Frustrating Times At The Ea Offfice Indeed

[HonestEA -]

I had forgotten just how slow house price downturns are to gain momentum....

We are in a complete standoff at the moment. Most of the agents in my town are still ramping like there is no tommorow but they appear to be selling very little. I continue to give competitive valuations, am selling the vast majority of what I am able to get but cannot get nearly enough volume at the right prices to keep the corporate bosses happy. I pride myself on giving factual evidence based valuations, so when i do manage to get one on the market it is generally the right price and therefore sells even in this market. I have had to put the fees back up to a no compromise 2% sole or 3% multi agency to compensate for the reduced volumes. Most agents must be hoping for a Spring bounce , that is the only possible reason for continuing to stockpile masses of overpriced houses, hoping I suppose to stay in business long enough to talk the vendors down to sensible money. When the Spring bounce fails to materialise the long anticipated large scale job culls from our industry will begin in earnest.

Small example to illustrate. The town where I currently work has a large sector of Victorian 2 Bed Terraced housing, the value of which is very easy to determine at any given time due the number of comparables available. In the peak of the market last Summer, a nice example was touching £150000 with around 6 on the market to choose from at any given time. By the end of 2007 these were sellling for £140000-145000 with around 20 to choose from. Today there are nearly 40 of these near identical places available for sale with all agents big and small priced variously between £135K and £145K. What do you think a professional agent acting in his clients best interests should be advising on price in the context of this market? I had a client today who was a preferential seller completely disregard my competitive valuation of £135000 in favour of a rival agent who looked her in the eye and told her with total conviction but no hard evidence that it would sell for £155000 ! The HPC is going to be exceedingly slow at this rate of progress. These houses will rent for £600 pcm and I reckon we will have to talk them down to below stamp duty (125K) before it looks attractive for a FTB to buy rather than rent. We have not registered a buy to let investor for many months now so the ramping effect from this sector has been all but eliminated locally. Sellers do not realise this yet , and are therefore expecting prices to remain consistent with last year or marginally down, when in reality, the bottom of the market is now being supported ONLY by demand from First Time Buyers who are not able to pay anywhere near these levels, are relatively few in number and understandably very hesitant to enter the market. A correction is therefore inevitable, it is just a case of how long it takes us to get there. There are some distressed sales coming through, but yet in sufficient numbers to force the market down to the level we require.

At the other end of the market, a quality 1930s 3 bed family home in a stable neighbourhood near good schools attracts 12 viewings on the second day on the market with the vendor being in the happy position of having 3 offers very close to the asking price to choose from as I left the office today.

Completed on my STR in JAN after a 6 months and 2 broken chains. Many of my estate agency collegues think I am completely mad. Now completely debt free with a tidy lump sum in the bank, hoping I am able to steer my family through what I expect to be fairly choppy waters ahead.

Edited February 17, 2008 by HonestEA

[tigsrenting]

Good to hear from you again HonestEA.

[needle]

Ahhh...the voice of reason.

How refreshing amidst all the realistbear-isms of doom and gloom!

I had forgotten just how slow house price downturns are to gain momentum....

You and 90% of the HPC'ers...

A correction is therefore inevitable, it is just a case of how long it takes us to get there.

- Would be interested to hear your opinion/ speculative opinion on how long this will take. One year? 18 months?

- Regarding the collapsed chains; whats the feedback?

Credit (cant get mortgage) problems? Buyer-cant-sell problems? Buyer-getting-cold-feet problems? What are you hearing from surveyors?

Good luck with the STR'ing.

Edited February 17, 2008 by needle

[muggle]

We have not registered a buy to let investor for many months now so the ramping effect from this sector has been all but eliminated locally. Sellers do not realise this yet , and are therefore expecting prices to remain consistent with last year or marginally down, when in reality, the bottom of the market is now being supported ONLY by demand from First Time Buyers who are not able to pay anywhere near these levels, are relatively few in number and understandably very hesitant to enter the market.

Thanks, this made my day.

[tinecu]

I had forgotten just how slow house price downturns are to gain momentum....

