A. The market value of a property, and the value that is put on it for insurance purposes, are two very different things. Market value obviously reflects the price someone is prepared to pay for your home – which, as we all know, can go up, down or sideways, depending on a whole range of external factors. On the other hand, insured value is based on a calculation of what it would actually cost to completely rebuild your home to the same specification in the event of something like a major fire. Even in the current market, the former is almost always higher – primarily because the insured value doesn’t take into account the value of the land on which a property sits.
So, that’s where the discrepancy comes from – and in itself, it needn’t be a cause for concern.
However, whether or not the insured value is actually correct is another matter altogether. Generally speaking, insurance companies increase their valuations annually in line with inflation – but that won’t necessarily reflect the true cost of labour and materials at any given time. Besides, they may have got their sums wrong in the first place. Then again, you may have significantly extended or improved your home over the years, and unless you make a point of telling your insurers, they won’t have taken that into account.
As a general rule, I would advise you to check the insured value every 2-3 years. You can calculate this yourself by multiplying the total external size of your home (both upstairs and downstairs) by the estimated rebuilding cost per square foot or square metre, which can vary quite considerably, depending on where you live and the type of property you live in. These costs are published by the Royal Institute of Chartered Surveyors, and are available – at a price - from most qualified surveyors. Alternatively, you can check out the Association of British Insurers’ free online building insurance calculator.
Once you’ve done your calculations, compare the result with the insurer’s valuation, and if you’re not happy, ask them to make the necessary adjustment. It might mean you pay a slightly higher premium, but it’s a small price to pay for peace of mind.
Tuesday, 24 April 2012
Friday, 20 April 2012
Q. We are hoping to buy an old character property, but the lender’s valuer has given it the thumbs down, unless we have a structural engineer’s report...
A. Despite our sending them a copy of a full building survey which we commissioned and which says it is OK!
Not knowing the specifics of the case, I should start by saying that this is not an unusual problem, since lenders have always tended to take the word of their own valuers over any professional you might employ.
What can you do? Well, my first piece of advice would have been to send them a copy of your own survey – but you’ve already done that! So, you could start by writing to them asking for a detailed explanation of why the survey is not acceptable. You could follow that up with a further letter or report from your surveyor, setting out in detail why in his professional opinion the property is fundamentally sound - and specifically, why it should not be expected to meet modern standards and regulations, etc. After all, there are plenty of such properties around that are successfully bought and sold with mortgages every year.
Alternatively, you could always just commission an engineer’s report, as the lender asks. However, before going to that expense, you would need to have a pretty clear commitment from them that they will give you the loan you need if the report comes back positive.
Of course, I’m afraid it’s always possible that this particular lender will simply refuse to budge. After all, mortgage companies are the ones being asked to lend money, so they can basically set their own rules and decide who they are prepared to lend to – or not, as the case may be.
If this happens, then I would suggest you simply take your business elsewhere. After all, since so much depends on the personal opinion of the valuer, it would be strange if it were to prove impossible to get the loan you need from anywhere else! If you went through a mortgage broker, then I would definitely get him involved again. And if you didn’t, then I would definitely recommend you use one next time. After all, a broker won’t earn his commission if you don’t get the loan you need, so he will certainly have an incentive to try and sort things out!
Not knowing the specifics of the case, I should start by saying that this is not an unusual problem, since lenders have always tended to take the word of their own valuers over any professional you might employ.
What can you do? Well, my first piece of advice would have been to send them a copy of your own survey – but you’ve already done that! So, you could start by writing to them asking for a detailed explanation of why the survey is not acceptable. You could follow that up with a further letter or report from your surveyor, setting out in detail why in his professional opinion the property is fundamentally sound - and specifically, why it should not be expected to meet modern standards and regulations, etc. After all, there are plenty of such properties around that are successfully bought and sold with mortgages every year.
Alternatively, you could always just commission an engineer’s report, as the lender asks. However, before going to that expense, you would need to have a pretty clear commitment from them that they will give you the loan you need if the report comes back positive.
Of course, I’m afraid it’s always possible that this particular lender will simply refuse to budge. After all, mortgage companies are the ones being asked to lend money, so they can basically set their own rules and decide who they are prepared to lend to – or not, as the case may be.
If this happens, then I would suggest you simply take your business elsewhere. After all, since so much depends on the personal opinion of the valuer, it would be strange if it were to prove impossible to get the loan you need from anywhere else! If you went through a mortgage broker, then I would definitely get him involved again. And if you didn’t, then I would definitely recommend you use one next time. After all, a broker won’t earn his commission if you don’t get the loan you need, so he will certainly have an incentive to try and sort things out!
Monday, 16 April 2012
Q. What is the current situation as far as Energy Performance Certificates is concerned?
A. A new consumer-friendly version of the EPC, together with new rules governing their use, came into force, bizarrely enough, on Good Friday, April 6th. By law, the new 4-page EPC must now be commissioned and made available within 7 days of a property being offered for sale or rent – with an extra 21 days allowed if any particular problems are encountered with its production.
Anyone (the owner, landlord or their agent) failing to make an EPC available, free of charge, to prospective purchasers or tenants within that time frame can be reported to local Trading Standards and may be liable to pay a fixed penalty of £200.
In addition, the front page of the EPC – the bit containing the familiar bar chart and key advice on increasing energy efficiency - must now be attached to all estate agents’ particulars. Moreover, the National EPC Register, which already contains several million certificates, has for the first time been made publicly available, with the aim of making it easier for people to compare the energy efficiency of their own homes with other, similar properties.
