People on both sides of a property transaction can benefit by being more informed about property values but, whoever possesses more information is likely to have the upper hand.

If you are are selling your house and you have received an offer which is lower than you expected, it is very easy to turn it down and move on. What if you had a independent report which calculated the value of your property by presenting factual market data which you could then quickly email to the person who made the offer?

It is a simple step that could take just a minute or two, but it could get you a few thousand pounds if the purchaser takes the gesture as a genuine counteroffer. It is difficult for anyone to disagree with a well organised, and well presented 15 page property report and the buyer should recognize that you have done your research before you set the asking price.

Conversely, if you are attempting to purchase a property and you feel as though the seller has overpriced the house, you may be able to persuade them to accept a lower offer if you present your offer along with a detailed market analysis. Even though the seller may still disagree with you about some of the nuances contained within the report, at least it has started a dialogue, whereas a verbal low offer may just be rejected in the first instance. Now that a dialogue has started, it has the chance to eventually lead to securing the deal because of the rational approach that you employed in your negotiations.

If you are interested in obtaining independent market analysis for you situation, have a look at the Free sample reports at www.e-valuations.co.uk

The money spent on an online property valuation can easily be recovered by simply providing the report to the other party along with your counter offer.

Good luck with your negotiations!

Negotiation Image courtesy of sheeshoo’s Flickr Photo stream

The only information that is collected about the characteristics of the property is a description of type of property that has been transfered. This description is chosen from one of the four categories:

1. Detached Property
2. Semi-Detached Property
3. Terraced Property
4. Flat

These four categories provide an indication of the possible size of the property, but it does not provide any statistics about the actual size of the property or the land it is situated on. This lack of information creates uncertainty when researching comparable sales. Everyone in the property industry would benefit if the Land Registry would require an additional piece of information that specifies the size of the house.

Interior Square Footage

If I were to pick only one additional characteristic, my vote would be to record the interior square footage because that is the best benchmark measurement which can be best translated across many types of properties.

Number of Bedrooms

My second choice would be to record the number bedrooms contained within the property. The number of bedrooms always has the greatest effect on the overall valuation of the property, but it is not always an accurate indicator of the overall size of the property. A 3 bedroom detached house could have 3 single bedrooms, one bathroom, and an open plan kitchen with an attached living room and could actually be a smaller then some 3 bedroom flats (especially those built in the 60’s).

Combine both indicators

If the Land Registry were to combine the number of bedrooms along with the interior square footage, then that would clarify any doubt about the characteristics of the property, and it would provide a treasure trove of information for Estate Agents, Surveyors, Valuers, Home owners and, of course, the Tax Man.

The Land Registry is about the only organisation that has the capacity to implement this as a national requirement. It would be fantastic if they were able to add just 2 more lines to the TR1 form.

I’ve already asked Peter Collis (Chief Land Registrar) and he did not seem keen to put it on his agenda, so I will need some help. Here is how to get a hold of him: Peter.Collis@landregistry.gsi.gov.uk

UK vs. USA

The UK property market has not evolved with the benefit (or is it detriment?) of local multiple listing services (MLSs). In the 1960’s the Real Estate agents in the USA began to split their sales commissions for each transaction and the buyers agent would be compensated with 3% of the sales price and the sellers agent would also be compensated with 3% of the sales price.

The split commission structure encouraged an open exchange of listing information between all of the agents and soon MLSs began to start in local areas as a way to manage the transfer of information. Before everyone had a PC, the MLSs published books for agents to subscribe to. The books would come once a week or at regular intervals. Once PCs became mainstream, and the MLSs published the information electronically and each agent would subscribe to access the listings database. There are currently over 900 local MLSs in the USA.

National MLS

Back to my point about Rightmove. It is easy to draw a parallel to Rightmove as a national MLS for the UK. The market share is not quite 100% but it does dominate the competition. The interesting thing about the Rightmove property portal model is that it has achieved its success through the traffic was driven by the public’s demand for the information, whereas the local MLS’s in the USA were set up by Real Estate Agents to benefit Real Estate Agents and are for the most part closed to consumers.

The consumer driven model in the UK is a superior system for publishing property information and it is unfortunate that the majority of the MLSs in the USA have been refusing to open there listing to the public. Some are slowly beginning to adapt and allow public access, but the rest should hurry because the large brokers are now starting to push their listing towards Trulia and other “portal-ish” websites.

Now only if Estate Agents in the UK began to split their commissions and share their listings with competing agents, they would have the most efficient real estate system in the world,…. but that is an entirely different post

Notice that I did not even call it a new technology? Google, Microsoft & Yahoo all have developed their own mapping service application and they each have allowed anyone to tap into the mapping capabilities and build applications on top of their basic service. Some of these services have been available for more than 2 years already.

Property, as we have been told, is all about Location, Location, Location (Thanks Kirstie) Placing a property within the context of location is fundamental an it is best to use a map. The websites that I mentioned above have all embraced this and built their services around the ability to place multiple properties on one map.

Why has Rightmove decided not to incorporate this element into their service? They have historically provided a link to a map on the listing page of each property and recently they have even switched from a static streetmap to a dragable Microsoft map, but that does not provide a very useful service because you cannot compare many properties at the same time.

Rightmove is an extremely successful company with many great features and an enormous inventory of properties. They are missing an opportunity and they need to focus on innovation before they start to lose market share.