We are in a complete standoff at the moment. Most of the agents in my town are still ramping like there is no tommorow but they appear to be selling very little. I continue to give competitive valuations, am selling the vast majority of what I am able to get but cannot get nearly enough volume at the right prices to keep the corporate bosses happy. I pride myself on giving factual evidence based valuations, so when i do manage to get one on the market it is generally the right price and therefore sells even in this market. I have had to put the fees back up to a no compromise 2% sole or 3% multi agency to compensate for the reduced volumes. Most agents must be hoping for a Spring bounce , that is the only possible reason for continuing to stockpile masses of overpriced houses, hoping I suppose to stay in business long enough to talk the vendors down to sensible money. When the Spring bounce fails to materialise the long anticipated large scale job culls from our industry will begin in earnest.

Small example to illustrate. The town where I currently work has a large sector of Victorian 2 Bed Terraced housing, the value of which is very easy to determine at any given time due the number of comparables available. In the peak of the market last Summer, a nice example was touching £150000 with around 6 on the market to choose from at any given time. By the end of 2007 these were sellling for £140000-145000 with around 20 to choose from. Today there are nearly 40 of these near identical places available for sale with all agents big and small priced variously between £135K and £145K. What do you think a professional agent acting in his clients best interests should be advising on price in the context of this market? I had a client today who was a preferential seller completely disregard my competitive valuation of £135000 in favour of a rival agent who looked her in the eye and told her with total conviction but no hard evidence that it would sell for £155000 ! The HPC is going to be exceedingly slow at this rate of progress. These houses will rent for £600 pcm and I reckon we will have to talk them down to below stamp duty (125K) before it looks attractive for a FTB to buy rather than rent. We have not registered a buy to let investor for many months now so the ramping effect from this sector has been all but eliminated locally. Sellers do not realise this yet , and are therefore expecting prices to remain consistent with last year or marginally down, when in reality, the bottom of the market is now being supported ONLY by demand from First Time Buyers who are not able to pay anywhere near these levels, are relatively few in number and understandably very hesitant to enter the market. A correction is therefore inevitable, it is just a case of how long it takes us to get there. There are some distressed sales coming through, but yet in sufficient numbers to force the market down to the level we require.

At the other end of the market, a quality 1930s 3 bed family home in a stable neighbourhood near good schools attracts 12 viewings on the second day on the market with the vendor being in the happy position of having 3 offers very close to the asking price to choose from as I left the office today.

Completed on my STR in JAN after a 6 months and 2 broken chains. Many of my estate agency collegues think I am completely mad. Now completely debt free with a tidy lump sum in the bank, hoping I am able to steer my family through what I expect to be fairly choppy waters ahead.

Good post. It takes time for the market adjust to the new credit market conditions but it will.

[asquithea]

Great post. Thanks for taking the time to write.

[kagiso]

honest EA.

whilst I appreciate this is an anecdotal.I believe it deserves to be on the main board.A wider audience will appreciate it.

very interesting what you say about FTBs propping up the market and no BTLs

Very much agree, I don't consider this to be just anecdotal.

[HonestEA -]

- Would be interested to hear your opinion/ speculative opinion on how long this will take. One year? 18 months?

- Regarding the collapsed chains; whats the feedback?

Credit (cant get mortgage) problems? Buyer-cant-sell problems? Buyer-getting-cold-feet problems? What are you hearing from surveyors?

Good luck with the STR'ing.

Well for the vested interest point of view of continuing to earn a living in estate agency, I need this crash to be quick and large enough to attract enough first time buyers back into the market so that volumes are restored to more normal levels quickly. The reality is that without more forced sales to drive down the prices, it could be a long drawn out process which may take years to reach the bottom , similar to the last one. Very many estate agencies who do not start to help to drive down the prices now will not be in business in 6 months at current sale volumes in my opinion. The Spring selling season this year or lack of it will decide the pace of the correction. Many sellers are absolutely convinced that the market will recover as we move into Spring. If this fails to happen and more become forced sellers, then the prices will start to come off more quickly. In my town I reckon we will finish down around 10% this year which is not really a crash in the context of recent rises, but the downward trend will have started and will be just as hard to change the market sentiment on the way down as it was on the way up.

