Last time we looked at the main reasons as to why it was so vital we get proper valuations on property, and now we will have a brief look at some of the factors involved in getting a valuation as accurate as possible. Saying that, this is a very detailed process and knowledge and experience are key to understanding this in depth. So to give you an easier way to undertand this, we will briefly explore what some of the well-known online automated valuation websites like ‘hometrack’ or ‘PropertyPriceAdvice’ and ‘Zoopla’ look at when estimating their valuation on property. Please note that online property valuation tools need to be treated with caution because none of them are 100% accurate.
For example, ‘PropertyPriceAdvice is another AVM (Automated Valuation Model) provider (similar to the ‘Hometrack’.How do they value property? Like ‘Hometrack’ the company’s economists use a version of the statisticalapproach to valuation on property called “hedonistic regression”.
Simply put, hedonistic regression is a way to value a commodity by calculating the sum of all its parts (or characteristics).In the case of a property these parts would be:
• Location of the property
• Age
• Type (i.e. Detached / Terraced / Semi / Flat)
• Number of bedrooms
• Number of bathrooms
• Number of reception rooms
• Quality of the kitchen
• Parking facilities
• Outdoor space
• The general condition of the property
That’s not an exhaustive list but I hope you get the idea.Their online property valuation and market data will provide you with:
• An estimation of your home’s current market value.
• An estimation of how much major home improvement projects would increase the value of your property.
• The number of property sale in your postcode area over the last 3 months.
• A list of schools within a 2-mile radius.
• A list of GP’s, dentists and pharmacies within a 2-mile radius.
• Your local crime rate.
As with any AVM, exercise caution (and a large helping of sound personal judgment) when using them because of the possible inaccuracies that they may present you with. One small gripe with this service is that although the online property valuation can be reasonably accurate, on occasion we’ve found the “how much an improvement project can add to the value of your property” information to be (in my opinion) a little unrealistic.
Certainly never rely on them solely for setting your sale price!!
At the end of the day, nothing beats research, research, research ….from your own efforts called due diligence, but to help you, I can point you in the direction of this really useful website which asks people what are their challenges in valuing property and then provides them with practical valuation, information and tips to help property buyers and sellers. Also, for UK Smart Property Buyers, it gives you the essential 5 Keyfacts you should know on Land Registry Prices.
So please check this website out by clicking on the link below:-

http://www.smartpropertybuyers.net/#/house-valuation/4558039778l

Good luck with your due diligence and hope you find the above website helps clarify how to go about getting an accurate valuation on your property…to buy or sell! A good tip is to use the holiday break to do this research as you have time to look at it more thoroughly. I shall try to do the same, and in the meantime, wish you all a very happy Christmas or seasons of the year, and a very happy prosperous new year! All for now…till the new year begins!
Sudeshna

P.S We welcome and will reply to your comments.

Since purchasing, selling or refinancing a UK residential property [and particularly your home] is probably the highest financial investment you could be involved with, it’s good to have crystal clear steps to execute when you want to know the value of that house. When it comes to selling your home there are few more emotive issues than the valuation of your property. Investors in property too have to fully aware of the valuations of the properties they are interested to buy, if they are not to make expensive mistakes with inflated or misleading valuations on property. The current property climate makes the valuation even more important as prices seem to be fluctuating and in some areas of the country, falling. It depends of course upon what you are using the valuation for. Agents will value your property in line with current market trends but their opinion is just that, opinion. It is chartered surveyors that can give a true valuation on property that is accountable, which is usually at a price. This valuation on property is usually required in mortgage deals as banks try to seek a cast iron sum for the lending of funds.

What is clear that in the UK the property market is currently slowing, while this may be untrue in areas such as London and the Southeast; in other parts of the country, prices are definitely falling. It is believed that the property market is in the worst state for a decade and hence a valuation that was legitimate six months ago may not be representative of a valuation in the present situation, subsequently up to date valuations are important. The reasons for the property market slowing are wide and diverse but what has been labelled the global ‘credit crunch’ is a definite factor.

