Wednesday, December 31, 2008

We require a true valuation Sir

How an excessively low valuation can leave you feeling really down

This article is over a week old, my apologies if it has been posted previously very interesting though, even if you have no intention in selling you are being marked to market.

Posted by sosoon @ 07:30 AM (1132 views)
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16 thoughts on “We require a true valuation Sir

  • The article sumes up the stubborn donkey-like attitude of homeowners; they just don’t want to accept that the price of their precious house has fallen. This HPC has been going for a full year now and idiots are still in denial.

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  • japanese uncle says:

    Things will certainly get worse to make any housing finance business riskier by the day for the foreseeable future. As I mentioned earlier, you simply cannot expect lenders to offer loans that are destined to be bad debts size of which will get even bigger the later. House prices should be kicked out of the heads of the people. This nation should get rid of the ridiculous obsession with housing. Houses are there just to provide roof and reasonable comfort, not to make financial gain nor status. In no other country on earth, does every news article featuring murder or whatever inevitably carries silly housing information such as ‘Mr. Smith was shot to death in the lounge of his 1.5 million five bedroom detached house in the leafy suburb’

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  • it_is_going_with_a_bang says:

    Excessively low? Says who? just who is the acting professional in this situation?
    Unrealistic borrowers is the true problem.

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  • Just goes to show what an unprofessional bunch surveyors are really. Send two different valuers to the same property on the same day and they will come back to you with two completely different valuations. Not surprised they are scared of getting sued, considering the amount of fraud that was committed with their implicit help in collusion with builders during the boom.

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  • Many sellers are suffering from the very same delusional certainty.
    I manage to sell my house after dropping the price AND accepting a lower ( 10%) offer. A couple of months ago it looked as though I might have gone too low but now I certainly wouldn’t get the same price.
    House prices are dropping and will continue to do so so unrealistic sellers will see their houses not generating any interest by the few genuine buyers out there, these being hard-nose bargain seekers.

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  • Now THIS is an interesting paragraph:

    A bleaker valuation than expected wiped 10% off the property of Scott Weber, 37, and wife Nicci from Nottingham, forcing them to overpay on their mortgage just to qualify for a decent rate with Lloyds TSB. “It was a massive reality-check. The lower valuation gave us a loan-to-value of 80% instead of 75%, and we had to overpay so we could secure a cheaper mortgage deal,” Scott says.

    Is this the start of lenders insisting on borrowers paying off lump sums to maintain their LTV? Maybe they aren’t contacting customers, but certainly once the customers fixed rate ends it is the ideal opportunity for a revaluation. Even if mortgage rates come down, they will only be for the people with lower LTVs, and existing homeowners are having their LTVs raised daily by falling prices. Nice.

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  • Parkin says homeowners must accept a new reality: their homes aren’t worth what they used to be. “People just don’t like the idea that their homes are worth a lot less; people read about big falls elsewhere but always think, ‘Well, that’s a big loss but it still won’t affect my house’.”

    Says it all really.

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  • Are the values surveyors giving to high? On average it takes three months to sell a house, so at least they should factor in the trend for the previous 3 months, which on most indices is -4/-5% of the value. If the most positive view of the market next year is -10% of current value, with the median view about -15% of current value, then surely it is from these figures a lender need to look at loan to value. Another way of looking at this is how one would price things in business. In a period of high inflation, you would only guarantee prices for one month. If someone insisted on tha price for a years time you would factor in the increase in costs. With housing, unfortunatelyit works the other way. What is happening is that banks are factoring in the drop, but not promoting the fact they are doing it.

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  • In the 1990s when people lost money on houses in the last big bust, it was a few thousand pounds.

    This time round it will be tens of thousands. This bust was inevitable, yet the bubble was allowed to happen, the unsustainable borrowing allowed to continue.

    People have been very stupid, but the negligence of govt, regulators and banks has been criminal.

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  • Sad news for homeowners : You now own a home and not an imaginary big pile of reproductive cash.

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  • notaneconomicsguru says:

    10.Plato “Sad news for homeowners : You now own a home and not an imaginary big pile of reproductive cash.”
    I must have been asleep – I always did think all I had was a home and a debt.

    9. Tinker “In the 1990s when people lost money on houses in the last big bust, it was a few thousand pounds.
    This time round it will be tens of thousands.”
    I don’t know where you get the idea that the losses were only a few thousand pounds last time. In my area, I personally saw the following multiple £10,000 price drops between 1988 and 1990. This level of drop was quite widespread and occurred very rapidly over the same timescale as we are seeing now.

    4 bed detached £128,000 (early 1989 asking price) down to £87,500 (asking price in late 1990 – thought about it seriously but wanted a flat instead)
    2 bed appartment £105,000 (1988 original asking price) down to £64,500 (the actual purchase price I paid in late 1990)
    Studio appartment £64,000 (asking price from developer in Oct 88- needless to say I didn’t buy) down to £45,000 (vendor asking price of identical property in same block in spring of 1990)

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  • Surveyors being sued again will be interesting John D Wood a very respected estate agent in the 80’s went bust after being sued for over zealous commercial valuations. The whole valuation system was changed after that lets see how well it works in practice..

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  • I think the surveyors are being kept a very close eye on by all sides – the media viewed them as culpable for the housing boom (remember the Channel 4 documentary last year about the overvaluations of Thamesmead flats?) so they are getting their own back in many ways by being very cautious.

    I suppose that one of the problems in marking to market is that if the property takes a year to sell (as many do now), the value could have dropped by 15%! This has to be factored in.

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  • Excessively low valuation leaving you feeling down??? Well the opposite, where people feeling ‘up’ because of excessively high valuations
    persisted for years.

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  • gone-to-colombia says:

    Surveyors should stick to what they really know about – the physical condition of a building, not its value. Value is a matter of statistical analysis, this would be betted done by a computer, including recent sale values.

    These home owners reaped the rewards of cheap money, now they pay the cost of more expensive money, tough.

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  • @ 11. notaneconomicsguru said…
    I don’t know where you get the idea that the losses were only a few thousand pounds last time. In my area, I personally saw the following multiple £10,000 price drops between 1988 and 1990. This level of drop was quite widespread and occurred very rapidly over the same timescale as we are seeing now.

    You may be correct about the actual values, to many at the time it was a big deal, however, the point I was making is that now, with a trebling of house prices, the financial disaster will be of epic proportions.

    It should not have been allowed to get to this.

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