How to Choose the Right Property Survey

Whenever you buy a property with a mortgage, the lender will insist on a Valuation Survey to check the property is worth lending against. Unfortunately such valuations exist to protect the lender’s interests, not to inform you adequately as the buyer. The fact you generally pay for this survey no doubt explains why 80% of homebuyers rely on the lender’s valuation. But on this occasion you shouldn’t follow the crowd. If you’re smart, you’ll commission your own independent survey. When you do you must choose between a Homebuyer’s Report, and a Building Survey (aka a “full structural” survey).  This article will help you understand why it’s worth paying for an independent survey, what you can expect for your money, and how the type of property you’re buying should determine which survey you choose. 

 Valuation Survey: Necessary but Insufficient

Valuation Surveys are brief and superficial because your lender is less concerned with the quality of the property than the security of their loan. In the current credit climate this loan is generally a much lower sum than your offer price. The surveyor will usually be in and out of you future home inside an hour, or may simply “drive-by”.  Such a survey will merely check that the price paid is in line with similar properties in the area given its age, condition and location. It won’t scrutinise your future home for any potentially costly faults. You’ll get a copy of a short and fairly uninformative report. Since you are not the client, you will have no redress over any errors. So you are unlikely to be any better informed or protected than you were before – despite having paid up to £300 for the privilege.

 Homebuyer’s Report

The surveyor will usually spend at least a couple of hours in the property and up to half a day producing a standard format report typically about 20 pages in length. You can expect this to be written in plain English. It will assess whether the property is a reasonable purchase at the offered price so you can make an informed judgement as to whether your purchase is sound and your offer is fair. You can expect a comprehensive account of the property’s overall condition, and a summary of any urgent or significant repairs. If you do wish to re-negotiate you will do so with a much surer grasp of the hidden costs you’d face as the new owner. The valuation should cover both market and insurance value.

 Building Survey

Unlike the Homebuyer’s Report this does not automatically include a valuation unless you ask for one. The contents will be much more detailed (up to 40 pages or more), and the language more technical. If you’d appreciate photos to illustrate the analysis, do check this before commission as there is no standard format for this survey. The surveyor will make a thorough check of every visible or accessible part of the building, spending up to a day on site. You can expect to wait up to two weeks for the full report. If you need to get a verbal top-line earlier you should make this clear at the outset.

You can expect a detailed account of major and minor defects, a thorough analysis of the building’s construction and condition, and technical advice on remedies and ongoing maintenance. Both survey and report can be tailored to your particular concerns.    

 Choosing the Right Survey

A Homebuyer’s Report is well suited to any standard (brick or concrete) property in reasonable condition built after 1930, which has been subject to little in the way of alteration or extension.

A Building Survey is worth investing in for properties built before 1930, when building regulations were more relaxed. Period properties may not have the foundations expected today. Full surveys are also worthwhile for any property of less conventional construction (timber frame or stone), any dilapidated building, and also anywhere which has been extensively renovated or where you plan major alterations. You should regard the extra expense as a worthwhile investment given that such properties are more expensive to fix and harder to value.

 Choosing the Right Surveyor 

Lenders may offer to upgrade your survey for an additional payment, but you have no guarantee as to the quality of the surveyor. Choose someone independent who knows the area well. If you are buying a period house, make sure that the surveyor has relevant expertise.

An independent property survey is always worth paying for to avoid costly mistakes. Think of it as the best value insurance policy you’ll ever buy.

How to Assess a Property’s Value

Searching for a new property is a famously stressful experience. So when you eventually reach the point of negotiation you’re in a high-stakes game, one where you’re likely to feel as if the vendor’s agent holds all the cards. Fear of losing out naturally makes you vulnerable. Once you’ve set our heart on somewhere, all those media reports of slow markets and falling prices offer little comfort or assistance. In reality every house price will be negotiable to a greater or lesser extent.

N is for Negotiability

 After months of fruitless searching you see somewhere you like. It’s got everything you want in a home. Unfortunately it’s at the upper edge of what you can afford.

 So how can you tell whether your dream home is really worth the asking price?

 And if the price is too full, how much lower might you sensibly offer instead?

 You want to know the property’s Negotiability – or N-Factor for short.

 Establishing the N-Factor is not an exact science. There’s no magic formula. But negotiability is generally determined by the inter-relationship of 4 variables: Desirability, Comparability, Supply, and Proceed-ability.

 D is for Desirability

 If you didn’t like the property you probably wouldn’t be reading this in the first place – but how many others are really interested? It’s harder to tell with fresh instructions. The longer a place has been on the market, the lower its D-Factor will be. Changes of estate agent or multiple agencies are both tell tale signs of a lower D-Factor.

