Gazumping & Sealed Bids

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In case you haven’t heard the property market is once again on the ascendancy. For the first time in years, most sales agreed are going to sealed bids with people fighting for the same property. In January, most of the properties we sold at sealed bids were the same ones that struggled to sell the year before for much less.

One such instance in which another agent struggled to get a sale on last year at £550,000 came back on the market in January with us at £600,000. I told the vendor the market had picked up and I was confident we could sell it. I very rarely get my expectations wrong but  in all honesty the dramatic upturn in the market caught me off guard and I wasn’t expecting to achieve the asking price with this one. Within days we had an asking price offer and after the first weekend of viewings the bids came in. £620k, £625k and so it went on. There were two people desperate for it. The ironic thing was one of the buyers had noticed the property 6 months ago with the other agent at £550,000 and could have bought it for less than that then. They just didn’t want to sell theirs in a depressed market. As I was saying all last year, a depressed market is probably the better time to sell and upsize. What you sell and buy for is all relative anyway so why not sell and buy at a lower figure. If your property has come down 10% then the chances are the bigger and more expensive property you are looking to buy has also come down, so you are in a better position.

I digress. When it comes to having buyers fighting over a property, the cleanest way of handling the situation is via a sealed bid scenario. Best and final offers to the manager of the agency by a set time. Otherwise you end up in a “Dutch Auction” in which all buyers involved outbids each other by £1,000. This can take a lot of time and becomes stressful for all involved.

The problem arises when one buyer gazumps another. The only ones to get the blame are the agent. What many people are not aware of is that, as agents, we are legally obliged to disclose every offer to the vendor, whenever they come in. The Ombudsman code of conduct is as followsThe agent must record all offers received and pass a written copy of the offer promptly to the seller. The agent must not conceal, misrepresent, withhold or delay communicating offers”

Estate agents are working for the vendors (Sellers). They are our paying clients and as such our job is to get them the best possible price. Many buyers however, have the preconception that we like to gazump buyers by a thousand here or there and will call us untrustworthy when that is far from the truth. We cannot control if and when a buyer decides to offer. Once they do, if we were to withhold that offer from the vendor (unless they have specifically asked us to) then we can get in serious trouble, as this in itself would be untrustworthy. Unfortunately in UK law, anyone can offer until the point of exchange which can make things difficult.

From our perspective, if we have conducted viewings and secured a good buyer, done all the paperwork and started progressing a sale, the last thing we want to do is start again with a new buyer. Remember, money is just one of many factors. Someone with £5k more may not be in as good a position due to chains, financial standing, etc. Your average estate agent will earn approximately 8% – 10% of the agency’s fee. There is really no merit in them actively pushing to gazump their buyer if they are solid and proceeding. Agents just move on to the next sale. For example, on a £350,000 property at an average 1.5% fee of £5,250, the agent will earn £525 at 10%. To get another £5,000 on the offer would mean the agent earns an extra £7.50!

To a vendor this can be a lot of money which is why we need to disclose it but most will stick with the original buyer out of goodwill if they are progressing well. However, some may not. If that is the case the agent will get the brunt of the original buyers fury, possibly a bad review online and then having to start with a new buyer, delaying the time they will get paid their extra £7.50!

Whilst buyers hate them, sealed bids are a way of slimming down the chances of gazumping. The idea is buyers do really stretch to their best and final offers and not carry on the negotiation process. The preconception is that agents love doing big open days and getting 20 or so offers. We went through it some years back but I actually quite prefer a calmer yet active market whereby we achieve the vendor an asking price (or very close to) with a solid buyer, then move on. You can only sell to one person so letting 19 or so down can be difficult and stressful for all involved. I am not asking for anyone to feel sorry for us, just my honest perspective of what goes on behind the scenes

 

7 Tips to Increase the Value of Your Home in London

Increasing the value of your home in London is a smart way to go further with your investment. Even if housing prices naturally increase in the area as it develops, renovating and improving your London home will boost its value even further. Between improving its aesthetics for yourself, and increasing the financial value for when you sell, here at Elliot Leigh we want to share with you our top seven tips to get you there!

