Valuing a Property.

Valuing a Property.

Please note that I am NOT a surveyor, the following is a property investor’s take on valuation. There are lots of ways to do it, but this is what I do:

First go to  http://www.mouseprice.com/   and type in the post code. You might need surrounding post-codes if it’s a very small street. Click the dot for SOLD HOUSE PRICES. Not the online valuation nor even the paid-for version, it’s hopelessly inaccurate. There should be a list of all the sold prices over the last ten years. ONLY look at similar houses. These are called ‘comparables’, or ‘comps’ for short. It’s no use looking at a large semi on the same street if yours is a small terrace. Here’s an example where some units are flats, therefore much cheaper than the others.http://www.mouseprice.com/house-prices/land-registry/bs5-6ay?Mode=SP  If you are only looking at terraced houses, for instance, you need to ignore the leasehold flats. Flats are usually leasehold, so you can eliminate them from your research. Note down the sale amounts with dates. If there are lots of recent ones that instantly gives you an idea what it’s worth now.

Then go to http://www.upmystreet.com/properties/house-prices-in-uk.html    and track the graph for the price change for the type of property (in this case terraces) you are looking at. Check how much the prices have changed since the date each comparable property sold. You need to use a city-wide graph, in my case I put Bristol into the search box, otherwise the sample is too small and the graph jumps about unreliably. You can also usehttp://www.home.co.uk/guides/house_prices_report.htm?location=brist…

It’s not an exact science but gets you within a few percentage points of what the value should be now. Use as many comparables as possible for greater accuracy. The most recent are the most relevant. Note that in a very slow market where almost nothing sells, the ‘sold comps’ may not represent what you could re-sell the property for in a reasonable time. The so-called ‘BMV’ (Below Market Value) price may be the de facto ‘MV’ (Market Value).

You also should consider things like any special features that apply, or any blights such as proximity to a takeaway food store or busy road, and preferred side of the street etc. There are a number of traps, such as ‘non-standard-construction’ and title issues. Non-standard often means pre-reinforced concrete (PRC or prefabs) which may appear normal to the untrained eye. They are normally unmortgageable, even if they have been converted to brick but remain attached to an existing PRC building. Title issues include anything denying the owner full beneficial title and are more common with leaseholds, but freeholds can have them too. They include short leases, restricted access, 3rd party rights-of-way, wayleaves and easements, restrictions on title, charges for unpaid ground rent, service charges or tradesmen’s charges, chancel charges… the list goes on. Your solicitor should pick these out early in the conveyence, but these are common with property supplied at auction and less scrupulous sourcing companies.

Also consider the condition of the property and how much it will cost to bring it up to standard. You will also need to add in an amount for you’re your finance while any refurb takes place, and general inconvenience of holding a property that can’t be let or sold. Then subtract the cost of the works + finance from your valuation – what it is worth to YOU. Don’t forget that if you plan to sell on, there are costs for conveyencing at purchase and disposal, and estate agent fees, possibly stamp-duty, plus various other minor costs. It’s amazing how many novice investors forget these costs!

Upmystreet.com also has some great info about demographics and facilities in postcodes on the LOCAL AREA pages but it is a bit broad-brush. You should then take a look around the street and neighbourhood with google streetview, to get an idea of whether the streets look well kept or not and what type of folks live there. Research LHA rates at https://lha-direct.voa.gov.uk orhttp://www.direct.gov.uk/en/Diol1/DoItOnline/DG_196239   , and local employment statistics.

Also check nearby homes FOR SALE on http://www.rightmove.co.uk/ If there are cheaper homes for sale, you may have got it wrong! Don’t forget that FOR SALE comps mean little compared to SOLD comps. Most homes sell for significantly less than asking price and sometimes the margin is huge.

Also ask several local agents whether it will sell/ let easily and who to/ how much.

Only then, if all adds up, pay a visit in person (essential). You might like to take along a competent builder to assess the state of the building and cost any works. If your builder spots a serious problem, he could save you hundreds of pounds on a survey. If he gives it the OK, then by all means get the survey too.

There is a lot more, but I think this blog is long enough already so I’ll stop.

Rich

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