Move 2 You

In the last post we started to look at the housing market and how we feel more secure by following the commonly accepted wisdom of the ‘the market’

One of the causes of our inclination to follow the herd when it comes to the housing market is the way we think about the market.

In previous posts we’ve discussed the concept of the “Housing Ladder”.

We strive (or we’re told we should strive!) to climb it – bigger and better. We invest so much time, effort, money and worry trying climb the ladder by moving to larger more expensive houses and by capitalising on the price increases we have enjoyed in our homes.

But the problem about thinking of the market as a ladder is that it leads to us becoming fixated on what is happening to house prices. We worry about them. And this is the reason why we can’t help reading about house prices, talking about house prices.

But should we be as fixated on house prices as we are?

Doesn’t our fixation on prices work against us, particularly when prices are not shooting upwards, by paralysing us with fear?

Think about it.

If prices rise we feel good about it and we are keen to make a move up to the next rung. Buyers are easy to come by and all is good.

But when prices fall or stagnate the story is different. Nobody wants to move, worried that they won’t make as much on their property as they feel they ought to or could have done a few months back.

And if everyone acts in this way the market grinds to a halt.

But what if we think about the market as an escalator and not a ladder?

Those of us that are home owners should think of ourselves as being on the Housing Escalator rather than the Housing Ladder. This escalator can move upwards or downwards in its own right carrying everyone with it.

In other words when house prices move up they move up for everyone – ie the escalator moves upwards taking us with it. And when prices fall they fall for everyone – ie the escalator moves downwards. But relative to each other we all move together.

And this is the really key point here; everyone is moving together on this great big housing escalator and because price rises or falls are all happening to us all we are all keeping our positions on the escalator. And unless you want to get off the escalator completely this should give us all some sort of comfort in uncertain times.

Now that we have challenged our view of the housing market we also need to look at how we make our move up and down the escalator; ie how we sell and buy property.

Selling a house in the UK property market can be an extremely frustrating process as too many people know only too well. But more than that it is a very hit and miss process as well.

Worse still it it’s been this way for a long time and if we all continue to act in a herd-like way it will be this way for a long time to come.

It is like a conspiracy and no-one wants it to change. The Estate Agents generally do just fine the way things are (ok it’s a bit tough for them at the moment), the solicitors do ok, the government collects its taxes and we, the home owners, well we just plod along selling our houses in the same old way.

Think about it – as a seller you are completely reliant on a buyer chancing upon your property amongst all the others that are out there.

So even before the pain of the move has started (i.e. the saga of the negotiation, the surveys , hoping the chain won’t collapse, exchanging contracts and all the rest of it) you are leaving your house sale completely in the hands of fate!

i.e Will the right buyer actually find my property or not?

The way the market works at the moment, if you’re selling you just sit there passively and wait for someone to come and make you an offer!

But what is to say that buyers will find your property amongst all the others? The answer is that it is largely luck. You are being what we call an Accidental Seller.

Think about it; all the houses on the market are being advertised and promoted in much the same way. There is nothing to make any one of them stand out from the others.

What does this matter you say? Houses get sold so surely things must work ok?

Well maybe when the market is buoyant. But what about when things are not so good?

Yes we all use estate agents, but they are passive as well. Sure they will advertise your property in their window, produce a nice brochure and ensure your home ends up on one of the property websites, but all of this is still the same old game – it is waiting for a buyer to take action and to find your property in and amongst all the others they and every other estate agent have on their books.

As sellers we need to think of the market in a different way and more importantly ACT in a different way.

And by this we mean:

• You need to access as many potential buyers as possible and not just those that are actively searching for property at that moment in time but also those who are interested but not active in the market.
• You have to work out from all those potential buyers which ones are more likely to be interested in buying your property.
• You need to begin a conversation with this group of more likely buyers in an attempt to persuade them to make an offer on your home.

If you can do all of these things then you really are becoming proactive and taking control and as such you are much more likely to sell your house.

In a previous article posted here we’ve talked about the “Housing Ladder”, and how we should really think about it as a “Housing Escalator” – an idea that opens you up to a different way of thinking about what opportunities really exist for you to move house.

But whatever you call it – ladder or escalator – there’s one key ingredient to make the whole thing work. It’s the person who should be everyone’s best friend … the First Time Buyer (FTB).

And right now the Housing Ladder looks less like a ladder, and more like a Well Fortified Castle with the Drawbridge pulled fully upright and firmly shut!

Why’s that then? (we’re just about to tell you.)

And can we help? (hint: answer’s yes – read on to find out how.)

First, let’s look at why FTB’s are finding it so hard right now. Think back to the nineties and early “naughties” – in those times house prices were rising steadily … and so were people’s pay. So lenders could be sensible, and use “multiples of income” to be confident that you’d be able to repay your mortgage.

Multiples of 2.5x – 3x income were commonplace, weren’t they?

But then the craziness started … house prices were shooting up like there was no tomorrow (turned out they were sort of right after all – eventually there was no tomorrow!) … but pay didn’t shoot up in the same way.

The result? House prices started becoming genuinely more expensive … for everyone. Especially for FTBs.

But … banks needed to keep lending … otherwise their income dried up. And they really didn’t want that to happen … not when there was so much money to be made. So they became more cavalier with their lending.

We started to see multiples of 4x … 5x … even 7x earnings.