1.    Keep your property in good repair

Regularly deep clean your property, stay on top of any mould and damp, and generally aim to fix any issues as they arise. This will keep your home in great condition and help you spread out the cost of maintenance. In return, you won’t have to heavily negotiate on the price of your home when the time comes to sell, or risk it being actually unsellable because a small issue became a big issue simply because it wasn’t handled at the time.

2.    Install and nurture front and rear gardens

Front and rear gardens are a great way to improve the overall look of your property, and almost 1 in 5 buyers want these features. As a bonus, you’ll have a project that will keep you fit, out amongst the nature, have a beautiful home, and a lovely place to sit!

Tip: Many people today are looking to live more sustainably. Having beautiful gardens is a great way to start, as it offers a breath of fresh air even in the density of a city. To really appeal to these buyers, however, consider investing in a kitchen garden. Something that can be easily maintained, such as a wall of herbs, for example as this can really help sell your home.

3.    Add character features to your property

Far too often, beautiful character features get removed, so consider adding them in! Change lighting fixtures and fittings to options you find characterful or quirky, replace flooring to incorporate hardwood, add mouldings, beams and even an open fire or log burner. These character features add to the beauty of your home and can become a true selling point later on. At the very least, these character features will help your property stand out against the others in your area and make it easier to sell your property quickly.

4.    Improve your home energy efficiency

In terms of adding value to both the sale price and your wallet now, improving your property’s energy efficiency is key. This means replacing windows if they are not double glazed – or if they are very old, as double glazing loses its efficiency over time – it means insulating your home and changing the main doors so that they are better sealed. It could also mean investing in a new heating system. Central heating is a popular option, but there are many alternative means to heat a home that are even more efficient. If you get these changes done early, you can lower the cost of your utilities, and boost the value of your home.

5.    Add a bedroom

Adding a bedroom will instantly put your property into the next price bracket. A two-bedroom home will never sell for as much as a three-bedroom home, and if you have a sizeable loft you have the perfect opportunity to convert it. For even better results, add an ensuite!

Tip: Adding a home office or a playroom can be just as lucrative as adding a bedroom and can be done at a much lower cost. Add a rear extension to your property and use that extra space to make room for a downstairs office or child-friendly zone. With the rise of remote working, both of these options will appeal to working professionals and parents.

6.    Renovate the bathrooms

Modern bathrooms can look fantastic and help you feel like you have a spa in your own home! They can also increase the value of your property. Bathroom remodels are one of the top renovations that buyers and homeowners want done for their property, and new technology and materials are better than ever at keeping the room sealed and your home free of damp.

7.    Renovate the kitchen

Kitchen styles come and go, and chances are the kitchen you inherited when you bought the house is not to your standards or tastes. Renovate with timelessness in mind and remember to ensure your kitchen’s value is in line with your property’s value. A successful kitchen renovation can boost the value of your home significantly, but make sure you stay within your budget so that you see the value back.

For expert advice on increasing the value of your home in London, contact the team at Elliot Leigh on 0208 960 8000 today.

£0 value apartments!

The repercussions following the dreadful Grenfell tragedy back in 2017 will forever be with the families and friends of those that lost lives. Nearly 30 months on and you will be forgiven for thinking that any affected tower blocks have been dealt with when it comes to cladding. Those that live in modern private developments will certainly be forgiven for thinking they are not affected by such problems. However, this is far from the truth.

Sways of mortgage valuations conducted on properties that are in some cases no more than a year old are being returned by surveyors at a £0 value. This does not mean that your block is necessarily deemed as unsafe, more of a confusion as to who will foot the bill if the block does have any aluminium composite material (ACM) cladding that needs to be rectified. Don’t be fooled by thinking this is confined to visible cladding itself. We have had two £0 valuations on brick built blocks of late, one of which was a Victorian building. On that particular building there were questions over the materials used in the roof and the other was the insulation used between the two penthouses, nothing to do with the flat itself.

