The logic and emotion of house buying and selling

There are over 1 million property sales in the UK every year. Whilst for some, the buying and selling of property is a business decision, an investment perhaps, for most people emotions will play a big part in the vast majority of these transactions,. So how do you stay logical and rational through the process of selling or buying a house and should you use emotions to your advantage?

The reasons why selling a house or buying one is an emotional process

For the vast majority of people their home is their castle – it is where they spend a lot of their time, the place where long-term relationships are forged and children brought up, and often represents a significant proportion of people’s wealth. So it is no surprise that emotions run high when both selling a house – walking away from years of emotional attachment – and when buying a house – your dream castle for the foreseeable future.

Emotions can run even higher in some case for example if the house is being sold due to death or divorce, or from a buyer perspective, the fear and excitement felt by first-time-buyers plunging their hard earned savings into a property and taking that first step on the housing ladder. These heightened emotions are more common than you might think. Anecdotal experience from the houses we’ve helped to sell via myonlineestateagent.com is that emotions play a noticeable part in the sales process, and most importantly emotions affect the price paid, in about half of cases!

Top tips for dealing with emotions when it comes to property

First of all, accept that emotions play a part – they probably will, and there is no point in trying to avoid the inevitable, which will do nothing but increase your stress-levels. As such, the best strategy is to turn emotions to your advantage, rather than battling against them.

Everybody talks about “valuation” but there is actually no such thing. Yes, a surveyor may come round to the property and quote a “value”, but this is simply an average of prices paid for similar properties in the same area. So don’t get too hung up on valuation – it is nothing more than a figure agreed between what somebody wants to sell for, and what somebody is prepared to buy for. Following this logic, if you are selling a house and receive an offer less than the “value” an estate agent has suggested, don’t immediately turn it away as an insult – see if you can negotiate and agree a price that is acceptable to you, irrespective of what anybody else tells you the property is worth.

Before you start buying or selling, spend time thinking about what you want to achieve. If you are selling is it all about price; or perhaps the ability to trade up or down; or the ability to make a life change.
If you are buying, what is your financial limit; is this a stepping-stone or a long-term solution; what are the most important characteristics of the house you buy. In other words, think about the logic of the transaction beforehand – including the wider factors as well as price – and this will help you to assess each possibility as they come along.

Whilst an estate agent cannot tell you how much to sell or buy for, they can take away the stress of the negotiation. Many people dislike haggling, or negotiating on what is their prized asset, and this is where a high-quality estate agent can offer some logical and rational thinking and work on your behalf to get the best price. But remember, never be pushed into accepting an offer that you don’t believe in!

Take the other party’s position into account. Buyers have different perspectives when they are house-hunting – they won’t see the years of happiness that the house has given to the seller, they will have financial constraints, and they will have a variety of options. As such, if you are selling, show people around with pride, and let them know how great a house it has been. Conversely, if you are buying, respect people’s feelings, and don’t just treat the property as bricks-and-mortar. An amicable negotiation and respect for the other side will make everybody feel better at the end of the process!

Once the property sale has gone through look forwards not backwards. Don’t keep on wondering if you could have got a better price – either as buyer or seller. Personally, I’ve got nothing but fond memories from the dozen or so houses I’ve bought, and every new one opens up another chapter.

Final thoughts

Emotions will play a part in just about every house transaction – don’t try and avoid this, but accept it is a factor – in itself this can help you be aware and stop emotions overtaking reason!

Should You Invest in the New Help-To-Buy ISA?

The Chancellor George Osborne’s 2015 budget announcement included a new incentive to encourage first-time buyers, namely help-to-buy ISAs, to be launched in Autumn this year. We take a look below on how this new scheme will work, its pros and cons, and how first-time buyers can make the most of it.

Overview of help-to-buy ISAs

The headline-grabbing soundbite is that this scheme allows individuals to save up for a deposit on a new house, as a first-time buyer, and receive a cash inventive from the government of up to £3,000. All well-and-good!

But, to earn the full £3,000, you need to save up £12,000 yourself, with the government contributing 25% to what you have saved. Another condition of the scheme is that the maximum amount you can save per month is £200, although you will be allowed to make a one-off contribution to the ISA of £1,000. All of which means it will take 4½ – 5 years to save enough to earn the maximum incentive.

The new ISA will operate at an individual level, so if you are buying your first house with somebody else you will both qualify for the incentive and collectively receive £6,000 towards your first property from the scheme.

Why has the help-to-buy ISA incentive been introduced?