And that’s if you bothered to tell them your earnings at all! It got to the stage when they just didn’t seem to care anymore.

Don’t have enough income? “No Problem!” said the banks and other mortgage lenders … “as house prices are shooting up, just tell us that you can afford it, and we’ll lend pretty much whatever you need … if it turns out you can’t pay your mortgage, we’ll just repossess your house, which will have gone up in value … a lot … and we’ll be able to sell it and get our money back that way.”

Two things happened as a result … one, the chickens came home to roost, so to speak. In other words, so many people could no longer afford their mortgages that the number of repossessions became enormous … so big that they effectively flooded the market with properties that were trying to be sold off “cheap”.

But the buyers slowed right down. And that led to what we all now know as “The Credit Crunch”.

And the second thing that happened was lending swung right back the other way. Banks then became so worried about lending they made sure they’d only lend if there was plenty of equity in the house.

So the size of deposits required became … well … big. People are needing to find 25% or more as a deposit now. (OK, some deals are now becoming a bit more realistic, but it’s slow change at the moment).

Now, that’s the background to the absence of FTBs. But we desperately need them back in the market don’t we? They are the bedrock of housing chains.

And what we need is FTBs (and everyone else too) to have the ability to buy a house at the right price. So they need:

- the right house

- the right price

- and a deposit (that’s hard to get).

OK, so now we need to help them.

And that’s what we’re going to do here at move2you.

We’re going to be revealing the methods (and there are lots of them) that people can use to raise the deposit they need.

Of course, that doesn’t just apply to FTBs … raising the deposit is useful for anyone buying a house.

So come back here again soon … when we’ll start to reveal methods of raising deposits. In fact we’ll even reveal methods of owning a house without needing a mortgage at all … (and all completely legally, in case you were wondering!)

Only property investors know some of this stuff … and while they’re making a killing from knowing it, it’s about time FTBs benefited from knowing this stuff too.

So, we look forward to welcoming you back soon as we build up the article base of information that could make all the difference to helping you buy your first (or next) home.

Speak soon.

Chris

• First of all do your research. Speak to people you know and find out what people are saying about the agents around where you live / or are moving to. Research them on the web and try and find out some facts about each of them; for example how many properties they have on their books, how many they are selling, how long on average houses remain on their books before being sold.
• Go and see all the agents you have decided upon and talk to them. Ask them about their experience and get a feel for what they know about the market and what it is happening in it. Ask them about their professional qualifications. It won’t necessarily make them a better agent but the fact they have taken the time to get qualified might give you some reassurance that they will do their best for you and in the right way.
• Go with your instincts. If you don’t feel comfortable with an agent then they are not right for you. Make sure you find out which agent will be running with your property and spend some time with that person. Do they want your business? Will they put the time and energy into selling your property into that you want them to. This is mostly gut feel and you need to go with your instincts.
• Don’t necessarily go with the cheapest agent. The fees that an agent charges are of course important but the professionalism of the agents and their desire to work on your behalf are also important. Go for the agent that gives you the best across all these areas. Ultimately you need to select an agent that you trust and one that you are sure is working on your behalf. There are estate agents who charge as low as 0.5% who can provide a better service than those 4x more expensive ie 2%. National chains will often be harder to negotiate with on fee levels.
• Spend time investigating exactly what activity the agents carryout in marketing your property. Take a look at the brochures they produce, ask them about their database of buyers, see if they can name buyers that are looking for properties like yours. Ask what other activities they carry out. Listing with online property portals is a given now, but see if they have any more imaginative ideas in terms of generating interest in your property. If you have ideas that are a little different make sure your agent is able to act on them and to put them into practice.
• Do some mystery shopping. Phone up or get a friend to call saying your interested in a particular property. Get a feel for how well the agent deals with your enquiry, how helpful they are and their level of professionalism. Agents that respect your time and don’t make you feel like a number will probably be better at doing the real work; selling your property.
• Discuss the market with each agent you are considering. Through your discussion make sure that your estate agent understands what you want from the sale of your property. You will need to choose an agent whose view of what your property is worth matches your own. Of course if you are provided with a lower valuation you may getting an honest valuation and not a figure that the agent thinks you want to hear.
• Choose an agent that has first rate negotiation skills. This could translate into a higher sale price.
• Look for an agent who is continuing to perform well and expanding due to success. An agent that is performing well is selling lots of properties.
• Examine the contract closely and fully understand what you are committing to. You must be happy with the contract so make sure you discuss and clauses in it that you are not comfortable with it or do not understand. You should not sign contracts you are not happy with. Overly restrictive contracts are not to be entered into lightly. Flexible contracts can indicate that the estate agent is confident about providing satisfaction to the client. Find out if the contract is a ’sole agency’ or ‘multiple agency’ contract? Multiple agency contracts are where you get several agents to sell your property, the one who sells the property gets the commission. Multiple agency contracts will most likely involve higher fees.

I hope this helps those of you that are about to embark on the sale of your home. Don’t forget that the move2you website is a tool that can be used in conjunction with an agent.

One of the key benefits of the site is the ability to use it to find people that are looking for properties just like yours. The site works like a dating site for property and as soon as you have a match with a prospective buyer you can use the site to make contact with them safely and annonymously. You can at any stage choose to get an agent involved or deal with it the sale yourself (maybe in a future post we could look at the pro’s and con’s of private selling versus using an estate agent).

Take care.