The population of the UK is estimated at 60,000,000 people with an area slightly smaller than the area of Oregon. Greater London is estimated to be around 7,500,000 people.

Estate Agents

The number of Estate Agents offices in England is estimated to be around 11,000. Each office tends to employ between 1 and 5 sales agents which are likely to be paid on a part salary and a part commission basis. The average office has about 50 active property listings at a time. The top ten estate agency chains own 27 per cent of the estimated total estate agency offices in the country. In addition to the larger estate agency chains, there are many small independent estate agents who operate in local areas and own only a few offices or a single estate agency office. A growing trend is for smaller estate agents, while remaining independent, to belong to affinity groups with other independent estate agents. This enables their properties to be marketed not only through their own offices but also through those of the other group members. The top 8 affinity groups make up 37 per cent of estimated total estate agency branches in the country. The remaining 36 per cent of the market is composed of completely independent Agent offices.

1) The value of actual property transaction as reported by the Land Registry

2) The value of the opinions of all of the local Estate Agents that were surveyed

3) The value of similar houses currently for sale in the area

Each of these independent sources of information will, alone, provide an estimate of value. By combining all three sources, e-valuations is able to provide a significantly more accurate indication of the value of a property. This figure is determined by averaging the three separate sources to reach a balanced and more informed value. The average is then adjusted to account for any unique features or characteristics that may be found at a specific property.

Land Registry London Office Image courtesy of HM Land Registry Wikipedia Entry

Source 1: Actual House Prices

-Advantages: This source can be thought of as the most dependable. The Land Registry records the date and the sales price for every property transaction in England and Wales.
-Disadvantages: The prices that are recorded only represent a snapshot in history of the property market. The property market is prone to fluctuations in value and a price that was recorded, say, 6 months ago, does not necessarily represent the price that someone would pay for it today.
-The e-valuations compromise: The fluctuations of the property market are reported by the Land Registry every 3 months on a postcode sector basis. These localised fluctuations are tracked by e-valuations and the data is inserted into our mathematical formulas that produce a projected estimate of “today’s value” for any individual property that has been sold in the last 3 years.

Source 2: Local Estate agents opinions

-Advantages: Each community has it’s collection of local Estate Agents. They have first hand experience in dealing with all types of properties within the catchment of their high street office. They are aware of recent market trends and also the current state of the market. They know the hot spots as well as the “not-so-hot” spots.
-Disadvantages: In some situations, the interests of an Estate Agent may conflict with the interests of someone who is trying to sell their property. For example, when an Estate Agent is invited to value a property, the agent may inflate their own valuation in an attempt to impress the person selling the house, and hopefully gain a new customer.
-The e-valuations compromise: As a professional valuations company, e-valuations is able to approach the local Estate Agents and discuss property values objectively and without any undue sales pressure. By speaking with a range of selected agents, e-valuations is able to form a “consensus of value” by tapping into to the wisdom of crowds.

For Sale Boards Image courtesy of moonpie’s Flickr Photo stream

Source 3: Similar houses for sale
-Advantages: This is the most up to date reflection of the current market conditions. If asking prices are higher than recently sold properties, then (obviously) the market is rising and the value of your property should reflect this trend. If the asking prices are lower than recently sold properties, then the market is falling and the value of your property should reflect this trend.
-Disadvantages: Anyone may set the asking price of their property to any value that they want. Their is no limit and there are no rules. This creates a situation where many sellers, first, “test the market” by asking a higher price than what they expect to achieve. “Testing the market” distorts the actual strength, or weakness, of the current market.
-The e-valuations compromise: The ratio of asking price to the amount of the accepted offer is a good indicator of the current state of the market. When e-valuations presents the data for properties that are currently for sale in the report, an adjusted figure is also presented to compensate for the tendency to over value properties. This adjustment varies from region to region, but it is consistently between 1% to 7% below the asking price

Adjustments

Every property is unique. Location, number of bedrooms, type of property and condition are only a few of the many variables utilised to classify property. A two bedroom flat in London cannot be compared to a four bedroom bungalow in Lincolnshire. e-valuations seeks to compare properties using an “apples to apples” approach. When e-valuations is unable to find a comparative property, or when there is a feature in your property that is completely unique, an adjustment to your property will be utilised. These adjustments, positive or negative, will be based on the special feature.

For example, if your property has a driveway with off street parking and every other house on your street has to park on the street there will be an adjustment made to the value of your property to reflect the added benefit that your property has to offer. Conversely, if your property has a feature that is undesirable and the rest of the nearby properties do not have that particular feature, an adjustment will be made to the value to reflect the undesirable feature.

Valuation Result

A property’s value is almost entirely determined by the values of the properties that surround it. That is why e-valuations is able to provide a valuation for your property without ever seeing it. By using multiple sources of available property data, e-valuations has created the most comprehensive and informative residential property report available on the market.

The result of the valuation has been arrived at using the three components of the valuation. Each of these components is described and presented in abundant detail throughout the report. e-valuations averages the three sources of data and then applies the adjustment to determine the valuation for your property.

During my time in the UK I launched e-valutions.co.uk as a service to provide detailed property information on a house by house basis. Each report that is produced is overseen by a human being, we don’t rely on algorithms to predict houseprices!