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Rateable Values As A Guide To Fair Value


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HOLA441
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HOLA442

Sorry for all the posts but just checked my figures and I was wrong. There's 60k between the prices. 75 for the repo and 135 for the private seller.

Now the fact that the repo is a repo will scew the price somewhat so we can add 20 - 30k to bring it back to a realistic level. That means there is still a 30 - 40k difference in prices.

I would offer 95 - 100k on the second house simply because I would consider that a reasonable pice given the work required and the fact that I could get a similar property for roughly that price in the same area (other factors considered).

As a personal example, in January 2009 I had an offer accepted on a 4 bed 2 rec, 1 bath terrace, 3 streets away from the 2 houses above.

All went well until the survey from the bank came back. Surveyor put a retention of 5k on the mortgage. I had a chat with him and he said that to fix the problems (damp etc) and make it livable would require 15k investment. Spending 25k would make it a palace.

My offer was 108,500. for a fixer upper needing ~20k of work.

Therefore a well decorated 4 bed terrace at that time could be speculated to have been worth 135 - 145k.

I didn't have the cash at that time so I pulled out.

Now fast forward to today, prices have dropped 10 - 20% since Jan 09.

For the house today the vendor should be willing to accept an offer of 90 - 100k

RV on that house is 115k.

Judging by the way EAs and vendors are guesstimating house prices round here at the moment (165 for 2 bed terrace in some cases) I should have bought the house 2 years ago, done it up and made a profit selling it now.

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HOLA443

Rateable Value has an importance to ourselves here and other market watchers which belies and goes beyond it's original purpose. This is for several reasons.

1) A total lack of transprency in sale prices in NI, a situation which does not exist elsewhere in the UK, exacerbated by commission based selling and greed.

2) As average house prices slide back to 2005 and beyond, the 2005 RV is easily understood by most - vendors, buyers, EA's, the public.

3) whilst poo pooed by some, there is no doubting it was a substantial piece of work and in my view has use as a guide and a baseline.

I would like to nail it's utility on the head one way or the other, for my benefit and the benefit of others on here because lack of transparency and incomplete information on our part is our enemy and weakens us in negotiations esp with EA's who will be able to tell from their ledgers (irrespective of RV's) exactly what houses bought and sold for currently, in 2005 or any other year for that matter.

I would love for someone involved in the Reval to come on here and state their case regarding its robustness and validity and therefore confirming its utility. Say, for example, they could identify a margin of error of + or - a couple of percent, either built in at the time or identified on review. Wishful thinking. Could be a good FOI request if someone cared to frame a good question however!

Some EA's who dismiss it were, I'm sure, involved in it and must have been content with it - certainly content enough to take their fees. The RICS would have been cogniscant of their reputation as professionals (such that it is), and Govt would be extra cautious regarding fairness and have explicitly stated this.

As a baseline, it will retain it's usefulness (for me anyway) as prices slide below 2005 levels - if they haven't already done so. Yes, I acknowledge it may be blunt (I would dispute that it is flawed and without merit) but I have a printout from a now deleted LPSNI info web page and I will share and allow others to decide on how good or bad a job was done. I hope it brings some clarity to the debate - it helps to know what you are talking about.

Before I do this I would like to address BVI who stated the drive by nature of the exercise could mean extensions etc are not rated so value not captured. This is undoubtedly true. However if it is found out in the future (or some green eyed NIMBY reports you), your rates will increase and may be backdated. Morally you may also be evading tax. Further, if building control were not notified (hence no rates notification) it may be illegal or at least of poor quality. As an aside, I'm not sure if 'development potential' was captured in this exercise either so garden grabbing potential could have seen a RV mismatch with attained prices (skewing indices at the same time) - less so now the planners have reigned it in. Kitchen and bathroom assumptions could distort but, I would argue, minimal effect.

What follows is selected verbatim from the Land and Property Service FAQ (which I am now unable to source on the net.) I have added some bold.

We have carried out a revaluation of all properties to restore fairness and make sure everyone pays rates in line with an up-to-date value of their house.

Capital value is the amount your property could reasonably have sold for on the open market on 1 January 2005

In assessing this value, we use information on the sale prices of houses in your neighbourhood. We also make some assumptions to keep the capital values fair: for example we assume that properties have the same standard of kitchen and bathroom for their age, type of property and location.

The old way of assessing rates was based on how much it would have cost to rent your home 30 yrs ago. Changes in the economy in the last 30 yrs meant some households were paying a larger share and some a smaller share than they should. We believed that this was unfair.

Assessed Capital Values are based on property market sales. Between 2002 and 2005 we inspected domestic properties that sold on the open market. Statistical analysis of the sales information determined which property characteristics are important and how important they are in explaining sale price. CAMA models were produced for 25 market areas in NI. Each model represented a formula, which explained the relationship between sale price and property characteristics for that locality. All values thus produced were reviewed, and amended if necessary, by locally based experienced valuation staff, who took into account market evidence and the relativity of assessments.

