sales are an auction, either the traditional, where the price rises in competition from a modest asking price or a Dutch auction where an over-valued property falls in price until someone is prepared to buy it. However, getting the assessment right is crucial to our business. Our clients are always the first to see houses that are about to come to the market and we have to know what they are really worth. Our role as an advisor is to ensure that our client ends up owning the home they have set their hearts on whilst paying as little as possible to do so. If we didn’t know what the house was worth in the first place it would be impossible to advise when to take it out of the market and when to leave it in order to buy at a more advantageous price once it has failed to sell.

In order to do this we need to use all of the tools available to us. Most importantly we need to see everything and find out exactly how much it sold for to build our comparable knowledge. Clearly here we have a huge advantage as a selling agent only gets to see the houses they are invited into, which even for the biggest players probably only accounts for 25-30% of the market. We then need to combine this with an understanding of who the competing buyers are, how well educated they are in the market, how desperate they are and how deep their pockets are.

I find it amazing that many agents feel compelled to shoot from the hip and provide owners with a figure before leaving a valuation. The margins for error are simply too high, many is the time that I have come away from a house and been glad that I hadn’t nailed my colours to the mast on value as some of the realities of the location, size of rooms, lack of acreage closeness of a near neighbour etc etc hit home and impact on initial thoughts.

Agents have to be credible and provide facts to justify their thoughts. Owners have an expectation and through the valuation process and beauty parade of selling agents they want to know where they are likely to end up and what strategy should be used to get the best result. They don’t want to be filled with false hope and false promises.

In the case of the distressed vendor above, the impartial advice we were able to give has given them comfort to employ the right agent at the right price. They’ll do well too as it’s a lovely house, it’s just a great shame we don’t have a client for it!

What is value?

by Philip Harvey
on March 25, 2010 in Service

I received a bill recently from a builder who had come back to replace twelve light transformers and a faulty boiler valve. The cost: £660! I couldn’t believe it, and didn’t pay him for over a week in protest. No matter how much he justified it to me I just couldn’t understand how it could cost so much. What made it worse was that I had just bought a whole fully functioning, in tune, half ton piano for only £140, delivered 35 miles to me for only £75 more – what a bargain! On reflection, of course, I was out of line: the piano, however good, is at least 40 years old; the cost of components, travel and his time certainly justified the £660 bill but in the electrician’s case, I just didn’t ‘feel’ the value.

I was with an estate agent today who was feeling totally let down after a client had called him to try and reduce his fee. His justification was that the agent had sold the house to the second person through the door and therefore he hadn’t had to work too hard? Knowing the house I had more than a little sympathy with the agent who, in my opinion, had skilfully managed to get the buyer to pay well over the asking price (which was already 15% over my assessment of value!) by convincing him that he had a long list of potential buyers waiting in the wings. Perhaps the vendor would have felt the agent’s value more if the process had taken 6 months with a mass of advertising and 50 viewings, even if the end result was a sale price of 15% less.

Other professional advisers in our field who seem regularly to struggle to convince their clients of the value of their services are architects and lawyers. Lawyers are like the pilots of a plane, when everything is as it should be it’s sometimes hard to understand why they are so highly paid, but when a potentially disastrous situation presents itself, aren’t we all so glad that their remuneration reflects the years of study, training and experience they have been through. A pro-active lawyer will not see problems, simply issues that need to be explained and overcome, ultimately ensuring a buyer gets clean title and protecting their investment.

Architects are often seen as being expensive throughout the process. Before someone buys a house or plot they want sketches and ideas of how a house or extension will look, but as they have yet to secure the purchase they don’t want to suffer potentially abortive cost. When planning drawings have to be changed the original cost seems wasted, and when the full technical plans are produced before a brick is laid the costs are very significant due of course no architect can afford to wait until the project is completed to present his fee account, when the client may be better able to feel the value.

We are very lucky that, unlike estate agents whose fees are based on the sale price of a much loved asset, often being reluctantly sold, or lawyers and architects whose fees are a necessary but largely intangible cost. We have the opportunity to provide huge amounts of free advice, demonstrate significant performance and help in the acquisition of a much-wanted dream home prior to charging a final fee. The challenge for us though lies at the beginning of the process: most people do not see the value in paying someone to do things they feel they should be able to do themselves!