Now, anything over 18m in height (usually 6 storeys) will most likely be zero valued, unless there is a very comprehensive fire report to show there is no risk. As with any survey inspection, the scrutiny can vary from different surveyors and the lender associated. However, a surveyors job is to both protect you and the lender against exposure and, given the seriousness of these new legislation’s, you will be hard pushed to simply substitute one lender for another that is more lenient.

The report themselves can take some time to conduct. Just trying to speak to a fire safety expert is virtually impossible as they are so busy being pulled from pillar to post. When they finally get around to conducting the tests, samples need to be taken away before collating the results and putting the extensive document together.

So what can be done if I have been affected?

Well, firstly if you are concerned, thinking of selling or remortgaging and living in a tall tower it is worth contacting the management company and asking if they are aware of any issues and, if so, have they made the relevant steps to testing and rectifying?

Even to this day we are agreeing sales in blocks that were not affected in the past and the management companies seem oblivious to the problem. At the very least they need to get the ball rolling.

On my block in Dalston Square, Hackney all the residents had a letter informing us that if we are thinking of selling or remortgaging anytime now until the Spring to forget it. Surely this cannot be fair. What if someone is coming round to renewing their mortgage and now on a higher standard variable rate?

What if you are really desperate to sell?

I have spoken to a number of vendors looking to take action against the management companies and freeholders. In Greenwich a group of owners at New Capital Quay are pioneering this approach by bringing a case against Galliard Homes and Roamquest Ltd, a firm owned by Galliard Homes Ltd, under the Defective Premises Act (1972) which, if successful, could act as a test case. The residents are claiming for other costs including loss of income, reduction in property value, insurance premium increases and distress and inconvenience.

Petitions, social media campaigns, demonstrations and lobbying your MP are all worth doing as many of these big companies do not want the publicity.

The question of course is who pays for the bill should works need doing?

The developers will say they built to regulations and its not their fault those goalposts have been moved. The management company will not want to foot the bill and so, as usual, the shift goes to the homeowner.

At the 11 New Capital Quay blocks the NHBC is paying for remedial works but this will not be completed until 2021. Does this mean a lender will not consider exposing themselves until then?

Either way it is a total mess and one I believe the government should be taking the reigns and making funds available for. It’s not as if anything else is going on politically at the moment!

New kitchen or new buyers?

One of the main questions I get on valuations is “should I do works on the property before selling?”.

Generally speaking, the answer is no. Minor repairs and a lick of paint are simple cost-effective ways that go a long way to create a more desirable space. However on the whole, drastic changes like a new kitchen, bathroom or even a loft conversion are not usually the way forward. Yes you will add value, especially adding square footage in the form of an extension or loft conversion and, with the latter, you could achieve a greater return than you outlay. However, is it really worth the time and effort if you are just going to sell straight away?

If you are doing it for your own needs and will enjoy the fruits of your labour then go for it. Truth be told, if you are thinking of doing works just to sell I wouldn’t go out of your way to put your own touch on it, different buyers have different taste and you can’t guarantee your refurbishment will appeal to buyers. I’ve been on countless valuations where the owners are living in tired homes and they think a B&Q kitchen (other kitchen outlets also available!) will get them an extra £50k. I just think to myself, why did you live like this for so many years when you could have enjoyed a new kitchen and bathroom yourself!

Just by changing such rooms is not enough to appeal to new buyers and, in some cases, can put prospective buyers off further as they would rather have a say in the finish, spec, colour, etc.

Traditionally in the areas I cover, namely Shoreditch, Hackney and Bow, the creative buyers could see past even the most odorous of pig sties and have a vision of the space they wanted to create. In fact, I have been involved in a number of sales whereby a run-down probate house has sold for between £30k and £50k less than a nice house on the street. This is despite it needing over £100k works to make it liveable. It seems the worse the condition, the more desirable it became.

Times have changed of late and I am experiencing a noticeable swing in the pendulum. The demand for really poor properties such as probates is still present. However, now it has to be the right price and those that are immaculate are getting a noticeable increase in viewing activity, multiple offers and even premium prices achieved. Also, those in the middle i.e. the tired properties needing more minor cosmetic work such as ex buy-to-lets are really struggling more than ever.