Everybody knows that first-time buyers are finding it increasingly difficult to buy a property – a combination of rising house prices and greater deposit requirements from mortgage providers mean that for many it is simply not affordable to buy a house, despite mortgage rates being surprisingly cheap at present. A lack of first-time buyers is not in the long-term interests of the country, and hence George Osborne is trying to ease this burden.

There are other government schemes also available for first-time buyers, which generally seek to reduce your deposit to 5%, with an additional loan being supported by the government. Whilst positive, these other schemes have not had the take-up that was hoped for, mainly because interest rates on such mortgage arrangements can be quite high, reducing the benefit of a lower deposit requirement.

How will help-to-buy ISAs work in practice?

Nobody really knows, as they will only come into operation in Autumn, and the devil will be in the detail!

You will be able to withdraw the money put into the ISA should there be another reason you need the funds, but will only receive the government cash incentive if you use the savings to buy your first house. Whilst this makes sense, it is also canny politicking from the chancellor, as he will only need to find the money towards the end of the next parliament.

It is not yet clear what interest rate will be earned on the ISA, in addition to the government cash. Banks tend to like regular savers, so offer relatively attractive interest rates, but conversely the attraction of these ISAs is the government support, so there is less need for high interest rates. Time will tell, but the best advice will remain as always, shop around.

Are there any negatives?

As noted above, you will need to save up for the best part of 5 years to earn the maximum reward. In that time, house prices will have increased, and mortgage rates will almost certainly be higher, so you could be chasing your tail! It is certainly difficult to advise people to put off buying their first house, simply to earn more government money – whilst this may appeal, it is unlikely to be the best answer.

There is speculation that the scheme will increase house prices, making it harder again for people to get on the property ladder. The view at Myonlineestateagent.com is that the scheme is overstated, and it is unlikely that there will be a noticeable impact on the property market. Government schemes in this area have flattered to deceive, with a lower impact than planned, and the amounts involved are unlikely to stimulate high demand for first-time-buyer properties.

How can you make the most of the scheme?

If it encourages you to save, then there is an immediate benefit. At present there would appear to be few down-sides to opening a help-to-buy ISA if you are likely to be a first-time buyer in the next few years. Interest rates for your savings are likely to be lower than other more general ISA products, but if you shop around and the downside should be minimal.

With the government cash, the maximum house deposit you can save from these ISAs will be £15,000, plus whatever interest a bank may give on top. This still doesn’t represent a particularly high deposit for typical house prices, especially in London, so if you can, blend a help-to-buy ISA with other savings that can be combined to maximise your deposit.

Also consider that the bank of mum and dad can help! Rather than having to support children with a large one-off deposit, parents should consider setting up and funding, or part-funding, payments into such an ISA. For example, if children are going to university, having a help-to-buy ISA whilst getting educated can make a good start to a having a deposit for a property purchase upon graduation. Parents may be more able to afford the monthly payments, rather than a large lump-sum, especially if there is some sharing of the contribution.

Final comments – is it worth setting up a help-to-buy ISA?

Anything that encourages savings and supports first-time buyers is good. But the new help-to-buy scheme is not the panacea that some people believe – it takes time to save up the full amount to maximise “free” cash, and the property market will have moved on in that time. So, start saving early, and you will reap the best rewards.

If you’re looking to buy a property, view the properties for sale with My Online Estate Agent here.

Selling property without an estate agent, is it for you?

There are over 1 million property sales every year. Traditionally, house sellers have had to use estate agents to manage the sale, but with typical commissions charged of £5000 many people have looked for cheaper alternatives, believing these commissions are very poor value for money. It is possible to sell your house privately, but is this for you?

Why have people traditionally used estate agents?

Before the rise of the internet, estate agents were just about the only way that you could advertise a property for sale. The estate agent would take photographs, prepare a floorplan, and then advertise the property – their high street shop window, local brochures and newspaper advertising were the main way in which people found houses to buy.

Rightmove changed all of that! By providing an online portal to list available properties, househunters no longer needed to trawl the high street – a connected computer was all that was needed to search for the ideal home. This has massively reduced the value that estate agents provide – although their fees haven’t reduced! – encouraging people to seek cost-effective alternatives.

Is it possible to sell a house privately?

In a word, yes! There is nothing requiring you to use an estate agent. If you already know somebody that wants to buy your house, or are prepared to advertise it yourself, you can eliminate agent fees altogether. You will need to use a qualified conveyancer to legally transfer ownership, but these fees are relatively modest.