 C is for Comparability

 How many comparable properties exist in your favoured area? In a typical suburban street the answer is very clear. Consequently, variations in asking price between similar homes in the same street are not too hard to understand. Character or period detached properties in the country are naturally more difficult to compare in this way.

 I always employ a few simple principles when assessing value for clients, whether in town or country.

Firstly I adjust recent historic selling prices for property inflation by postcode.

Secondly I assess fair value from top down or ground up, i.e. the cheapest/ most expensive property in the street, neighbourhood, or village. I’m always wary of “herd pricing” by estate agents, an inevitable consequence of the way competition between agents to secure instructions can push up asking prices.

Thirdly I benchmark both these measures against total internal floor space. Outbuildings such as garages, stables or garden rooms should be treated as distinct from living and working space in the main dwelling.  

A good comparability analysis is invaluable. It enables you to make a reasoned assessment of what intangibles (such as a quiet site, large plot, Grade 2 listing, or thatched roof charm) are really worth to you as premium over fair value based on the C-Factor.

S is for Supply

How many similar properties are there on the market currently? In other words how much choice do you the buyer have in practice?

The lower the S-Factor, the more important it is that you are decisive in choosing what to offer and how best to frame your offer. Because the longer you wait, the more likely you are to face competition.

P is for Proceed-ability

Have you the finance ready? Are you a cash buyer, chain free, or under offer?

Proceed-ability has a clear hierarchy. Cash buyers top the hierarchy, followed by sale agreed chain free buyers, then sale agreed buyers with a chain – and so on. The importance of the P-Factor is easily under-rated. It is increasingly screened by the vendors’ agents at all price levels. They will always favour the more proceed-able buyer.

A Working Formula for Negotiability

Property valuation is not an exact science. But we can illustrate the relationship between the 4 Factors with a simple formula:

 D/ (C+S) – P = N

It doesn’t matter whether this is strictly robust, mathematically speaking. What counts is the relative (high/ medium/ low) levels of the component Factors, and how they modify each other to drive that critical Negotiability.

The higher the right hand figure (N) is, the smaller you may expect the gap between the asking price and the selling price to be. To secure a place with a high N-Factor you may have to pay close to the full price. But as that right hand figure gets smaller, you may reasonably expect a higher gap between asking and selling price. 

Using this approach has three big advantages.

Firstly, it lets you put a sensible figure on Desirability in the context of a given location and property type. It’s nice, sure – but is it really worth £XXX,000?

Secondly it helps you turn Comparability into an effective and meaningful benchmark to furnish a reasoned argument to the vendor’s agent in support of an offer below the asking/ guide price

Thirdly, it reminds you to emphasise your Proceed-ability in your first offer and any subsequent improved bid. Sell your property first before you start making serious offers, and you’ll be treated much more seriously by vendor’s agents. They may well even favour such buyers over higher bidders who are less able to proceed.

Applying these principles should make your negotiation less daunting and more straightforward, and deliver the home you deserve at a fair price.

 

Mind the Neighbours

You’d be forgiven for assuming that problem neighbours were confined to sink estates or high density urban housing. You’d be mistaken, as shown by a recent experience of a client of mine.

I got involved on a negotiation only basis with a good sized detached property in a Hampshire hamlet. Conservation area, quiet rural road, large attractive plot, slightly underwhelming 1960s house which nonetheless had some potential.  That said, the asking price was stiff – fair value would have been around £740K, but the place was being marketed well north of £800K. 

As I usually do, I got to the viewing early, and wandered down the lane. I simply wanted a quick look at the historically top priced property in the neighbourhood, just to convince myself that my judgement was right about the place I was assessing. Halfway down the road I was accosted with an   aggressive “CAN OI ‘ELP YEW?!” by a chap in the field between the two  properties in question. I cheerfully declined, and went on my way. But his belligerence stuck in my mind – it was hard to seen how I could have been mistaken for a burglar. Later that morning, having completed the viewing and discussed our negotiating strategy, I mentioned the incident and suggested the clients ask the estate agent about this guy before we start the offer process.

It quickly transpired that he and his partner were living in a summer house in the large neighbouring field which they’d ostensibly bought to keep horses. The building did not have residential planning permission, and none was likely to be granted given the conservation area status. The couple were “known to the local council” (always an ominous phrase), whose sterling efforts to remove them were making little progress. Of course this kind of thing should be spotted by any decent conveyancer in enquiries before contract. The estate agent in question owned up the instant the issue was raised. How he thought anyone would buy the place in the circumstances is an interesting question. Unsurprisingly no negotiation went ahead. It just shows that it pays to look before you leap – and that a second set of eyes can help you avoid wasting time.