Whilst I can mitigate the fall in volumes by raising my fees to some extent, the biggest problem is the broken chains. Chains are falling apart at the bottom left, right and centre for all of the reasons that you have just mentioned. When you work in the industry and see people who would have got a mortgage no problem six months ago now getting turned away, you see the reality of the credit crunch taking its toll at first hand. We have an in house mortgage advisor so I can see all the products being withdrawn and ammended on a daily basis. We are constantly reselling the same houses only for them to fall through and start over. So we are working quite hard to achieve considerably less in terms of income which only comes from the sales that do actually complete.

The STR was a pragmatic choice to deal with a situation where my income ( which is performance related to completed sales volume) was falling and my outgoings were increasing. We decided as a couple that having tried for 15 long years to start a family that my wife would stay home and look after the child. To pay the mortgage and have any kind of quality of life on one income was becoming impossible, like many I was funding the deficit by borrowing and this is obviously unsustainable in the long term. To downsize would involve buying a house in an area that I did not particularly find inspiring, so we are now living in a far better neighbourhood in a larger house than we sold for £300 per month less than the old mortgage with no debts at all and the good lady is actually the happiest I have seen her in years. I dont think any honest man can put a price on that.

[Timm]

The STR was a pragmatic choice to deal with a situation where my income ( which is performance related to completed sales volume) was falling and my outgoings were increasing. We decided as a couple that having tried for 15 long years to start a family that my wife would stay home and look after the child. To pay the mortgage and have any kind of quality of life on one income was becoming impossible, like many I was funding the deficit by borrowing and this is obviously unsustainable in the long term. To downsize would involve buying a house in an area that I did not particularly find inspiring, so we are now living in a far better neighbourhood in a larger house than we sold for £300 per month less than the old mortgage with no debts at all and the good lady is actually the happiest I have seen her in years. I dont think any honest man can put a price on that.

Good luck with everything!

People also thought I was mad when I left agency in 2005 and STRed in 2007. I now rent a barn conversion that would have been outside of my wildest dreams to buy ever.

[Fence]

Honest EA.

You write very well (which I know takes time) and make some excellent points (which takes intelligence!). So many thanks for the efforts.

[Limpet]

and the good lady is actually the happiest I have seen her in years. I dont think any honest man can put a price on that.

Good chap

[hunthunthunt]

Thanks HonestEA, you just got my vote for post of the year!

[grey shark]

Honest EA

If you don't mind would you answer these few Q's for me , just quick short answers will do thanx in advance.

What are sales volumes like overall in your office to say 12 months ago ?

What area are you based in , county will do ?

If someone walked into your office and wanted 20% off a family house , not a timewaster , was a cash buyer and could move in weeks how would they be treated overall by you and local EA's , would they be greeted or shown the door ?

The spring bounce as we all know isn't happening , when will the majority of EA's accept this 6-8 weeks time ?

[HonestEA -]

Honest EA

If you don't mind would you answer these few Q's for me , just quick short answers will do thanx in advance.

What are sales volumes like overall in your office to say 12 months ago ?

What area are you based in , county will do ?

If someone walked into your office and wanted 20% off a family house , not a timewaster , was a cash buyer and could move in weeks how would they be treated overall by you and local EA's , would they be greeted or shown the door ?

The spring bounce as we all know isn't happening , when will the majority of EA's accept this 6-8 weeks time ?

-35%

Medway towns, 1 hour train journey and 30 miles from central london on the North Kent coast.

We have spare roll of red carpet in the back office which I personally would be prepared to roll out . I would also be prepared to drive around to the vendors house and put the offer to them in person, especially if they were a seller of necessity. Waste of time if they were a preferential seller, would probably result in a disinstruction if I were to strongly recommend acceptance at the moment. Indicating to you which were the sellers of necessity and which were the preferential sellers would not be something I personally would feel comfortable with. Cannot speak for other agents in the High Street however.

