What agents do behind the scenes

What most people may not realise is that for every hour that an estate agent spends with a seller, they will spend approximately nine hours working behind the scenes on the homeowner’s behalf to get the property sold.

If an estate agent works on a no sale, no fee basis, they will only get paid after the home has been sold. While a risk, working on commission pushes agents to do what is necessary to see the deal through to fruition. In other industries, professionals will charge their clients an hourly rate for the time they spend working for them. However, agents don’t, which means they run the risk of coming away empty-handed or worse – out of pocket. Agents will often spend their own money and resources to market a property, money they will not get back unless the home is successfully sold.

There is often discussion regarding why certain agents charge more, while others charge less. As with most services, it is based on experience and the value offered to the client. If the agent can deliver on the key performance indicators set out from the start, they should be paid accordingly.

So what do estate agents do behind the scenes?

Market the property
It is vital that the property is exposed to the right target market of potential buyers. To get exposure, agents will advertise their listings on property search portals such as Rightmove, Zoopla and OnTheMarket, as well as in magazines, newspapers, flyers, and brochures. Part of the process of setting up the adverts is having photos taken of the home and having the layout professionally designed. Other marketing tactics include using the services of a public relations officer to engage with targeted media, posting listings on social media, arranging and hosting open houses and facilitating private viewings.

Qualify buyers and negotiate offers
Agents are professional negotiators. A lot of their time is spent talking to their network and ensuring that buyers are matched with the right homes. The agent needs to have an in-depth knowledge of the homes that they are currently marketing, along with what each of the buyers in their network wants.

When a buyer has found a home that meets their criteria, the agent will guide the buyer through the process of making an offer. They will also facilitate any counter offers from the seller – a vital aspect of the property sale, as the agent can net the seller thousands during this stage of negotiations.

Research the market
Knowledge of the property market and specific area information is a vital arrow in an agent’s quiver. A substantial amount of an agent’s time is dedicated to researching property sales prices and data to ensure that they know their area well and have a good handle on the market.

Correctly pricing a home is a valuable skill. To do so, an agent needs an understanding of the economic environment and their target market, which takes time and research. To accurately pinpoint the right price to list a home, an agent will need to complete a comparative market analysis (CMA). Factors taken into consideration during a CMA would include the average price per square metre in the area, recent sale prices of similar homes and comparative prices of other properties that are still on the market. This information will help establish a reasonable price range for the property.

Ensure a smooth ride
The fact is not every property transaction will go according to plan. However, agents will try to shield their clients from any unnecessary drama – unless there is a need to inform them. An agent will work tirelessly to ensure that the property sales process is as hassle-free as possible for all parties involved.

Selling a home can be stressful, and emotions often run high. A good agent will need to be a problem-solver, keep a positive approach and come up with a constructive solution to any issue.

Network with other agents
Networking is an intricate part of being an agent. Most agents will have a network of other real estate professionals that they will use to find a suitable buyer for a home. Agents often spend time helping each other to match the right buyer with the right home. In certain instances, agents will refer buyers to other agents if they know that agent has the house that checks every box on their wish list.

A good agent will add value to the property transaction and earn their keep.

Unpacking Section 24 and how it will impact landlords

In the past, landlords were able to deduct the full cost of their mortgage interest payments on their rental properties before they had to pay tax – this is no longer the case. As of April last year, mortgage, overdraft and loan interest costs cannot be taken into consideration when calculating your taxable rental income.

This is due to the amendment know as Section 24 of the Finance Act (No.2), dubbed as ‘The Tenant Tax’. Changing the Generally Accepted Accounting Principles (GAAP), the amendment will change the way that profit is calculated on rental portfolios in the UK. It applies to all UK resident landlords with residential rental properties situated in any country worldwide, any non-UK resident landlords with residential rental properties in the UK, and any trusts or partnerships with a residential rental portfolio.

Who will be most affected?
Those who will feel the impact of the change the most will be landlords with high-loan-to-value portfolios, who currently have a rental yield of 4% or lower. Essentially what the amendment will do, is push certain landlords into a higher tax bracket despite the fact that their income has not changed or increased. If the landlord is already dealing with a marginal rental yield of below 4%, the result could be that the run into a negative cash flow situation and financial distress.

Landlords who have a buy-to-let mortgage in the 40% to 45% tax brackets will pay more tax, while those in the 20% bracket might pay additional tax if their gross income, which is their rental income inclusive of all other revenue streams is higher than £45,000.

It is important to bear in mind that landlords will be reporting an inflated profit on their tax returns, which could impact their eligibility for child benefit, tax credits and increase any student loan payments.