So what are the reasons for this?

Well, I believe there are a number of factors that have led to this change in sentiment. Firstly unfavourable tax law changes for buy to let landlords has meant many have exited the market of late leading to a glut of properties coming on for sale that have been rented for years and are generally in no more than average condition. Areas such as Hoxton especially (which has a large density of rented ex-local authority flats) has seen huge dips in prices, more than the average for Hackney. Is the condition of the properties the main factor for the price dip however?

The demand for such stock in general is low at present anyway as they have historically attracted buy to let investors, the very same people that are offloading or looking outside of London for bigger yields. This though doesn’t explain the fact that the few lived in and immaculate flats are selling for a premium in the very same area. For example, we recently sold a very nice two bedroom ex-local authority for £462,000 whilst struggling to sell an average 3 bedroom in the next block at £450,000. That suggests to me that the difference in condition is a big factor as two beds have historically sold for around £50k less.

There is a theory that the 3 bedroom are less desirable as they are prime for investors as opposed to 2 beds which still attract first time buyers and those looking for a home to live in. Surely then you are better off buying a tired 3 bed and sprucing it up yourself?

And there’s the issue. Either the first time buyers are not even thinking to search the 3 beds (which I doubt), or my theory is right and the well finished properties sell for so much more now.

That still doesn’t answer why this is the case though. The fact that building costs are now much higher than they were two years ago may have something to do with it. Could this be a result of Brexit with more hard working and cheaper eastern European workers migrating back?

Stamp duty may have also been a factor. Since the increase of 3% for second home owners was introduced the obvious result has also been a decline in investors, not only buy to let, but those looking to add value by refurbishing themselves. I’ve lost count of the number of times I have seen a property languishing on the market at a fraction of the price it was two years ago and been tempted to dip my toe in myself. However, the extra 3% stamp duty takes a huge chunk out of any benefit once you factor in the higher refurbishment costs. This is obviously not as pertinent now with the stamp duty holiday although I haven’t seen a huge uplift in investors since.

All of which are contributing factors. For Hackney and Shoreditch though I have one more theory…the demographic of buyer. Having seen the change of East London over the last 15 years it is easy for me to notice the different buyers now coming to the area. Whilst heavily bombed in the war, Hackney is still flush with lovely period property. Historically it was always the cheaper alternative to the likes of North London’s Islington or Crouch End and thus attracted the artists and creative types. Whilst Shoreditch is still a huge creative hub, many young millennial’s can only afford to rent in the area. The older artists are migrating out of London to places such as Margate and the buyers now seem to be more blue collar workers such as bankers and solicitors i.e. those with less time, effort, inclination (and dare I say creativeness) to do the works themselves.

Maybe one, two or even none of these theories are correct and it will be interesting to see how it all pans out in the future. Markets are constantly evolving and this year has been a rollercoaster thanks to Covid-19 and the stamp duty holiday. Brexit will rear it’s ugly head soon which will be another bundle of joy we can all look forward to!

Stop blaming Brexit – The real reason for the flat London housing market

If you have had your head buried in the sand of late you may not know that the London housing market is very stagnant on the whole. According to Halifax, house prices are falling at the fastest rate in nine years. In the past I have taken such reports with a pinch of salt. They tend to focus on the worst hit locations around the UK, dramatize and apply the shock headline to everywhere. London itself has always had its own market and on the whole it has been a resilient one since I started in this game over 15 years ago. I have seen the cycles and I have been fortunate enough to experience a very buoyant, fast paced East London market. However, this time is different.

