Property Match (UK) blog:

We predict that ‘Moving Contracts’ are set to replace old estate agents’ ‘Selling Contracts’

Estate agents’ selling contracts should become ‘moving contracts’ which should pay them a fee when they arrange a successful combined move, not just a sale.

For this to work, instead of vendors signing selling contracts with solely appointed estate agents (as happens at present), they would instead appoint several estate agents and sign deals with each of them – both to find suitable new houses as well as finding buyers for their existing houses.

This way, the seller would not be beholden to any specific agent until they had both found a buyer AND helped them to negotiate and secure the house they wanted to buy.

Several teams of agents could legitimately work for each moving client at the same time, on a fair and level playing field basis, but only the agency that both secured the most competitive deal on the house being bought AND the best terms of sale on the one to be sold, would get rewarded with a fee from the client on completion.

This would be rather similar to a house-owner getting two or three competitive quotes for a replacement roof, the roofer being hired being paid after successfully completing the work.

Instead of a roofing contractor though, it would be the estate agents who proved to be the best at both doing the search and also the most successful negotiations on both properties who get paid for obtaining the best deal for the house-owner’s next sale and purchase combination. Any disputes about fees could be dealt with by the courts, as now.

Agents could develop wide-ranging networks able to help each other to achieve this new service, instead of each trying to out-exaggerate the others by over-valuing to win instructions from the same client; as now.

An alternative way to explain this would be for agents to still try to out-compete their rivals, but instead of competing to win the most instructions, they would be in business by being the best at finding BOTH a buyer for the existing house and negotiating the most acceptable terms on the house to be moved to.

One advantage under this new idea would be that if a client continued to experience difficulty in selling as part of the process of finding a suitable house to move to, they would not have to change estate agents, as they might have to do at present, they would simply instruct more agents to join in the search both for buyers and crucially, for suitable houses to move to.

This method would replace the existing archaic method of appointing a ’sole agent’ to sell each property.

It would finally bring estate agency into the 21st Century by empowering them to offer a fuller service.

Posted by: Property Match (UK)/Asking_Prices: Peter Hendry, Consultant in Housing Valuation, Property Match (UK).

We have a fatal flaw in the way our housing market is run at present and it is the very same flaw that was instrumental in bringing down the Spanish housing market last year.

During the boom phase of their housing economy, and following the application of more government stimulus after the 2007 crash, it become clear that the house prices still being obtained were not, if fact, genuine market prices but were ones being orchestrated by the larger chains of estate agents, owned predominantly by the banks themselves.

Since those banks were the same banks that were exposing themselves to too much risk, when making loans and mortgages, the estate agents clearly had a conflict of interest. Why didn’t they do anything about it?

They didn’t do anything about it because on the one hand, the banks wanted to keep making loans and charge interest in return for doing so. And, on the other hand, the banks didn’t want house prices to start falling, as this would affect the distribution of new loans and adversely affect their profits.

Even more fundamentally however, falling house prices would threaten the overall security of the majority of loans the banks had already made, which are secured on the equity of house and flat values, across the country. Understandably, the banks did not want these to fall!

Valuers employed by the said agents were thus placed in an untenable position and this, understandably but inappropriately, coloured they assessments.
As their employers were effectively the banks themselves, the temptation to be over bullish about current market prices won out and taking a more cautious or prudent approach lost the day.

History shows that faced with the threat, and certain fact, of needing to address reducing market ‘values‘ for dwellings right across the nation, the firms involved quite blatantly chose to keep over-valuing. As a result, the housing market over-heated and in the end, it stalled spectacularly. The rest, is Spanish history.

As an aftermath, there is now poverty spread across their country, beyond anything that could have previously been imagined. The economic situation is still out of control now and there is no easy way to restore a reasonable level of prosperity to the ordinary Spanish populace.

Do we want to risk finding ourselves in a similar situation in the UK?
If nothing is done to correct a similar conflict of interest between the banks here in the UK and those estimating current house values in the market on behalf of those banks, we are at serious risk of experiencing the very same fate – and it may happen not of a time of our own choosing!

Sadly, there are no indications that our government is doing anything of significance about this and few if any members of it seem to be raising questions on behalf of ordinary members of the public in regard to this.

The true situation is that without generating more exports and improving our balance of payments, the fate that awaits us can only be a similar one to that of Spain’s, whether we invest in more infrastructure, or not.