Gradual implementation
Thankfully the changes will be phased in over a period of four years from 6 April 2017, with the full brunt of the change only fully being felt on 6 April 2020, giving landlords some time to decide whether they wish to remain in the rental game or sell up. By 2020, all finance costs will only be restricted to a 20% tax relief.

What to do next?
Landlords who want to hold onto their rental properties will require cash flow. They will also need to ensure they have a decent buffer so they don’t run into financial difficulty that forces them to sell. Ideally, as the first point of call , speaking to a knowledgeable tax adviser who understands property will be their best bet for successfully navigating the Section 24 road ahead.

For more information regarding Section 24 or ways to reduce the financial impact, contact RE/MAX London at info@remax.co.uk

Buying a home – It’s an emotional journey

While the majority of home buyers will generally have a checklist of must-have features such as the numbers of bedrooms, bathrooms, amenities in the area and commute to the office, often it is emotions that drive home purchasing decisions and not the facts. For many home buyers, the decision comes down to how they feel when they first walk into the property.

Ideally, buyers should err on the side of caution when purely basing their decision on emotion, as this could turn around and bite them in the future. While it is natural to have an emotional response when going through the process, it is crucial that emotions are not the only reason that certain decisions are being made.

As buyers move through the home buying process, there are four emotions they are likely to experience. Understanding these emotions and keeping them in check will help you to remain level headed and buy the best possible home.

Exhilaration
Owning a home is an amazing milestone that many aspire to, so it seems only natural that the initial emotion would be excitement. If you are just starting out your home-buying journey it is likely you are in the dream phase of the process and searching for properties online. In these early stages, you will start to figure out what you like and what is available in the current market.

The start of the journey is an ideal time to sit down with a financial adviser or your bank to discuss budget and affordability. Another great resource is an estate agent who will be able to guide you through the steps of buying a property, along with the costs associated with buying a home, such as stamp duty, valuation fee, mortgage costs, and legal fees to name a few.

Overwhelmed
If you are a first-time buyer, there is a vast amount of information to ingest during the initial stage of the search. Apart from the various listings you will be viewing, there is also the matter of calculating finances, and preparing to move to a new home. The masses of information available and the number of decisions that need to be considered can be overwhelming.

You might start out with an idea of what you are looking for, but after seeing property after property, it is possible to lose sight of the initial vision. Having a clearly defined list will help to stay on track and narrow down the search. There are a few other ways that will help you keep tabs on all the properties to compare them:

• Write notes on each property viewed – this can be done using a smartphone, tablet or the more traditional pen and notebook. Make a list of the pros and cons of each property.
• Take photos – this can be done with the camera on your phone.
• Keep the records of properties you are really interested in and discard the others.
• If you have any inquiries, talk to the agent who showed you the property. They will have a record of the homes that they have shown you and will have a list of each property’s features.

Anxious
Once your decision is made and you are moving ahead with purchasing the home, you are likely to start feeling stressed out. Buyers are often anxious to get through the process as quickly as possible so that they can move into their new home. During this time is it important for the agent to explain the legal process while providing an estimated time period that each stage of the process will take.

Satisfaction
Often buyers feel a sense of accomplishment and fulfillment once they have made it through the process. Owning a property can provide you with a sense of security, as well as a cornerstone for building wealth, provided the right decisions are made from the beginning.

Understanding the home buying process and the emotions that accompany it will assist you to make decisions that are based on the facts and not just your heart.

Home staging can create buyer appeal

While not new to the property market, home staging continues to grow in popularity among homeowners who wish to optimise buyer appeal and sell their home for the best possible price, within the shortest possible time.

To get the property sold for the best price, the home needs to appeal to the highest possible number of potential buyers. Home staging is used by estate agents as one of their marketing tools to highlight a home’s best features. It is preparing the home for sale by using techniques that focus on improving the property’s appeal and transforming it into a more attractive and welcoming space.

A prime example of staging is a retail shop window using mannequins to display items in such a manner that it allows people to picture themselves wearing the clothes or using the products in the window. Similarly, home staging aims to showcase the home’s best qualities and entice the potential buyer to see themselves living in that home – it creates aspirations.

It is possible to hire professional home staging specialists; however, this will obviously come at a cost. Professional staging can include the rental of furniture or artwork, buying paint or wallpaper, as well as products that may be required to fix up problems such as cracks in the wall or sanding wooden floors.

You can avoid the cost of a professional stager by doing it yourself, making simple changes to your home that could create a big impact. In this age of information, there are vast amounts of content available to help you through the home staging process. There are many websites, television shows and other mediums that you can use to source information that will assist you to get your home ready for viewings.