If you want to go down the private sale route here are some tips:

  • Invest in high quality photographs (a smart phone is rarely good enough). Poor imagery massively reduces the interest from house-hunters – first impressions really do count.
  • Buy a “For Sale” board from a local printer (they are not that expensive). It promotes your house to passing traffic, and makes it easier for viewers to find you. But, a poor quality, home-made board will have the opposite effect – first impressions again, and will suggest to viewers that you are doing things cheaply, and they will reflect this in any price they offer.
  • Use different advertising channels, and work them. Advertising your house is hard work – you have to keep at it. Selling your house online is a good place to start – use social media, try different routes. Be aware that advertising also becomes stale very quickly, so where possible monitor the level of interest in your property and keep on updating photographs and descriptions, and promote in different ways, such as open house weekends.
  • Vet your viewers to see their potential as buyers for your home and to avoid time-wasters and nosy parkers! When you get a genuine viewer make sure you engage them as much as possible. Make them feel at home, leave them to view alone after an initial show-round, give them a high quality printed brochure, and follow up with them after the viewing. Offering incentives (such as paying their legal fees) can be a good way to encourage an offer, so long as you don’t lose your negotiating position.

So why don’t more people sell privately?

In essence, it is all about advertising. If you want to achieve the best price for your property then you need to advertise it to the widest possible audience. This is where Rightmove, Zoopla etc comes in – they provide a website where properties can be advertised, and they get huge volumes of people searching on their sites and via their mobile and tablet apps – in excess of 90% of all property searches start on these portals.

Whilst this sounds great, Rightmove and Zoopla do not allow individuals to advertise directly through them – they require an estate agent acting on behalf of the seller. Although this may seem to be collusion, it is not, but rather is driven by law – it is a legal requirement for a property advert to be accurate and not misleading, a law introduced to stop unscrupulous estate agents using clearly inaccurate and exaggerated property descriptions. If Rightmove and Zoopla were to allow individuals to list their properties for sale, they would need a mechanism to check the accuracy of descriptions and photographs – this is not what they are about, so pass this responsibility to estate agents.

Of course, there are other websites available where individuals can list properties independently, and if you want to sell privately these can be used. But – and it is a very big but – the amount of website visits and the amount of potential buyers who will see your property is a tiny fraction of that received by the major portals. Rightmove can attract 100 million site visitors a month!

So, if you want to maximise advertising of your property, you are still stuck with using estate agents.

Online Estate Agents – an affordable alternative to high street estate agents

Recent years have seen the rise of online estate agents such as www.myonlineestateagent.com. These have been set up to challenge the way in which estate agency services are provided. They recognise that you no longer need a high street presence to advertise a property, which comes with very high branch space and people costs. They operate centrally, with investment in technology, allowing a far cheaper alternative. But – and this is critical – online estate agents still advertise on Rightmove and Zoopla – so you can get the same advertising awareness without the high fees.

Most online estate agents provide a menu of services, so that you can choose to buy what you need. A basic package will include Rightmove and Zoopla advertising (including checking the accuracy of the property description) plus management of viewings and negotiations of offers. Additional services, such as professional photography, For Sale boards, premium advertising etc is also available, for pre-agreed fees.

£500-£1000 are typical online estate agency fees, compared to the £5000 paid to bricks and mortar agents. Whilst the fees for using an online estate agent might be higher than selling privately, you are getting a near-full service for a fraction of the price.

Just think what else you could spend those savings on – a holiday, home improvements, new car – the choice is yours!

Silver Landlords Warned To Be Wary With Pension Pots

Five simple steps to help secure your pension pot

This April, changes to the pension reforms will boost the buy-to-let investment property market, as more and more pensioners decide to invest in property to fund their retirement.

According to research, 16% of retirees will reinvest in property, adding more fuel to another buy-to-let boom. Many will take out a lump sum of money, paying tax on 75% of it and reinvesting in property to live off the rental income.

While this may seem like a sound investment on the surface, CEO of My Online Estate Agent and ex-regional managing partner at accountants Grant Thornton, David Grundy, is keen to offer silver landlords five key tips to help them secure their savings.

Balance it out

Property investing can be a good opportunity but it needs to be part of a balanced portfolio. Although bank interest rates are unattractive – and will be for many years – this isn’t a reason to take more risks and invest in property. Ask a simple question – can you still live comfortably from other savings if your property investments fall in value?

Stay on track

Invest in properties that have a proven track record of being let-able, preferably with a sitting tenant, and you are less likely to lose money. Avoid buying properties to renovate to then rent out – it might seem like a good way to double the gain, but it also doubles the risk.