We need to steer our economy back to growth as a matter of absolute priority, no holes barred, and George Osbourne does not appear to be concentrating on this hard enough at present.

If anyone has firm views about this, whether for or against, please blog with us.

Posted by: Property Match (UK)/Asking_Prices: Peter Hendry, Consultant in Housing Valuation, Property Match (UK).

If new online media (or new online business models) were able to compete with estate agents on a level playing field, the effect would be that estate agents would be less able to guild-the-lily in order to win instructions because the online presences would help to expose that.

For example, if a badly set up estate agency tried to win business by over-estimating asking prices, online business models with more accuracy and less incentive to do that would be quoting lower asking prices. This would result in those houses being sold elsewhere, effectively causing the badly set up estate agency to loose business.
It would also have the effect of helping those wishing to sell and move, to accomplish that by using an online house-marketing service like ours. It would therefore be a WIN-WIN situation.

Posted by: Property Match (UK): Press Release: Peter Hendry, Consultant in Housing Valuation

What’s more important than average house prices stats is the following: -

“Our Government needs to revamp the UK housing market completely – and soon,” says Peter Hendry, a Consultant in Housing Valuation and the Web Site Manager at Property Match (UK), a new DIY online house selling web site.

He explains, what’s currently wrong is the way houses are marketed in the UK by estate agents. One way to help would be to rename them all ‘Property Sales Agents’, so that buyers would stop being deceived into thinking that these agents are helping them in some way.

He believes that the stagnation in the number of house-moves over the last few years has been caused mainly by estate agents working exclusively on behalf of their selling clients. “This is totally unacceptable”, he says.

He says, “If one accepts that internal markets are primarily driven by ‘prices’, then UK housing market activity should have been able to continue at close to normal levels of activity in a downturn, even if there would need to be appropriate price reductions during that time.”

But this hasn’t happened. “I base my theory on the fact that demand from those wishing to move house generally remains fairly constant. This was recently confirmed as being the case by Rightmove and it suggests something is very wrong with the housing market. Contrary to popular belief, it isn’t the lack of available mortgage finance, it’s prices”, Peter says.

“I suggest that whilst some people may be put off by falling prices, more would have been happy to move, IF prices could have been held relative to one another, but they’re haven’t been”, he says.

“One of the advantages of keeping them relative to one another would be that those people planning to trade up, and move into a more expensive house, would be more interested in buying at a time when prices are subdued. Also first time buyers would be helped at such a time.”

Peter says, “To understand this concept better, it’s first worth explaining precisely what market value is.
“True market price (or value) is simply relative. It merely compares one type of property with another – at any one time”.

Peter says , “Since the number of house-sales has collapsed, in the housing market generally and asking prices have fluctuated too wildly in many parts of the country, it is now clear that the housing market itself is malfunctioning because at the end of the day, people just want roofs over their heads. Most don’t insist on making huge profits at the same time”.

“I’ve tried to explain this to Government, but to no avail so far”. “It’s not surprising though, as our present government is probably more profit-orientated than the last one! They simply don’t seem to want to see the real problem”, he adds.

“The main problem to be corrected is the disparity between asking prices and actual sold prices. By not changing the way houses are valued by estate agents on take-on, the market will simply continue to stagnate for much longer than it needs to.

Posted by: Property Match (UK)/Asking_Prices: Peter Hendry, Consultant in Housing Valuation

There were 74,000 completed sales during the month of March 2012, up from 63,000 in the previous month, the figures show.

The pick-up is likely to be, in part, that some buyers brought forward purchases in order to benefit from the stamp duty concession, which has now expired.

Despite this, sales activity has remained subdued compared with the housing boom. The number of transactions in March 2012 was about half the level seen in March 2007, HMRC figures show.

Latest proposal for the best way to resolve the current unacceptable stagnation right across the UK housing market.

It’s no good working under the principle that house prices can’t ever go down. Anyone who understands the nature of investments must understand that, but house prices don’t necessarily have to suffer from vast reductions either.

My idea involves improving the way houses are bought and sold, by making ‘knowledge’ about current house prices more generally available to buyers. The change would involve estate agents taking a more proactive position on this. They would need to improve their methods of assessing house prices.

It may be argued in common law that as soon as an agent accepts an offer on behalf of a seller, the person making the offer then becomes a client of that estate agent. Therefore, all agents have a duty of care to advise buyers about what they are negotiating to buy and thus the level of price which such buyers are intending to pay.

