Jun 23

The ‘G’ word is one of the dirtiest words related to property sales.  It blights the reputation of estate agents, puts fear into the hearts of property buyers and causes a whole heap of additional headaches to solicitors north of Hadrian’s Wall.

This article will address some fundamental misunderstandings that exist amongst the majority of property buyers and sellers in Scotland.  It will show you how gazumping actually happens, what you can do as a property buyer to try and prevent it, and how all of this can negatively affect you as a property seller who just wants to get the best possible price for your property.

Some of the points here relate to differences between the rules that affect solicitors who are estate agents and traditional, non-law firm estate agents.  These rules affect the way that a solicitor/estate agent can negotiate on a seller’s behalf when the seller has already verbally accepted an offer on a property.  Why am I making this distinction?

In Edinburgh and Aberdeen, in particular, properties are marketed and sold predominantly by solicitor/estate agents (e.g. members of the ESPC or Edinburgh Solicitors’ Property Centre) rather than by non-solicitor estate agents (e.g. Foxtons or Countrywide).  Indeed, property throughout Scotland has traditionally been marketed and sold by solicitor firms and, even in areas such as Glasgow where non-solicitor estate agents have made huge inroads, solicitor/estate agents still have a significant percentage of the market.  This means that these Law Society guidelines, which many property sellers find surprising or counter-intuitive, affect the vast majority of property sellers in certain areas of Scotland and a good number of property sellers in other areas.  So it’s important that you know about them!

This isn’t an an anti-law firm diatribe: quite the opposite, I own a law firm!  I believe that selling your property through a regulated professional has many significant benefits, particularly relating to ethics, as long as they are actually good at marketing properties and not just doing it as a sideline.  However, what I’m about to explain below is not widely known or understood (even by some of my esteemed fellow-professionals!).  The intention here is to help you as a property buyer or seller in Scotland to be better informed about what is likely to happen to you during the process.  On with the show.  What is gazumping?

Gazumping – What Is It?

Let’s take an example: a property seller verbally accepts an offer from Buyer Number One then, later, changes their mind and sells the property to Buyer Number Two, usually because Buyer Number Two has offered to pay a higher price.

The perception is that estate agents are the bad guys here, going back to buyers and telling them, just before they are due to move into their new home, that further buyers are lined up all of whom are prepared to pay more for the property.  This forces the buyer into having to either withdraw at the last minute or to just stump up the extra cash.  Why would they do this?  The perception is that it’s because they are seeking to increase their commission fees which are usually a percentage of the final sale price.  In all my experience, this isn’t really the case, as I’ll explain later.  The perception remains however that after a buyer’s offer is accepted, the greedy estate agent rubs their hands gleefully and hawks the property around to further potential buyers, trying to get a higher price for their clients.

Gazumping is more likely to be a problem in a ‘hot’ or rising property market, or in very popular residential areas, where demand is high and the number of buyers outweighs the number of properties available.  It has therefore become slightly less problematic in the past three or four years.

What might surprise you as a property buyer is that gaumping does indeed exist in Scotland: many people think it’s only an English problem.

The fundamental point which seems to be lost in the anti-gazumping debate, often by solicitors themselves, is this, whether we are a solicitor/estate agency firm or a regular estate agency firm: we have to take our client’s instructions and then act on those instructions AND we have to act in the best interests of our client, not ourselves.

Why Can Gazumping Take Place?  Surely the Buyer’s Offer Was Accepted?

Gazumping is possible because the sale is not legally binding until the exchange of contracts (in England and Wales) or the conclusion of missives (in Scotland).  At this point a contract of sale/purchase exists.  Prior to the contract being concluded however, the seller and their estate agent, on the buyer’s behalf, can do what they want.

The period between verbal acceptance of an offer and conclusion of a written contract can last for several weeks.  Indeed, in some cases the contract is only concluded on the day that the buyer is due to move in to their new home!

It’s reassuring for property buyers who are buying from a solicitor/estate agent to think that they can’t be gazumped because of Guidelines that prevent solicitors from being involved in a gazumping scenario.  However, this isn’t actually the case, as I’ll explain: you can still be gazumped even when you’re buying a property from a solicitor/estate agent who has to follow the Law Society of Scotland’s anti-gazumping guidelines!

The flip side of this also might surprise property sellers.  When you use a solicitor/estate agent and want to retain that solicitor for the whole process, you cannot accept a better offer after they have verbally accepted an offer on your behalf.  If you DO want to accept a further offer after verbal acceptance, you have to fire you solicitor an appoint another one.  This can cost you money and means that you can’t have your originally, carefully-selected solicitor, negotiate your sale price on your behalf.

How Does Gazumping Negatively Affect Property Buyers?

Picture this scenario…

You purchase a house, make all your plans for moving, book the removal van, arrange cancellation of all of your suppliers, buy some new furniture for your new property.  Because the buyers of your property are due to move in on Monday, you decide to move temporarily into rented accommodation.

Then, a week before you are due to move in to the new property, you get a phone call from your solicitor telling you that the buyer has decided to sell to someone else unless you are able to match that new buyer’s offer.  You aren’t able to match that offer so you have to withdraw from the purchase.