Computer assisted mass appraisal (CAMA) is the world recognised standard approach to mass valuation exercises and is used to provide first pass estimates of capital value for property taxation purposes.

Our analysis indicated that the majority of sale prices can be explained by the interaction of the following property characteristics, the most important of which is habitable space (ie size)

Habitable Space (m2), Ancillary Space, Outbuildings Size, Primary Classification (Public/Private Build), Sub-classification (Detached, Semi, Terrace), Grade of Construction, Age Band, No. of Storeys, Heating, Sewerage Provision, Water Provision, Power provision, External Repair, Garage, Site Positive Features, Site Negative Features, Neighbourhood, Location (Urban, Rural, Suburban), Access Type.

You can contact LPSNI to appeal if unsatisfied, then to Commissioner of Valuation then to NI Valuation Tribunal if necessary.

So no auctions, no repos, no firesales/sales to family members - the potential indeed to overvalue. I'll let others decide. Undoubtedly not perfection, precision is impossible, but pretty comprehensive from what I can see.

Let the arguments begin.

Edited by Shotoflight
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HOLA444

I don't think there has been any argument or needs to be. If you believe the rates Valuation are an accurate snapshot of what that property was worth on the 1st Jan 2005, that is fine and few will argue. If you are using a page of fluff from a, now removed government website to prove that they are all individually accurate then some may question your logic.

I am not sure who the 'locally based experienced staff' were who done all this, or where did the government find them at such a busy time. They assessed 750,000 houses in NI, over a short period of time. Say two years. How many experienced people did they employ. 20, 30 or 50? How could the valuation industry survive with the loss of such a large amount of their experienced staff for two whole years? (They didnt)

How many properties could they properly visit, measure and research and assess a day. Do we allow 2 hours for each one. Thats 4 a day.

With 50 experienced valuers assessing the NI Stock at a rate of 2 houses every hour it would take 15 years to carry this out.

Like them I have made a few assumptions. I have assumed 50 experienced surveyors (on top of admin staff). Perhaps I am wrong as to do this in 2 years at a house every 2 hours it would require 400 experienced surveyors.

But perhaps my assumption on the time taken is over generous.

To assess 750,000 houses, in two years, with 50 experienced staff they would need to be visiting, measuring (as size is the most important factor in determining price!), assessing them against local prices, adjusting for the various assumptions and writing this up at a rate of roughly one house every 15 minutes. They say they done this between 2002 and 2005 (which is not correct)s if they did spread it out over 3 or 4 years you can allow 30 min per house rap rate. {We have to remember this was a Civil Service project and allowances should undoubtedly be included for the great efficiency savings they would bring!)

I am not saying the Ratable Value is too low. In many occasions I am sure they valued it too high. All I am saying is the valuation could be as much as 25 to 30% out in either direction because of, the way it was done, the scale of the project and the experience of the people employed.

The lady who visited my house had never been involved in Estate Agency or valuations before. She came via a recruitment agency. I told her I had young children sleeping in the house (the truth) and she said that was fine. She didn't come in. I think her valuation was low, but didnt mind about that.

Could have came back to bight me as the bank used it as a valuation base (think they added on a %) for my mortgage renewal.

If you want to do a FOI letter you simply need to ask how much it cost. Divide that by the number of houses they assessed. Lets take a very low figure of £100 per house to properly assess every house on an individual basis. Remember they had to visit each property (which may take more than one visit to get people at home). So at £100 each it would take £75m for NI

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HOLA445
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HOLA446

I don't think there has been any argument or needs to be. If you believe the rates Valuation are an accurate snapshot of what that property was worth on the 1st Jan 2005, that is fine and few will argue. If you are using a page of fluff from a, now removed government website to prove that they are all individually accurate then some may question your logic.

I am not sure who the 'locally based experienced staff' were who done all this, or where did the government find them at such a busy time. They assessed 750,000 houses in NI, over a short period of time. Say two years. How many experienced people did they employ. 20, 30 or 50? How could the valuation industry survive with the loss of such a large amount of their experienced staff for two whole years? (They didnt)

How many properties could they properly visit, measure and research and assess a day. Do we allow 2 hours for each one. Thats 4 a day.

With 50 experienced valuers assessing the NI Stock at a rate of 2 houses every hour it would take 15 years to carry this out.

Like them I have made a few assumptions. I have assumed 50 experienced surveyors (on top of admin staff). Perhaps I am wrong as to do this in 2 years at a house every 2 hours it would require 400 experienced surveyors.

But perhaps my assumption on the time taken is over generous.

To assess 750,000 houses, in two years, with 50 experienced staff they would need to be visiting, measuring (as size is the most important factor in determining price!), assessing them against local prices, adjusting for the various assumptions and writing this up at a rate of roughly one house every 15 minutes. They say they done this between 2002 and 2005 (which is not correct)s if they did spread it out over 3 or 4 years you can allow 30 min per house rap rate. {We have to remember this was a Civil Service project and allowances should undoubtedly be included for the great efficiency savings they would bring!)