My experience as a sales director meant I got to experience a number of different locations, overseeing 6 offices in the City Fringes. Better yet, I recently tasted the online/hybrid world which, for many of its faults (and that is a whole other story altogether) allowed me to oversee the whole of East London and West Essex just as the market turned. What interested me was the fact that the suburbs were outperforming the more central locations, a complete turnaround from just a few years ago. Back in 2011 Hackney prices were nearly doubling in the space of a year or two whilst the burbs…. well burbled along. Two years ago it all changed and yes Brexit had a lot to do with that. The first hit will always be the more Central locations. The Bloombury and Clerkenwell offices I was overseeing at the time were hit hardest. Those markets are dominated by buyers that simply have no need to rush into a sale. It’s fuelled by a want and by investment rather than a need. The same goes for the sellers. They don’t need to sell and won’t drop prices to do so. As you go further out however, you then factor the need to move such as schools and growing families.

Flash forward two years and this trend has continued and magnified. Only now the number of house sales has dropped significantly, even in the suburbs. Darn Brexit are the cries as I visit prospective sellers. Only I have never heard of a couple looking to start a family not wanting to up size because of Brexit. The fact is this. There are a number of changes introduced by the government, all of which have stifled the London market. Prime central and city fringes has definitely felt the impact of the stamp duty changes for investors and the fact they can no longer offset their mortgage interest fully when paying capital gains tax. Brexit has meant a loss of confidence in the same market and nothing is worse than an uncertain one. But lets focus on the suburbs itself. Yes all of that central London negativity and lack of investors will impact the suburbs slightly but there is one major factor I think most people have overlooked….Help to buy!

If you were to Google “Help To Buy pros and cons” you will get a whole list of why you should/shouldn’t consider it (again I could write for days on that one).

House market decline

But you will be hard pushed to find what I am about to tell you. This is my theory on why the London market as a whole is so much tougher now. Most agents will tell you that the cheaper stock is selling while the big houses are sticking. That is complete rubbish in my opinion. In fact whilst working in the suburbs I had no problem finding buyers for houses from £750,000 to even £1.75m. A house I had in Snaresbrook at the latter price had more viewings (and offers) on it than some of my £350k flats. One of those offers came from a family selling their house in Wanstead through me at £950k. That property had so much interest I had to beat them away. The problem came as we went further down the chain. Selling a one bedroom two year old apartment at £350k close to Victoria Park in East London should be bread and butter stuff, especially since it had little to no growth since purchased off plan and yet I struggled to get a viewing, let alone offer. This was a common theme. So how can this be?

What props up any market?

Answer: First time buyers. So where are all these people?

Well, ask yourself this. Why would you buy a two year old apartment, generous sized ex-local authority flat or period conversion (once so popular) with a slightly older kitchen and tired bathroom when you can put 5% down on a brand new apartment and get a 20% interest free top up loan from the government?

Its not that these new builds are people’s first choice, far from it, but with that kind of incentive when deposits are so hard to come by, it’s seen as a no-brainer. So the government have succeeded in their vision to help first time buyers get on the ladder and at the same time encourage more housing development. Job done right?

Well yes and no. Historically government intervention in the housing market seems to fix one problem but create another. Or maybe this is intentional. After all, house prices are dropping making everything more affordable. Maybe this time they have it spot on. It seems no matter how much a resale property gets reduced, the lack of activity doesn’t change. When there are no buyers at the bottom of the chain, there are no buyers. Most agents are just scratching their heads…unless you are in the New Homes game. If you are lucky enough to be selling a scheme with help to buy you will know a very different story. Just recently a scheme in Hackney Wick with around 44 new apartments sold within a week. That’s where all those darn people are!

Put aside the negative impact on the rest of the market for a second, we’ve had a good run guys, let the youth of today have their moment. However, my fear is this. What happens when these new builds are no longer new and the new buyers cant take advantage of the help to buy because of it?

In two years time when you want to sell your flat and pay off that government loan but you now have no buyers either. Couple that with the fact you have probably overpaid for your spanking new apartment in the first place. You see developers have cottoned on to the fact that these help to buy flats are selling like hot cakes and just inflating the prices. What is going to happen if after Brexit this uncertainty continues, the house prices continue to tumble and you are sitting on a government loan that you will, at some point (5 years) need to pay interest on?

Just ask the people that took advantage of the scheme 5 years ago. This could all end with a bang, or more pertinently with this side bubble the government has created, a pop!