While a valuation may place a figure on a property there is only one factor that determines price; that is what the buyer or investor is willing to pay. Sellers today are currently in a buyer’s market; supply has simply outweighed demand, meaning that the market is currently saturated with property choices. In this climate a valuation that is too high can seriously damage selling potential. It is believed that last year it took twenty percent longer to sell a house than in previous years, showing that the power is currently in the hands of the buyers.

The situation is not all bad for the property market however; seemingly the amount of first time buyer activity is increasing; in the past this has been seen as a precursor to resurgence. Property is once again becoming harder to come by as sellers realise that their valuation may be less than they are willing to accept, also fear and the media coverage of the ‘credit crunch’ have led to a loss of confidence and hence more people unwilling to put their property up for sale. This may be a good thing for the market generally as supply will once again hold sway over demand.

The process of making a valuation can be considered both art and science, making valuation resources extremely useful. For sellers the correct pricing is vital for a successful sale. If a property is undervalued a fast sale maybe assured but the money lost will be a painful infliction. Oppositely if a valuation is too high a property may sit on the market for a considerable amount of time, increasing the chance of sellers becoming frustrated and accepting too low a price to the advantage of a buyer or investor.

Automatic systems for valuation e.g. hometrack, zoopla, Rightmove are becoming increasingly popular for sellers and investors. The benefits of these systems are clear; with a database of thousands of property valuations the comparisons made can be infinitely more useful than those of an estate agent. The systems will give a base figure and then with some detective work it is possible for you to make an accurate estimate. However it is not always a benefit to go automatic, an agent’s unique knowledge of an area can be invaluable. As in most spheres, while technology may be advanced, the human factor should not be discounted.
Clearly the valuation of your property is a vital constituent of the sale; this is especially true in today’s climate. The automated systems present at the moment may not be perfect but do make a brilliant starting point for an assessment. While the human element cannot be forgotten, as this technology becomes more advanced, sellers, and investors will increasingly be making their own estimates. Whether these will be worthwhile and accurate remains to be seen.
It is therefore of immense value to have a system that combines the automated and human elements in one, and I would highly recommend checking out the ‘ Smart Property Buyers’ which provides practical valuation information and tips to help property buyers and sellers to work out that all-important valuation on property.
Please click on the link below to check them out at:-

http://www.smartpropertybuyers.net/#/house-valuation/4558039778l

I hope you have a much clearer picture of why valuation on property is important, but in part 2, we will explore some of the actual details of what goes into an actual valuation and factors that determine it. Check out my next blog to learn more on this!
All for now….
Sudeshna

P.S We welcome and will reply to your comments.

A prominent BMV Deal Provider Shifts to Lease Options Deals…

In a strategic meeting, we captured the reason for why a BMV deal providers should also start providing lease option deals.

We summarized these reasons as as follows:

1)      The UK Residential Property Market (part of the global economy) has not seen such a downturn since 1929.
2)      Traditional investment techniques such as NMD (No Money Down), BMV (Below Market Value) or Off-plan underperform when there is a lack of capital appreciation.
3)      Because of the credit crunch, banks and mortgage lenders have lowered their required loan to value ratios (on properties) and increased their credit scoring requirements (on borrowers). This means less finance available for property transactions, which in turn continues to drive the overall market down.
4)      Lease Option is not a new concept in the property market. As a simple and old asset acquisition technique, it has been used in residential property transactions in the USA, Canada, Australia, and France for more than a decade. Globally and in the UK, the car financing, commercial property, stock market option trading, and many other good markets use Lease Option deals every day.
5)      Lease Option, by nature, allows flexible transactions and, if well understood, it can address the deficiencies stated in points 1 to 3 to help investors, buyers, and indeed the whole service industry revolving around the residential property market, to preserve their profitability level. This is the WIN-WIN-WIN agreement where everybody truly benefits.