I am not saying the Ratable Value is too low. In many occasions I am sure they valued it too high. All I am saying is the valuation could be as much as 25 to 30% out in either direction because of, the way it was done, the scale of the project and the experience of the people employed.

The lady who visited my house had never been involved in Estate Agency or valuations before. She came via a recruitment agency. I told her I had young children sleeping in the house (the truth) and she said that was fine. She didn't come in. I think her valuation was low, but didnt mind about that.

Could have came back to bight me as the bank used it as a valuation base (think they added on a %) for my mortgage renewal.

If you want to do a FOI letter you simply need to ask how much it cost. Divide that by the number of houses they assessed. Lets take a very low figure of £100 per house to properly assess every house on an individual basis. Remember they had to visit each property (which may take more than one visit to get people at home). So at £100 each it would take £75m for NI

The page of fluff states some classes of residential property were unsuitable for CAMA and were valued by the traditional 'manual' approach. These amounted to about 10% of the total number of domestic properties. Large swathes of housing stock would be identical - council estates for example. As I said - a rough guide not individually accurate. Happy to consider an alternative.

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HOLA447

The page of fluff states some classes of residential property were unsuitable for CAMA and were valued by the traditional 'manual' approach. These amounted to about 10% of the total number of domestic properties. Large swathes of housing stock would be identical - council estates for example. As I said - a rough guide not individually accurate. Happy to consider an alternative.

Thats ok. I am happy with a rough guide. I cant fault them for that as the shear scale of the task couldn't allow for total accuracy.

A rough guide is all I ever claimed it was.

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HOLA448

Thats ok. I am happy with a rough guide. I cant fault them for that as the shear scale of the task couldn't allow for total accuracy.

A rough guide is all I ever claimed it was.

BVI, I am as cynical as you re public sector (well almost) and certainly the property 'professionals' - a really negative perspective would be to call their FAQ guide as propaganda! I value your and everyone elses views on this. I am not a cheerleader for them or indeed the RV system but neither will I dismiss it. Just trying to put a bit more info out there about it in the absence of anything else. If some people claim prices are at RV, or RV + 10%, or they will offer some percentage of RV when buying a house then, I think they should understand the system, it's merits and quirks. Obviously there would have been cost restrictions - in fact, the cost would probably have been added to the rates.

One way or another, they have captured the sq m of every property and other info eg outhouse, garage etc. You can check it for yourself. The methodology may be spurious hence my request for someone involved to stand by it. I can't do that. Perhaps it's even useless as a rough guide?

The webpage is missing because LPSNI seems to have been subsumed by DFPNI under NI direct. Obviously that level of detail hasn't been missed which perhaps sends a message in itself.

If it is an invalid system, everyone seems to be getting along with it swimmingly - in itself that seems to be some sort of achievement for Govt: and every ratepayer is happily paying thousands to Govt via a duff concept with the connivance of property 'professionals' and elected politicians who are supposed to run the place and represent 'the people'.

Still interested in the opinions of others.

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HOLA449

Thats ok. I am happy with a rough guide. I cant fault them for that as the shear scale of the task couldn't allow for total accuracy.

A rough guide is all I ever claimed it was.

I llive in a development with a mixture of house types. The house type that I have is the same as only one other in the development yet its RV is £5k more.

On another point (and i've mentioned this in a previous posts, so sorry to repeat), I bought my new build house in early 2005 and paid £20k more than its assessed RV (and thats before i take into account the cost to finish it). I did get advice before i purchased from a number of local EA's at the time who felt the price I paid was fair at that time.

Agree with your comment that it is a rough guide. I find it most useful when comparing the difference in asking prices of different house types in the same street/development.

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HOLA4410

Thats ok. I am happy with a rough guide. I cant fault them for that as the shear scale of the task couldn't allow for total accuracy.

A rough guide is all I ever claimed it was.

So what is the technical approach that EA's apply then to value houses that is so different??

When I put my house up for sale last year it was valued by 3 EA's... all of which came up with a different valuation. They each came out with their fancy looking 'laser' measuring device and spent all of 5-10 mins walking around my house doing catalogue poses into the corner of the room.

IMO they had a predetermined idea about what they where going to value my house at and nothing was going to change this unless the house was a wreck inside.

During the boom surveyors drove up to houses and valued them from the outside in many cases.

Rateable value applies a common sense approach to size of the house from what I can see as well as considering the area etc.

EA's have always only valued a house at what they think someone will pay for it ... up until recently anyway when now they value houses at levels which clearly dont and wont sell.

Banks recognise rateable value as a guide with a + or - % depending on area, from the info and posts on this forum it would suggest that joe public is starting to recognise it more and more as an acceptable guide ... and Realisitic EA is using it as a guide.

It would seem to me that for the most part that those with VI's see it as an undervaluation and the only reason for this is there ambition to keep house prices from falling further.

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