Disposable Architecture

by Philip Harvey
on January 8, 2010 in Country Search

Overcome by a sudden desire to build a beachfront house I have been pondering the concept of “disposable architecture”.

I have no idea if the phrase has been used before but it seems to describe coastal development the world over. Small plots of land, which capture both the beauty and the drama brought by the ever-changing sea state, hold buildings fit for the purposes of the current occupier. From fisherman’s shacks to movie star play-pads, structures are designed and built solely to meet the peculiar demands of the present inhabitants.

As many of these buildings are not occupied on a permanent basis their design life tends to be short and construction costs relatively low. Ultimately the constant regeneration of these sites comes back to the intrinsic value of the site, dramatically out-weighing the value of the bricks and mortar on it.

Thinking more widely we are of course seeing more and more “disposable architecture”. Any plot in a highly sought-after location, where supply is restricted and the existing structure is less appealing than those surrounding it, is in imminent danger of a nasty end at the hands of the wrecking ball. The resulting cutting-edge design will only be so for a short while and then the cycle will start all over again. I have just seen a plot on Wentworth redeveloped for the fifth time in less than 12 years, in which time its value has gone from less than £2m to more than £30m!

Ultimately few new houses have that timeless quality of design and construction that will draw buyers to live in them relatively unchanged for many years to come. Those that do, when combined with a stunning location, are a rare find indeed.

Reality check

by Philip Harvey
on November 27, 2009 in Properties

Are we really only a year post Lehmans? If I can bring myself to remember, the talk at the time was all along the lines of: ‘the end of the world is nigh’, ‘we must learn from the mistakes of our past’, ‘greed is not good’, ‘house prices won’t recover for a decade’…. blah, blah, blah! Self flagellation and moralising were top of the ‘where did it all go so horribly wrong’ pops.

If my memory isn’t playing tricks on me, previous recessions have all lasted a lot longer than this one, but in my small world it seems as if either it is truly over, (unlikely) or, (much more likely) many are willing to recklessly ignore the lessons of the very recent past and get carried away in throwing money at their housing problems. Forget discounts from peak 2007 prices if you want the best of the best in the country house market and you want it now, you are going to have to pay up.

A vast majority of the general property market is driven by affordability but at the very top end money is irrelevant, it is desire that counts. Every agent will tell you that supply levels of special houses are on the floor and look set to stay that way, they will also tell you that their applicant lists are full to overflowing, this is a bad combination. A leading Surrey agent informed me last week that they have 456 applicants registered for property over £2m within 15 miles of Guildford, I also know that only a handful of such properties have been valued for marketing in the coming months. The story is the same for other popular top-end markets such as Henley and Oxford.

Ultimately this is good for our business as more people see the value in what we do, but it is in no-one’s best interests to have a few desperate buyers with more money than sense vastly overpaying and giving vendors the illusion that their houses are worth far more than they actually are.

Mortgage malfunction

by Philip Harvey
on October 6, 2009 in Properties

I find myself strangely warming to HIPS, especially those compiled by a professional executor. They can include lots of really interesting information that can give the potential purchaser a great snap shot of issues surrounding a property. I even found a ‘last will and testament’ in one the other day (what ever possess someone to leave a considerable sum to the cats home and then give specific instructions as to how her own much loved moggies should be destroyed by the local vet?).

Don’t get me wrong, I still don’t think HIPS serve any real purpose in either speeding up transactions or preventing gazumping (which was, I believe, the original reason for their introduction) and I certainly don’t think you should be forced into having one prior to marketing.

Now, introducing mandatory timescales for the assessment of mortgage applications and the issuing of offer letters, that’s a different matter. Anyone who has tried to raise funds for a property purchase recently will know the frustrations. It’s bad enough watching the banks re capitalize themselves at our expense, without the added misery of the tooth-sucking interrogations into one’s finances, the embarrassing telephone conversations with stressed estate agents demanding to know what’s going on because their client is about to lose their on-going purchase, and the endless weeks spent waiting for the offer letter to fall onto the mat.

The delay is slowing transactions and in a time of low supply and strengthening demand, is leaving an even bigger window for the gazump or chains breaking down, resulting in the potential for more upset all round.