In announcing the changes, Communities and Local Government Minister Andrew Stunell said that the package of measures would make energy information on properties easier to understand, and help people save money on their fuel bills.
So far, so good, except for the fact that estate agents have been told by Landmark – the Daily Mail-owned private company running the EPC database – that the ability to automatically extract the front page of each report and attach it to property details (as required by the new law) won’t actually be available until June!
OK, so that is the agent’s problem, you might think – and you’d be right. However, homeowners might be rather more concerned to discover that thanks to these same changes, their full address and post code will now be publicly available on the Register. Something which, in extolling the virtues of the new arrangements, Mr Stunell somehow neglected to mention…
Ultimately, of course, the question that really matters is whether any of these changes will make EPCs more useful than they have so far proved – and so far, there is precious little evidence to suggest that buyers actually care very much about them at all.
Still, anything that saves the planet has got to be worth doing – hasn’t it?
Anyone (the owner, landlord or their agent) failing to make an EPC available, free of charge, to prospective purchasers or tenants within that time frame can be reported to local Trading Standards and may be liable to pay a fixed penalty of £200.
In addition, the front page of the EPC – the bit containing the familiar bar chart and key advice on increasing energy efficiency - must now be attached to all estate agents’ particulars. Moreover, the National EPC Register, which already contains several million certificates, has for the first time been made publicly available, with the aim of making it easier for people to compare the energy efficiency of their own homes with other, similar properties.
In announcing the changes, Communities and Local Government Minister Andrew Stunell said that the package of measures would make energy information on properties easier to understand, and help people save money on their fuel bills.
So far, so good, except for the fact that estate agents have been told by Landmark – the Daily Mail-owned private company running the EPC database – that the ability to automatically extract the front page of each report and attach it to property details (as required by the new law) won’t actually be available until June!
OK, so that is the agent’s problem, you might think – and you’d be right. However, homeowners might be rather more concerned to discover that thanks to these same changes, their full address and post code will now be publicly available on the Register. Something which, in extolling the virtues of the new arrangements, Mr Stunell somehow neglected to mention…
Ultimately, of course, the question that really matters is whether any of these changes will make EPCs more useful than they have so far proved – and so far, there is precious little evidence to suggest that buyers actually care very much about them at all.
Still, anything that saves the planet has got to be worth doing – hasn’t it?
Tuesday, 3 April 2012
Q. Is selling at auction worth considering?
A. Very much so. Traditionally, of course, this rather depended on what you were trying to sell. Here in the UK, auction always tended to be reserved for those properties where the normal method of sale by private treaty was less likely to produce the best price: for example, land, or properties requiring substantial renovation or remedial work, short leasehold properties, and houses suitable for conversion.
However, that is changing. There is plenty of evidence around the country that auction has moved forward quite significantly in the last twelve months, and that it is no longer seen as the exclusive preserve of the bargain-hunter or investor.
Of course, traditional lots are still selling well in the sale room. However, in recent months, there has also been a rise in the number of more “normal” properties coming up for sale at auction. This is generally happening in cases where the seller needs either speed or certainty – or both. This can be for a wide variety of reasons: in probate cases, for example, or where sellers may have a deadline to meet, such as a job move or children moving into a new school catchment area. In other words, people who do not necessarily have the luxury of hoping that a sale by private treaty will be concluded within their desired time frame.
And all this, of course, is happening against a background in which the lack of liquidity in the mortgage marketplace has seen a rise in abortive transactions, and new mortgage business is still at an historic low.
Another key factor helping to bring auctions more into the mainstream market is the growth in the number of auction houses offering new-style conditional contracts. As with traditional contracts, these still become legally binding on the fall of the auctioneer’s gavel – thereby offering that all-important certainty. However, they require a much smaller deposit from the successful bidder on the day – and instead of the standard 28 days to completion, they allow anything up to 60 days. By providing more time to secure the necessary finance, this has opened up the auction marketplace to regular buyers as well as investors.
Of course, as always, anyone looking to sell their property should take advice on the best method of sale from their chosen estate agent – but certainly, auction is increasingly becoming a viable option!
However, that is changing. There is plenty of evidence around the country that auction has moved forward quite significantly in the last twelve months, and that it is no longer seen as the exclusive preserve of the bargain-hunter or investor.
Of course, traditional lots are still selling well in the sale room. However, in recent months, there has also been a rise in the number of more “normal” properties coming up for sale at auction. This is generally happening in cases where the seller needs either speed or certainty – or both. This can be for a wide variety of reasons: in probate cases, for example, or where sellers may have a deadline to meet, such as a job move or children moving into a new school catchment area. In other words, people who do not necessarily have the luxury of hoping that a sale by private treaty will be concluded within their desired time frame.
And all this, of course, is happening against a background in which the lack of liquidity in the mortgage marketplace has seen a rise in abortive transactions, and new mortgage business is still at an historic low.
Another key factor helping to bring auctions more into the mainstream market is the growth in the number of auction houses offering new-style conditional contracts. As with traditional contracts, these still become legally binding on the fall of the auctioneer’s gavel – thereby offering that all-important certainty. However, they require a much smaller deposit from the successful bidder on the day – and instead of the standard 28 days to completion, they allow anything up to 60 days. By providing more time to secure the necessary finance, this has opened up the auction marketplace to regular buyers as well as investors.
Of course, as always, anyone looking to sell their property should take advice on the best method of sale from their chosen estate agent – but certainly, auction is increasingly becoming a viable option!
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