How to Choose the Right Estate Agent

In a slow market, it’s critical to choose the right estate agent. But faced with dozens of estate agents who look and sound alike, how do you identify one who will do a good job of marketing your property? 

When you invite agents to value your property, they’ll have a shrewd idea of what your property will eventually realise. But they also know vendors generally instruct those agents who suggest higher valuations. Inevitably such competition is likely to produce inflated valuations to secure the instruction. So think twice before you opt for the agent who blithely suggests a temptingly high asking price. A lower price which generates plenty of viewings is better than a higher price which satisfies only your vanity. 

Happily there’s a simple solution to this dilemma. Ask every agent to give you two prices – an asking/ marketing price, and a target selling price. What you should be most interested in is their anticipated selling price. This will help you assess offers rationally. It also enables you to budget realistically when searching.  Anyone proposing a very wide or small spread between the two prices should explain the gap. 

Once you’ve heard a target selling price, invite the agent to give examples of comparable local properties which they’ve sold for similar prices in the last 6 months. Good agents will come prepared with such illustrations. You’re looking for evidence they can deliver as promised. Avoid valuations from agents whose stock is generally unlike your own property. Personal recommendation is always helpful, but friends and colleagues may not be expert guides to an agent’s form where your house is concerned if they’ve sold much larger or smaller properties, or ones in a different neighbourhood altogether. 

All agents will enthuse about their costly but largely indistinguishable prominence on national websites and in the local /regional press. In reality most agents who maintain a large print presence nowadays do so more to impress potential vendors than actual buyers. Find out how they maximise viewings of properties fresh on their books. Ask about any marketing tactics that may be relevant to your property.  Listen for telling details, but don’t feed leading questions.

Establish how they manage viewings. Economic reality means that the valuer you’re talking to won’t conduct many of these. Most viewings are conducted by junior staff, or even part-timers for higher workloads at weekends. There’s little point in expecting special treatment. But you should expect helpful and honest feed-back, and a senior member of staff to remain accountable over all viewings of your property.

 You’ll generally find the rate card negotiable nowadays. Driving too hard a bargain may lower the quality of service. Treat offers of low commission rates as warily as you treat the highest price valuations. Instead consider aligning your interests with theirs by suggesting a small bonus for securing a minimum price and/ or selling within a certain time frame, according to your priorities. Don’t get tied into too long an exclusive contract. Don’t be afraid to change agents or instruct a second agent if you are unhappy with progress. Make your expectations clear at the start, and ensure the contract you sign reflects these. Instructing multiple agents smacks of desperation, and is best avoided.    

Vendors can easily assume that when they sell fast for a good price it’s all because they had a beautiful house. When this doesn’t happen it’s easy to assume the agent is at fault. It’s your responsibility to choose the right agent for the right reasons. Doing so will always give you the edge over vendors of similar properties who’ve chosen the wrong agent for the wrong reasons.

The Perils of Projects

Something I come across a lot when agreeing a search brief is people who say “but of course we’d also love a project”. Sure as night follows day they add “…especially if there was a chance to add value”. 

In most cases this is code for “is there any way you could find us a picturesque wreck going cheap that we could make over? It’s not that we’d be going to sell it, but we’d love the feeling of a paper profit”. 

Much as I enjoy a challenge, I find myself explaining a few harsh realities as diplomatically as possible. Firstly such green field opportunities are few and far between nowadays. Secondly they are very hard to come by – competition is intense, and developers will often snaffle them up long before anyone else has even heard of them. This imbalance of supply and demand naturally means that such sites command handsome prices. So sadly you’re unlikely to come across undervalued gems however obscure or rural their location.

Even when you do find something suitable, expect the economics to be challenging. It’s not unusual to find an unliveable property on a promising site priced at pretty much the market value of a liveable property. This is because the development value of a site with built-in planning permission will be way higher than you imagined. 

I was recently looking for a 3 bed cottage in rural Dorset (sensible budget around £300K). I came across a semi-derelict wooden chalet in a lovely rural setting with a generous plot asking £250K. The particulars said nothing about the property, which was clearly bound for the bulldozer. What was being sold was the development potential of the plot. Let’s be optimistic and say the plot went for about £230K. Building a 3 bed property from scratch would be in the order of £130K, giving a total cost of £360K. In such a situation the hefty asking price targets two very different types of buyer. One is a developer who will need to put 2 3-beds on the plot to see a decent return. The other is a wealthy private buyer who will use the site for an architect designed dream home of much larger dimensions. 