Also consider investing in properties to help your family get on the property ladder. Many retirees support their children with deposits etc, but buying a property jointly can have huge benefits – your children get the help they need, you earn rental income, and it’s all kept in the family!

Keep it fixed

Use fixed rate mortgage deals – rates are incredibly low at present, so use this to your advantage. Whilst fixing for, say, five years, may initially cost more than a variable rate loan it will provide certainty over the future – long-term fixed rates are still low compared to long-term averages.

Avoid chasing capital gains

Don’t chase capital gains – a good buy-to-let should pay for itself in rental yields, giving you a surplus after paying mortgage costs. If a capital gain arises, view it as the cherry on the pie, not the crust and filling. Some investors acquire buy-to-let properties in the hope of making a gain when property prices rise – this is not for the faint-hearted, as the recent property price crash demonstrated. If a property is not giving you net income from the rents then walk away.

Bring in the professionals

Whilst it may be appealing to manage the property portfolio personally, especially for active pensioners who are looking for things to do, be wary about learning from mistakes – these can be very costly –take advice on effective property management, at least until some experience has been accumulated.

David Grundy said: “Investing in property is an extremely popular option at the moment, we have seen ourselves first-hand that people approaching retirement are looking more and more into buy-to-let options as a way of securing stable income. But the potential for a combined property and pensions scandal arising from a slackening of rules, with pensioners worse off because they were lured with the expectation of interest rate-beating returns, but find they are sitting on losses, is something that needs to be avoided.

“Past performance has shown that the value of the property will generally increase, but retirees need to be careful when investing that they are putting their money into the right places and seeking professional advice before rushing into anything that could leave them out of pocket. So, invest carefully!”

MOEA is one of the UK’s leading and most established independent, online estate agencies – offering both Sales and Lettings services to property owners and landlords across the country.

March 2015 Property Trends from Rightmove

Rightmove have released their March 2015 house price index, which offers data and insights from the UK’s leading property portal. But what are the key points for property sellers and potential buyers?

Rightmove HPI March 2015 Key Conclusions

Rightmove’s latest data highlights a few points of interest:

  • An increase in house prices, but not at rates associated with a traditional spring bubble – possible nervousness ahead of the general election.
  • Quality properties remain in short supply.
  • The rise of “granlords” is starting to give impetus to the buy-to-let market.

The Rightmove website is one of the most visited sites in the UK, with looking at others people’s houses almost a national pastime. But searching and reviewing properties doesn’t necessarily feed through into increased sales activity.

What is the underlying trend in property prices?

On the face of it, property prices are now at or near all-time highs, but a healthy note of caution is needed! Property values always rise in spring – which is traditionally the peak season for sales – but the rate of growth is slower than recent years, suggesting underlying trends are not as strong. Also, annual price increases in London are now lower than the South East and East, indicating some slow-down in the capital and a wave of equalisation spreading outwards.

The Rightmove reports suggests there are some pre-election jitters in the market, keeping a rein on price rises. This is not unusual, with both buyers and sellers nervous what a change in government – or even a hung parliament – will have. However, the reality is that any uncertainty will quickly dissipate after 7 May, as none of the major parties have radical policies that could undermine the housing market, and all politicians are keen to improve consumer confidence.

In addition to the above, the price rises are on the back of low levels of supply, so supply / demand dynamics are a factor. It is worth noting from the Rightmove survey that the average agent now has only 59 properties for sale, compared to 74 last summer. If sellers start to come back into the market recent rises could be reversed.

All of this suggests that the headlines of rising values and record house prices are masking more caution, and it is likely that any bubble will deflate.

What is the “granlord” revolution?

Changes to pensions regulation is encouraging those approaching or beyond retirement age to access their pension pots, to be spent as retirees want. This is stimulating interest in buying buy-to-let properties, with attractive rental yields out-stripping interest rates on cash deposits. There is an acceptance in the market that this will provide a further stimulus to property values, although the hard evidence is yet to be seen.

Whilst investing in property may make a good retirement investment, there are a number of pitfalls, and should only be approached with caution. View our 5 tips for silver landlords here.

My advice for buying and selling this month

If you are thinking about selling, don’t keep on waiting for further price rises, as this trend could quickly reverse. Spring is always a peak time for property transactions, and delaying a sale process too long could miss this peak and result in trying to sell through the more challenging summer period – sometimes it makes sense to wait, as you can get a high value, but this is far from guaranteed. With a relatively low level of supply, purchasers are not in a position to negotiate aggressively as they don’t have much choice, so you can maximise the value you receive by careful marketing and strong negotiation.

For more insights on Rightmove’s index, view the index here.