Don’t know where to start? Here are a few tips that will help you along your way:

Keep it clean
As a first step, the home should be clean, inviting and exciting for potential buyers to view. The object is for buyers to not only want the home but to want it more than any other homes for sale in the neighbourhood.

Getting the carpets professionally cleaned will make a big difference to their appearance and will leave the home smelling great. Taking the curtains down and washing them will also add to the pleasant aroma of the home. Fresh or new bedding will go a long way in sprucing up the bedrooms to ensure they look their best on an open house.

Get rid of clutter
Where possible, reduce clutter and pack away any unused items. Don’t let your personal items detract from the home’s features. If a space in the home is full of items, try and remove some furniture to open the space up a little. While not always possible, ideally it is good to reduce the number of items in the house by around half. This will mean that you will need to be ruthless in the selection process. Hiring a storage unit while the home is on the market will assist in storing pieces that you want to keep, but don’t want in the house.

If there are fewer items in the home, it will appear larger and it will easier to keep clean.

Smells evoke emotion
If the home smells good, it will conjure up positive emotions in buyers, while unpleasant odours often drive buyers away. There is nothing quite like the smell of freshly brewed coffee or freshly baked bread to make a home feel more inviting.

A few updates and adjustments
If necessary, give the walls a fresh coat of paint to inject some colour into the space and revitalise the look. Any small defects should also be attended to, such as replacing a cracked window pane or broken doorknob. During viewings, it’s best for each room to be as open and bright as possible. Turn on the lights and open all curtains and blinds to let in as much natural light as possible.

Unexpected touches
Small changes can make a big impact in how the property is seen by buyers. It is the unexpected little touches that will leave an impression on buyers viewing the home. Some fresh flowers on display, a welcome mat or fresh fruit in a bowl in the kitchen – all these little things combined will add to the appeal of the home and impress potential buyers.

Could this be the most expensive property in Pimlico?

Possibly the most expensive property per square foot sold in Pimlico may not be what most people expect. Sold by RE/MAX Central in Westminster, the apartment which is located in the Pimlico grid, achieved a selling price of £285,000. That doesn’t sound like a lot at first, but it is when you consider that the property is just 8.8 m2, making it around £32,386 a square metre.

Previously owned by British actor Robert Waite, the apartment’s prime location was ideal for commuting to and from various studio and shooting locations around London’s city centre. Initially listed at £299,999, the property took approximately three months to sell because its size made it unmortgageable. “There were two challenges that we experienced when marketing the property, the first being that it could only be sold to a cash buyer because banks were not prepared to finance the deal. The second challenge was finding a buyer who wanted a property of this size,” says Roger Collings, Manager at RE/MAX Central.

The apartment is situated on the second floor of a period building, built in the 19th century by renowned builder, Thomas Cubitt. While it has just 95 sq ft under roof, it does have a roof terrace measuring approximately 13 m2.

Collings says that the property was bought by a couple who plan to use it as a Pied a Terre. “The price the apartment was sold at highlights the demand for property within prime central London. While the number of transactions has dampened, prime central London is still a sought-after address,” he concludes.

Financial preparation will improve applicant’s chances

For the majority of the population, purchasing a property will be the largest financial investment they will ever make, so it makes sense to give the decision the due diligence it deserves and prepare accordingly. Before applying for a mortgage, you will need to ensure that you have assessed your financial situation and answered a few pertinent questions before approaching your bank for property finance.

What is my credit score?

A favourable credit score and clean credit record is a valuable asset when applying for a mortgage. Applicants can obtain a free copy of their credit report from credit bureaus such as Experian or Equifax to assess their financial position.

Any missed, or slow payments will have a negative impact on your credit score. However, it is also important to be mindful of the less obvious credit infractions such as opening too many accounts, and numerous credit enquiries. All of these things will impair your records and could scare off lenders. Reducing the number credit cards you have and ensuring you are on the electoral roll will both aid in boosting your credit score.

What is my annual income?

As a potential home buyer, the maximum mortgage amount that you can qualify for will be based on your annual income, so be sure to include any bonuses or annual investment returns when making this calculation. Mortgage lenders will require proof of income to quantify the mortgage amount, so you will need a P60 form from your employer and possibly three months’ bank statements and payslips.

How much debt do I have?

Another major consideration that banks take into account when determining the mortgage amount they are willing to grant is the applicant’s amount of disposable income. To increase the disposable income you have available, get rid of or pay down debt as much as possible. Lenders will require you to provide them with all the debt you currently have to work out a debt-to-income ratio, which will be used as a tool to determine your level of affordability. Having a lower debt-to-income ratio will be highly beneficial as it will increase the chance of gaining approval for a higher mortgage amount.