Edited February 17, 2008 by HonestEA

[grey shark]

-35%

Medway towns, 1 hour train journey and 30 miles from central london on the North Kent coast.

We have spare roll of red carpet in the back office which I personally would be prepared to roll out . I would also be prepared to drive around to the vendors house and put the offer to them in person, especially if they were a seller of necessity. Waste of time if they were a preferential seller, would probably result in a disinstruction if I were to strongly recommend acceptance at the moment. Indicating to you which were the sellers of necessity and which were the preferential sellers would not be something I personally would feel comfortable with. Cannot speak for other agents in the High Street however.

Thanx Honest EA , yes i do remember your posts now , quite long and well thought out , i can understand you not telling buyers who needs to sell and who doesn't , that would be up to me and other buyers to assess vendors when viewing , most vendors let something slip when viewing anyway . Gravesend , Chatam etc. not a area i'm buying in though

Well done on your STRing and thanx again .

[HonestEA -]

'Sellers do not realise this yet , and are therefore expecting prices to remain consistent with last year or marginally down, when in reality, the bottom of the market is now being supported ONLY by demand from First Time Buyers who are not able to pay anywhere near these levels, are relatively few in number and understandably very hesitant to enter the market. '

EA,this post has been on my mind.I really appreciate the reports from the coalface you get on here from Converted lurker,buytoilet=mortgage brokers,but we don't have many EAs at all.

In terms of the victorianteraces you referrred to,do you know what the typical budget for a FTB is?How far are we from a firm floor?

In terms of forced sellers,what are the reasons driving their sales on the whole? Is this a phenomenon you see increasing a lot or is it the normal level of people who've loaded up on debt?

Well the average price of £140000 equates to a a repayment mortgage of around £1000 per month, say £800 for interest only compared to £600 pcm for the rental of the same house. A 12% reduction to an average of around £125000 would close the gap enough for many local FTBs to consider it seriously provided they can raise the required deposit. My senior negotiator with 5 years experience is a typical FTB I reckon. He takes home around £30000 gross per annum in his late 20's and has said he will buy into the market when they reach the stamp duty threashold because the desire for a place of his own outweighs for him the possibilty of negative equity. He currently rents a 1 bed starter home for £400 pcm. Also at this price point, buy to let starts to hit break even again if you have a reasonable deposit provided the finance is still available. The rental price of £600 pcm has remained static for at least 3 years ironically due to oversupply from the buy to let sector.

The forced sellers are a mixed bag of repossessions, over extended BTL and overloaded "must have it all now" generation. There are always forced sellers at any time in the market cycle. They are the most prized instructions in the marketplace right now because they will listen to professional market advice and market their properties accordingly which leads to real income for the estate agent. The numbers are creeping up but are yet to become the dominant driving force in the market. Until they do, this standoff will continue with an attritional drift downwards in prices in the order of around 1% per month which seems barely noticeable when you are working in the market on a daily basis. Most agents will give marketing price advice within a 5% range so the picture can be very confusing for the layman trying to get a feel for the market.

[drrayjo]

Fascinating stuff.

Main Board Now!

please

[Gurgle]

I was just wondering where HonestEA had gone. His posts were always fascinating and certainly appeared honest as his name suggests.

[dulwich buyer]

Thanks for your great posts Honest EA. Can you shed any light on the current health of the South London market, if that is part of your company's patch? It seems to be moving slowly from what I can tell, but there are also some signs of a spring bounce. Thanks in advance

[drrayjo]

He works the Medway towns.

The Spring Bounce is hamsprung.

[drrayjo]

He works the Medway towns.

The Spring Bounce is hamsprung.

Am assuming he's a bloke.

And you'll get my pun.

[nohpc]

I have had to put the fees back up to a no compromise 2% sole or 3% multi agency to compensate for the reduced volumes.

Here's an idea. Why don't you drop your fees to 2000pound flat fee and watch the business roll in as you out compete the other estate agents?

[Disillusioned]

BUMP - great post.