For example, if the agent advises or helps the buyer in regard to obtaining finance, or discusses the best way to proceed with regard to any disrepair noted in the buyer’s survey, or advises on general matters concerning exchange of contracts, that agent is advising the buyer and hence is acting for them.
Similarly with lettings, if the agent advises the buyer about which terms should be acceptable to the landlord and should discuss details in the letting agreement, then that agent is acting between the parties. That agent is, in effect, acting for the tenant as well as the landlord. The estate agent’s primary objective remember, is to get an agreement and hence collect its commission. To do that an estate agent will usually advise all parties on any matter relating to getting that agreement.

The effect of this is that all agents are, in fact, responsible to see that terms are reasonable in the current market conditions from the viewpoint of all buyers (or tenants) as well as for any particular seller.

‘Best price’ has to go. It’s that simple.

Here’s my latest proposal for the best way to resolve the current stagnation right across the UK housing market.

The only things that must vary in depressed economic conditions are: market prices.
If everyone knew that these were reasonably accurate, the market could still flow.
If the market could still flow, substantial economic benefits would be fed back into the whole economy.

NEW IDEA: designed to achieve this.
Instead of just listing a house at an asking price of say £500,000, state ‘Valuation: £500,000′.
That way, all agents could be held to account if they over-value at market appraisal time (and many estate agents openly admit they do, in order to win new instructions).

One can’t help thinking, how can doing that be in the interests of their selling clients when it results in protracted sales campaigns, far beyond the hopes and expectations of that client, or even worse, it achieves no sale at all?

Another advantage is that if the asking price does not have the word ‘Valuation’ with it, everyone will then know, and be forewarned, that the price being asked isn’t substantiated. In other words, if the agent is not prepared to stand by the asking price as being genuine, it can’t be genuine.

The first corporate to adopt this new idea will gain a massive advantage over their competitors.

Having done this, unless all other agents swiftly follow, they would be left behind in the rush to offer an improved service, which house owners are bound to like.
They are bound to like these new proposals because they would ‘level’ the playing field and make it possible for both individual moves and chains of moves to happen more smoothly, once again.

Obviously, in order to justify tagging the word ‘Valuation’ to the figure being stated as the price, additional appraisal methods would need to be employed by the estate agent, to ensure that the figure quoted was pretty close to the current value of the property being marketed. However, for most agents, only a small amount of further training would be likely to be needed by those staff carrying out the market appraisals.

The extra training, though short, would make a vast difference to the number of houses successfully bought and sold each year across the whole country.

If the majority of houses on sale were correctly priced, the buying public would gain in confidence considerably and thus become far more interested in moving again.

This one simple switch of emphasis, about pitching asking prices more correctly, would bring the much needed vitality back into the housing market.

Without it, the same old patterns must continue. That of buying in the grip of general panic (like a flock of sheep being made to run through a field gate by being chased by a rather well-trained sheep-dog – the agent) when prices are at least seemingly rising fast.
In the alternative, having to be patient as stagnation sets in, market VALUES start to dip and people are overcome by the fear of a fall in the value of their houses whilst being unsure whether or not the asking prices of the houses they hope to buy will truly reflect such falls, by comparison.

It’s time to correct the terrible twin aberrations, relentlessly reeking havoc in the housing market every seven or eight years. Instead we should welcome a wave of confidence back into UK home ownership and keep it there, once and for all.

Though setting the correct asking price is the way to go, it’s a serious business. It needs to be done scientifically and mathematically, using comparison data from recent similar sales, as provided by HM Land Registry. Such information should be used, with great skill, to deduce the correct market price for each house that’s about to go onto the market. Surprisingly, most agents don’t carry out or even offer to carry out this work before giving their opinion about the current value on a house they are hoping to be instructed to sell.

They are letting everyone down by not doing this, which is very sad.

This has even wider economic implications for people’s flexibility in a challenging job market, because evidence clearly shows that home owners, both those with a mortgage and those that own their home outright, find it most difficult to move at present.

The time for change is upon us. Who amongst our readers cannot see that? Who can?

We hope you find this new idea for improving the way houses are bought and sold across the UK refreshing and interesting. If so, please comment. If you hate the idea please comment too! We’d like that.

Posted by: Property Match (UK)/Asking_Prices: Peter Hendry, Consultant in Housing Valuation, Property Match (UK)