What kind of deposit can I put down?

The more money you can put down as a deposit – the better. A larger deposit means that the bank has to finance a smaller percentage of the purchase price of the home, which mitigates their risk. Another advantage is that bank reserve their best rates for applicants with large deposits, resulting in lower monthly repayments.

What is my employment situation?

Most lenders won’t want to provide finance to someone who is in their probationary period, so if you are thinking of changing jobs, rather stay put until after the application. Also, lenders view an extended length of employment favourably, only providing finance to an applicant who has had stable employment for some time. If you have recently changed jobs, rather wait three to six months before applying for a mortgage.

Lenders also view self-employed people as a higher risk, especially if the business is in its developing stages. Applicants who are self-employed will usually be required to provide their  SA302 form relating to the last three years from HMRC, alternatively their full accounts for the last three years.

What can I afford?

Affording a home is more than just paying the monthly mortgage repayment, other costs need to be considered such as utilities, taxes, insurance and maintenance. Owning a home is a long-term investment that needs to financially sustainable for the term of the loan, so it is advisable to purchase a property that you can comfortably afford. Financial preparation is the key to homeownership readiness and will make the mortgage application process far smoother.

Factors that will influence the property market in 2018

It is fair to say that 2017 was a year of much change in the housing market, from the abolishment of Stamp Duty for first-time buyers who are looking to purchase a home up to £300,000, to the new way that landlords will be taxed on their portfolio. One thing is for certain, and that is that the government is doing all they can to ensure that everyone has an opportunity to own a home for the first time. The year was geared towards encouraging first-time buyers to get in the game while getting landlords to rethink their portfolios and perhaps releasing some of their current properties into the market.

Here’s a brief look at the things that happened in 2017 that will influence the market in 2018:

Stamp Duty done away with for first-time buyers

The government’s decision to scrap Stamp Duty for first-time buyers who wish to purchase a property up to £300,000 was one of 2017’s biggest changes in the housing market. In addition to the exemption, rates have also been changed. Now, first-time buyers making a property purchase up to £500,000 will pay no Stamp Duty on the first £300,000 and 5% tax on the amount between £300,001 and £500,000.

New taxing for landlords

Last year also saw the introduction of the section 23 taxation change that will impact landlords. The change will be phased in until 2021 and will mean that landlords will not be able to claim tax relief on their mortgage payments from 2021, reducing by 25% each tax year until then. The change will effectively push landlords into a new tax bracket, which will essentially eat away at potential profits.

Interest rate has gone up

For the first time in a decade, the base rate of interest has increased marginally from 0.25% to 0.5%. The increase means that mortgage repayments will be slightly more expensive going forward.

A change in the rental landscape

Over 2017, the build to rent sector has seen growth, which has created an alternative type of accommodation for tenants. Many of the build to rent developments are owned by institutions such as pension funds and are then let out by letting agencies. At the moment, approximately 55,000 build to rent properties exist in London. Depending on the development or site, the developments offer residents features such as gyms, communal areas and other sought after amenities.

House prices are steady

In spite of both the economic and political challenges of Brexit, 2017 showed that the London property market is robust and house prices have remained steady. According to the UK House Price Index, the yearly average house price growth is up to 5% with 29 of the 32 boroughs in London showing house price growth since January 2017. Steady property prices, favourable interest rates and an increase in inventory are positive factors for buyers in today’s market.

An increase in affordable housing

According to recent budget announcements, the UK government will be focused on increasing the number of affordable homes available to buyers. A commitment has been made by the government to build more affordable housing, designating £44 billion to build new homes, with an additional £400 million to improve existing estates.
Approved schemes will also be pushed ahead as soon as possible to help relieve some of the pressure currently placed on council waiting lists.

With all this change during 2017, it will be interesting to see what we can expect of the next twelve months.

London’s 10 best value-for-money boroughs

In August 2017, the rate of house price growth increased to 5%, with the average UK house price increasing to £226,000. While the north-west of the country experienced the largest increase in property prices, with values going up by as much as 6.5%, London property prices only increased by 2.6%, with the heart of the capital’s financial district experiencing a decrease of 5.6%, which is believed to be a result of Brexit.

With London’s property prices seeing exorbitant growth over the last decade, many first-time buyers have been left on the outskirts looking in. As prices continue to rise, are first-time buyer’s hopes dashed or do they have options?

While London remains the most expensive place in the UK to purchase a home with the borough of Kensington and Chelsea topping the list with an average property price of over £1,3 million, there are some value-for-money boroughs in the east of London that still offer first-time buyers the chance to own property.