This is how we helped a prominent London-based BMV deal provider initiate a service shift towards Lease Option deals. Whilst we cannot comment on current performances, we can comment on the fact that the company was very grateful to us because they realised that many BMV deal sourcers also initiated their service shift in addition to new companies focusing only on Lease Option deals.

Victor Hugo said, “One can resist invading armies, but one cannot resist an idea whose time has come”.

House Price Trends in the United Kingdom

Due to poor demand, house prices in the UK are likely to remain flat until 2012, according to Jon Brown, a property expert from www.iammoving.com.

Jon says “Many people are forced to let their properties and only place their homes on the market when they can see a demand for them”. Mr Brown also added that “The possibility of banks and lenders providing more for those keen to buy is unlikely to happen; this problem means that there will be very little movement until 2012.”

His comments support a report released by the Royal Institution of Chartered Surveyors (RICS), which shows that the housing market remained flat in March.  Furthermore, 6% of surveyors reported a fall, rather than a rise, in new buyer enquiries.

Don’t be surprised

Considering the predictions made in October 2007, the lack of house price growth is not a surprise.  Fionnula Earley, the group economist at Nationwide said, “We don’t think the market is going to crash, but prices will be flat.  As a result of slower economic growth and the impact of the credit crunch, we now think inflation will be around 0%.  We might then see a few years of flat growth.”

Nationwide downgraded its expected house price growth for 2008 to 0%, and it predicted that growth would be flat for some years after that due to slower economic growth and the impact of the global credit crunch.

These predictions are a result of news in 2007 from the International Monetary Fund (IMF), which warned that the UK’s housing market was overpriced by 40% and could face a slump similar to America’s – where prices have fallen up to 30% in certain areas.

UK house prices have seen a significant rise over the last ten years; however, this rapid growth was, and is, not sustainable, according to Jon Brown.  He says, “Lessons must be learned from the recession and the increases seen in property prices over the last decade should not be repeated.”

What solutions should you consider

1)    Don’t move… improve!

With constant reports that the housing market is likely to remain static this year, it is purported that many people in the UK will undertake home improvement projects to try to increase their property’s value and make it more appealing to potential purchasers.

TV presenter, Sarah Beeney, recently told www.moneysupermarket.com that individuals are most likely to focus their efforts on upgrading kitchens and bathrooms.  Whilst home improvements can add value and increase appeal, the disadvantage is that some form of investment is required (in terms of both time and money) and a future sale is not guaranteed.

2)    Quick sale for quick cash

Furthermore, some homeowners desperate to sell are even considering a fast sale via companies such as Quick Cash for Properties, which buy houses for cash regardless of current condition. The advantage of this solution is that it’s quick and buyers do not need to invest time and/or money in home improvements. However, the disadvantage is that the offer is likely to be below market value.

To conclude, Jon Brown suggests that the most financially sensible option for homeowners is to stay put and the best possible outcome would be for things simply to carry on as they are or slightly improve.”

3)    Smart solutions

Ultimately and irrespective of the housing market, the real problem is around buyers, sellers and the terms of their house transaction. For example, you may be unable to buy because you cannot get a mortgage and would not mind paying a premium to overcome your borrowing circumstances. Another example, you could be unable to sell at below market value but would welcome receiving a premium for selling in flexible terms. In both circumstances, you need to get in touch with a house transaction specialist.

Visit Property Investment Information Blog (http://www.bfr-invest.net/pibwp) where we provide plenty suggestions to help people make smart property transactions.

Francis Emery

Sudeshna and I recently attended a course in London last weekend. We understand that many want to become rich but expensive seminars and training courses do not guarantee riches, they only increase the chances of becoming  rich provided one does not run out of cash after one has attended such courses or seminars. In the meantime, Sudeshna and I met many people with the desire to learn or to simply make the most out of the training course. That’s why I’ve create a page on this blog:

http://bfr-invest.net/pibwp/4-learning-to-be-rich

Visit this page if you have been given a password. If not register with this blog and send the admnistrator an email explaining that you need password to access page that http://bfr-invest.net/pibwp/4-learning-to-be-rich

Francis