Gazumping & Sealed Bids

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 follows “The 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

£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!

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Three Lions – Why can’t I warm to them like everyone else?

Sometimes I wonder if it’s just me, like I want to be different or controversial for the sake of it. I prefer to see myself as a realist and just look at the facts rather than get emotional. The truth is this…I cannot warm to this England team. Now don’t let my surname fool you, I am an England fan. In fact, back in 1990 I was a 12 year old watching England crash out in the semis to the Germans through floods of tears on my 14″ TV. That team was full of character and fight. I was sure they would have won the World Cup had they gotten through those damn penalties or Gazza’a toe was a little longer!

Roll on 28 years later (blimey am I that old!) and we have a team that got to the same stage and even had a better chance of getting further. “What an achievement” and “how proud they made us” were the cries on the TV and Radio. I agree, and they certainly did better than 28 good teams. I hear people like Stuart Pearce rave about them with the passion you would expect from him but at the same time nonchalantly dismissing the fact they faced weak opponents. No, back up a little there Piercey. The fact is they barely beat Tunisia, Panama was a joke and Columbia could have gone either way despite how bad the opponents were. Yes Sweden was a convincing win but the two decent teams they faced beat them. You see, I cant even say “us” and refer to as “them”. I just don’t have that feeling I had all those years ago. And its not just my age. I was more connected to embarrassing Euro team of 2016. Maybe its because i’m an Arsenal fan and the team is full of spurs players?

But then I hated players like John Terry and Wayne Rooney in the premiership and yet when they put that England shirt on I was fully behind them, as I was with Tottenham’s Gazza and Linekar back in 90.

England

So what is it?
The day the team was announced I was just underwhelmed. There was no one in that excited me, both in technical ability or character, like the John Terry’s or the Gerard’s and Lampard’s. Southgate’s team are just industrial and workman like. Now there’s nothing wrong with that. Sometime they are the most successful teams. Just look at what an organised Greece did in the Euro’s. I remember back in that tournament, pundits like Linekar absolutely slating them even after they won it, openly suggesting they were boring and that they didn’t deserve it. Yet the same person was cooing over a team that had fewer shots on target from open play than everyone except Iran!

I think we are getting closer to why I feel the way I do. It’s the over hype. It’s the dimwitted fans and pundits getting carried away. It’s the same fans that wanted us (“us”, see i’m warming up) to finish top of the group for the sake of “momentum”. Give me a break. You can’t lose momentum if the side you put out is completely different. And how long would we have lasted against the likes of Brazil or France given we cannot beat Belgium or Croatia?

The buzz has been so intense that it felt negative to even mention these things. So here I am to get it off my chest. Most of the players individually (in my opinion) are not good enough. At the back John Stones and Kyle Walker have mistakes in them. The midfield however was my biggest bugbear. Where was the creativity?
Henderson to his credit had a great World Cup and did his job well. He, to his credit proved me wrong. However, everyone was so hellbent focusing on Sterling’s performance that Dele Alli doing absolutely nothing for 95% of the tournament went unnoticed. In fact Sterling going off against Croatia is where it all went wrong. He was our outlet and Croatia were hesitant to push forward for fear of the break. Rashford came on and dropped deep to get the ball and be a hero allowing Croatia the freedom to push on. For me Rashford is not a centre forward, just ask Mourinho. He should have been coming on for Alli who was drifting out to the left wing and looking very uncomfortable for it. This is where I have seen Rashford at his best. The substitutions against Croatia summed up England’s problem on the whole. There was no one on that bench that could change things; no creativity, just like for like substitutions. Dier for Henderson, Rose for Young and Rashford for Sterling. Look further down the bench, Delph. Delph?
I have racked my brains with this one. A nothing player that is happy to sit on the bench at City and collect his wages. Surely a Lallana or Wilshire with their directness or even Shelvey’s creative passing could have been a better alternative to warm the bench?

I want to back up a bit and reiterate, I am an England fan and I desperately wanted them to do well. I am all for the nation’s good feeling. The sun was shining, beers were flowing, Brexit talk was at a minimum. Ironically I was an early predictor of their success, placing a decent sized pre-tournament bet on them getting to the final. I was impressed by Gareth Southgate’s organisation, the way he named his team early and had a set 3-5-2 system in place. He left no stone unturned with the preparation both on and off the pitch. And this is it. This is my problem. Whilst the majority of England fans were expecting less and feel like they got more, I had high hopes and felt they flattered to deceive. They were boring, created very little and Harry Kane scored penalty after penalty to help win the Golden boot, which as an Arsenal fan does grate on me because we won’t hear the end of it. It shouldn’t be like this. I want to feel for them like I have in the past.

Please everyone stop talking this team up and have some humility until they really prove something. Just getting to the semi’s really isn’t enough Piecey given their run of games. Let’s go and compete with the better teams first. I hear all this talk of us now winning the Euro’s and the next World Cup and “building for the future”. On what basis?
There are at least 5 other Eurpoean teams better than us right now let alone in two years. You cannot start talking tournaments in 2 years. All it takes is a bad game, an unfortunate decision or few injuries at key moments and the next tournament is gone so lets concentrate on now. Win what is in front of you and if you can’t, at least acknowledge the deficiencies and correct them. When my 7 tear old son comes home from school and talks about his day I ask him what he got wrong that day and then proceed with a “well done”, muct to his bemusement. Its not a negative thing but by acknowledging our flaws we can then go about working on fixing them and not making the same mistakes. Glossing over this tournament with star-gazed eyes does none of us any favours. Come on England, make me feel again!!