If you’re quick and committed enough to beat either of these competitors to the punch, you’ll need to pay the premium involved. That’s if you can work out what the premium is. Development properties/ sites are hard to price. So estate agents will often put them to tender at ‘guide prices/ offers in excess of …’ Since the small print may reserve the right to accept none of the deadline offers, this can be  a fishing expedition to test the level of market interest. Properties which are plain ugly, or in shocking condition, command high prices based on the right setting or a sufficient sized parcel of land. The growing popularity of self-build only fuels competition further. 

If you’re set on the project approach, far be it from me to put you off. But you’ll need deeper pockets than you thought and a lot of commitment. You can get to put your mark on somewhere in a way that’s more satisfying than money could ever be. However you need to go in with your eyes open. And if you’re looking for a quiet character rural 3-bed property in Dorset, there are easier ways of finding one.

Choosing the Right Property Search Agent

An obvious but appropriate topic for my inaugural blog post.

More and more people use property search agents to find the right home faster and avoid overpaying. There are at least 200 property search agents in the UK. With the exception of a few big firms, most are one or two man bands. But just because anyone can set up business as a property finder doesn’t mean everyone does. So I wouldn’t fret too much about cowboy operators simply because success fees are only payable when you’ve exchanged contracts – and you’re hardly likely to be manipulated into buying somewhere you don’t want.

To make the right choice you need to know two things. Firstly, what personal qualities should you seek in an agent? To a large extent this is a question of personal chemistry. Secondly, how do competing firms work? Understanding this is important in getting the best value for your money. Knowledge counts more than judgement here.

When it comes to choosing an agent, it’s a people business. Property is a very personal thing. Search agents’ clients are looking for something quite specific, even a little unusual. When you’re paying someone to be your eyes and ears in a market it’s important that they’re on your wavelength. Good property finders will be curious about your tastes and needs. They’ll be interested in why the right place has eluded you to date, and keen to understand your experiences, good or bad. You need someone who has ample confidence and presence to deal with professional sales people effectively, but is also thoughtful and sensitive to your individual requirements. Every client is different and should be treated accordingly. Good search agents will be happy to discuss your requirements on a no-obligation basis, and offer free advice to help you decide whether to use them or not.

Whereas estate agents won’t always say why your brief is proving so difficult, a good search agent will be direct about the issues, without being rude. It’s not in their interest to take on briefs where the property in question simply does not exist. Instead expect constructive suggestions on how to move forward. If what you’re looking for doesn’t exist, how else might you find what you want? If your budget won’t stretch to (say) a 4-bed character detached property in your chosen area, a good agent should be able to identify an area you hadn’t thought of that will suit you every bit as well.

When it comes to discriminating between organisations, big isn’t always beautiful. A few property search firms offer national coverage, but many more will specialise in a much smaller area they know well. Size isn’t everything. Bigger firms have higher revenues and marketing budgets, but that’s not the same as better quality service for clients. Several of the big players are franchise operations. Nothing necessarily wrong with that, except that quality in the property search game can’t be centrally standardised and guaranteed in the same way as when you’re buying hamburgers or skinny lattes. Best ignore the branding hoopla and look carefully at the strengths of the individual you’re considering in the area you want to live.

Fee structures are all pretty similar. You pay a non-refundable registration fee, with the balance as a success fee based on a percentage of the agreed sale price. But fee levels vary a lot. Registration fees range from £400 to £2,500. Success fees range from 1% to 2·5% of the sale price. Higher commission rates can reflect market positioning as much as superior quality service – some agents concentrate on properties well over £1 million and charge accordingly. At the very top end it’s an insider world. So if you’re in the market for a Kensington mansion or a beach front in Sandbanks, a premium priced service may be unavoidable yet still represent good value for money.

Elsewhere, higher fees may simply reflect office overheads (particularly pricey in London) and/ or outsourcing the labour-intensive search work invisible to clients. You may effectively be paying more for less of a senior person’s time and attention. Such a set-up has obvious commercial advantages but the benefits to you as a client are more debateable. Some firms simply “harvest” clients and sell them on to third party freelancers at a mark-up. No doubt these freelancers are perfectly capable, but whether you’re happy paying a premium to a middle man is up to you

None of this is to say that any particular type of search agent is automatically better or worse than another. But it’s more a question of “horses for courses” than “you only get what you pay for”.

Welcome to our Blog

Welcome to the Hampshire Property Finders blog. I aim to enlighten, educate and occasionally entertain anyone thinking about buying a new home  or a second property. If you need help finding the right place in Hampshire, Dorset or Wiltshire you can e-mail me at info@hampshirepropertyfinders.com or phone 01590 270107 or 07970 979794. I’m always happy to discuss your requirements without any obligation.