The borough of Barking and Dagenham currently has the lowest average house price in London at £285,085, with the boroughs of Bexley and Havering following closely on its heels as a good value for money option for first-time buyers wanting to get into the market.

Based on the UK house price index the ten boroughs of London with the lowest average property prices are:

1. Barking and Dagenham – £285,085
2. Bexley – £334,191
3. Havering – £358,251
4. Newham – £364,137
5. Croydon – £365,445
6. Sutton – £376,836
7. Greenwich – £385,103
8. Lewisham – £407,777
9. Enfield – £407,921
10. Redbridge – £409,248

While all of the boroughs on the list are above the average UK house price of £226,000, they are nowhere near the prices seen in the most expensive boroughs of prime central London, yet all still have easy access to city’s financial hub, making them a great place for first-time buyers who want to purchase a home within commuting distance of the city centre.

High street vs Online – What’s the difference?

Over the last few years, more and more online property sales models have made an appearance in the market sparking debate as to what is a better option – the online model or a high street agency?  While they are perceived to be two entirely different models, the fact is that all estate agency models have an online presence and advertise on property search portals such as Rightmove, Zoopla, etc.

Essentially, what this means is that being online is not what differentiates the two models, but rather it is the level of service that each model provides.

Rather than saying online or high-street, the differentiating term should be Upfront Fee model versus No Sale, No fee model.  The solely online model fills a gap in the market for owners who wish to sell their property themselves without the additional services that an estate agency provides. Once the property is listed on the respective site, the online agency has fulfilled their contractual obligation to their client regardless if the property sells or not. Clients will not pay commission, but they will pay a fee, irrespective of whether the home sells. In a no sale, no fee agency such as RE/MAX, if the home does not sell, they don’t make a penny.  In fact, they will be out of pocket because they would have spent money on marketing the property. They are incentivized to sell the home for the best possible price, within the shortest possible timeframe, which surely is advantageous to the seller.

There are several additional services that consumers get from RE/MAX that they won’t get from an upfront fee agency.

A full service from start to finish

Clients deal with one agent throughout the process. The property sales process can be complicated, so having an agent who can assist, will make the whole process far smoother.

Open houses

Buying and selling property is emotionally driven, it is not the same as picking a retail item from an online catalogue. Most people want to view a property and get a feel for it before they decide to buy it, an agent helps to facilitate that process.

Offline marketing

A No Sale, No Fee agent will have a network of contacts, experience, and market knowledge to successfully round out their marketing plan to ensure the property is exposed to the right target market.

Key pointers during the process

An agent can introduce trusted advisors to deal with the conveyancing and the financing of the property, provide advice on what to do should the surveyor find any issues with the property, make the move-in process smoother by introducing removal companies and providing valuable information about utility companies.

Negotiation

Good No Sale, No Fee agents are skilled, experienced negotiators, which is valuable when trying to reach a fair price for a property that is either being bought or sold.

All of these aspects enhance the client’s experience and make the process easier. Even in this digital age, a value-added service will remain an intricate part of the industry.

How the interest rate hike could impact the property market

The Bank of England Governor, Mark Carney announced in November 2017 that the interest rate would increase from 0.25% to 0.5%. This marks the first time in a decade that the central bank has hiked the rates, which are currently at historic lows.

The rate hike is likely to place further pressure on the market as mortgage costs go up and lending conditions become further constricted.

While rate hikes will have a lesser impact on those who have the cash to purchase a property outright, existing mortgage holders and potential buyers wanting to get their foot in the door will be hardest hit. According to Zoopla, the average price paid for a home in London is £621,881. Under the previous prime interest rate of 0.25%, the mortgage repayment over a 25 period was £2,139. With the hike to 0.5%, the monthly mortgage repayment will increase to £2,205 per month, which means that homeowners will pay a further £20,036 on interest over the term of the loan.

Based on the example, an increase in the monthly mortgage repayment of £66 a month is not substantial. However, it is the compounded effect of a rate hike on all other debt that the homeowner is currently servicing. Many people have high debt levels because interest rates have been so low for so long. As interest rates rise, it will be more and more difficult to service the debt and other household payments. Added to this, if we enter into a rate hiking cycle, we may see more than one increase.

Another effect is that it will be more difficult for potential buyers to show the necessary affordability levels to get their foot on the first rung of the property ladder. Higher interest rates mean that buyers will qualify for lower mortgage amounts. Essentially this means that they will require a larger cash deposit to be able to afford the same property. Before any further rate increases occur, potential buyers should focus on paying down their debt and building as much savings as possible.