[heather5]

Very interesting thread - well done HonestEA.

A member of my family had his own EA business - and sold it on just over 18 months ago as he saw this coming.

One of his frustrations with the last down-turn was exactly as HonestEA is describing - many owners not understanding his realistic evaluation - and other EAs quoting ridiculous figures they could achieve despite the downturn.

Result of that was - he lost the business - and the others got it - but houses stayed around for a year and more - and had to drop in the end when they realised they couldn't sell - but ironically they dropped to close to his original evaluation - but stayed with their new EA.

A few did go back to him - and over his 20 years in business - always went back to him for selling and buying again.

It was the one frustration he had with the industry as a whole - that they didn't all pull in the same direction - to price things realistically.

Then when things went on the up - he was giving realistic evaluations and advising people not to take out more than 3.5 times their salary - they too had an in-house mortgage fixer - and although they could fix 5-7 times more than salary they were constantly advising clients this was not a wise move and to sit tight - and be prepared to let a property go.

Clients weren't prepared to let their "dream" property go - and would go beyond prices affordable.

Recently, the most depressing thing that pushed him into selling the business on was the shared-ownership schemes - which initially he thought were a good idea and he became a main seller for some of the many sites springing up.

However, the houses/flats he viewed if sold at real value were well beyond what most first time buyers could afford and the valuations were set by the Shared-Ownership Scheme (he tried to dispute some of them - and failed) - and he was dealing with parents remortgaging their houses and giving away their pension savings for their kids.

At this point he decided it was not the business he wanted to be in.

Was he an HonestEa?

I can honestly say that this person has a natural mean streak - he's no pushover - and no-one can push him about - he's been like that since a kid - and a business deal to be done - he would achieve it. Not quite sell your own mother - but bordering on it - so he wasn't some kind nice person who just gave up because he was a nice guy.

But it got to him - and in the end he decided it wasn't worth it - and set-up a new business with the proceeds of selling the business on to a bigger fish (at a good price) - and is doing great in his new career.

[hunthunthunt]

Very interesting thread - well done HonestEA.

A member of my family had his own EA business - and sold it on just over 18 months ago as he saw this coming.

One of his frustrations with the last down-turn was exactly as HonestEA is describing - many owners not understanding his realistic evaluation - and other EAs quoting ridiculous figures they could achieve despite the downturn.

Result of that was - he lost the business - and the others got it - but houses stayed around for a year and more - and had to drop in the end when they realised they couldn't sell - but ironically they dropped to close to his original evaluation - but stayed with their new EA.

A few did go back to him - and over his 20 years in business - always went back to him for selling and buying again.

It was the one frustration he had with the industry as a whole - that they didn't all pull in the same direction - to price things realistically.

Then when things went on the up - he was giving realistic evaluations and advising people not to take out more than 3.5 times their salary - they too had an in-house mortgage fixer - and although they could fix 5-7 times more than salary they were constantly advising clients this was not a wise move and to sit tight - and be prepared to let a property go.

Clients weren't prepared to let their "dream" property go - and would go beyond prices affordable.

Recently, the most depressing thing that pushed him into selling the business on was the shared-ownership schemes - which initially he thought were a good idea and he became a main seller for some of the many sites springing up.

However, the houses/flats he viewed if sold at real value were well beyond what most first time buyers could afford and the valuations were set by the Shared-Ownership Scheme (he tried to dispute some of them - and failed) - and he was dealing with parents remortgaging their houses and giving away their pension savings for their kids.

At this point he decided it was not the business he wanted to be in.

Was he an HonestEa?

I can honestly say that this person has a natural mean streak - he's no pushover - and no-one can push him about - he's been like that since a kid - and a business deal to be done - he would achieve it. Not quite sell your own mother - but bordering on it - so he wasn't some kind nice person who just gave up because he was a nice guy.

But it got to him - and in the end he decided it wasn't worth it - and set-up a new business with the proceeds of selling the business on to a bigger fish (at a good price) - and is doing great in his new career.

Great anecdote, deserves a topic of it's own