Result?  You end up living in temporary accommodation, with the costs of the legal process up to date and any cancellation charges for removals, lost deposits on new furniture etc etc.

Even without this kind of doomsday scenario, the buyer will be hugely disappointed, having mentally moved all of the furniture into the property.  They also probably will have the legal costs associated with the purchase transaction to date.  And quite possibly the cost of a survey that they carried-out prior to making an offer.

How Does Gazumping Negatively Affect Property Sellers?

To be honest, when they’re using a regular estate agent, it doesn’t really.  Apart from a slightly heavy heart or a bad conscience, they end up with an offer that they like better than the original offer.  However, when the seller is using a solicitor/estate agent, there ARE consequences, some of which a seller might consider to be negative, in entering into a gazumping scenario…

What Happens if You Instruct Your Solicitor/Estate Agent to Accept an Further Offer?

So, you’ve instructed your solicitor to accept an offer of £200,000 for your property.  Congratulations!  Then two weeks later, your next door neighbour, whom you were speaking to over the garden fence at the weekend, comes forward and submits an offer to your solicitor/estate agent of £220,000  Congratulations again!  Or is it…?

Missives haven’t yet been concluded with Buyer Number One so there is no legally binding contract for the sale of the property.  There’s no legal reason then that you can’t accept the second offer.  If you are prepared to honour your original pledge to Buyer Number One, you are certainly in the minority of property sellers in my professional experience: £20,000 more is a lot of money!

So, you instruct your solicitor/estate agent to inform Buyer Number One’s solicitor that, regrettably for them, you have accepted another, better offer.  And they turn round and tell you that they can’t do this.  Eh?  Why on earth not?  You’re not doing anything illegal after all and you appointed them as your agent to do what you, as the client, ask.

If your estate agent isn’t a solicitor, this scenario doesn’t pose them any problems apart from the uncomfortable conversation with the original buyer.  And they can always give the original buyer the option that they can raise their offer by £20,000 and you’ll happily sell to them.

However, your solicitor/estate agent informs you that, if you wish to negotiate on the second offer or if you want to accept that second offer, they’ll have to withdraw from acting for you and instruct you to find another solicitor.  Understandably, the property seller is this scenario is probably a little confused an upset.  So why does this happen?

The Law Society ‘Gazumping, Gazundering and Closing Dates’ Guidelines.

Solicitors in Scotland are bound to adhere to the rules, regulations and guidelines of the Law Society of Scotland, our governing body and regulator.  If we breach these rules, we can be disciplined and, for serious breaches, be prevented from ever practising as a solicitor again.  So, although these rules are not actually law, they bind us and affect our behaviour.

As I’ve said, solicitor/estate agents still have a significant percentage of the estate agency market in Scotland and indeed dominate it in certain parts of Scotland.  This means that these Law Society rules affect the vast majority of property sellers in certain areas of Scotland and a good number of property sellers in other areas.

In an attempt to prevent gazumping happening in Scotland, the Law Society published anti-gazumping guidelines, an extract of which states:

“Where a solicitor for a seller has intimated verbally or in writing to the solicitors for a prospective purchaser that their client’s offer is acceptable – whether after a closing date or otherwise – the seller’s solicitor should not accept subsequent instructions from the seller to accept an offer from another party unless and until negotiations with the original offeror have fallen through. The solicitor should advise the seller to instruct another solicitor if he wishes to accept the later offer.

This extends the guideline on closing dates to a situation where no closing date has been fixed.”

In short…if I, as a solicitor, have indicated acceptance of an offer from Buyer Number One and I subsequently receive an offer from Buyer Number Two, I cannot negotiate with Buyer Number Two on your behalf, let alone accept Buyer Number Two’s offer on your behalf.

Does this mean that you a property seller in Scotland is prevented from accepting a better offer from another buyer?  In other words, do these guidelines actually prevent gazumping from happening when a solicitor is acting as the estate agent for a property seller in Scotland?  The answer is ‘no’!

As I’ve said, the fundamental principle in this agency relationship is that: we have to take our client’s instructions and then act on those instructions AND we have to act in the best interests of our client, not ourselves.

Therefore, if we receive an offer from another party, even after accepting one from the original buyer, we have to take that offer to our client.  The law of Scotland does not prevent a property seller from considering offers from other parties after accepting an offer from a buyer.  In Scotland, there is no contract until the missives.

After that, the missives usually contain some provisions for damages to be payable if either the buyer or seller withdraws from the transaction after the missives have been concluded, but even then we would still have to let our client know that we have received a further offer, even if missives are concluded.  Of course, our advice would be that they have already concluded missives and we’d have to outline the legal consequences of accepting an offer from someone else at that stage.

So How Do These Rules Negatively Affect Property Sellers?

If you have accepted an offer from someone, your solicitor/estate agent cannot accept an offer, on your behalf, from someone else.  What’s more, they can’t even enter into any kind of negotiation on your behalf with that person!  So even if it is only tentative interest at this stage, they can’t go back to them, find out what they are prepared to bid, speak to you and then tell them that you’re not interested.

And meantime, whilst the seller’s solicitor/estate agent is prevented from even discussing a potential offer with a second buyer, the original buyer of your property can walk away from the deal at any time, scott free!  Your property is therefore off the market until missives are concluded.

If the seller does want to negotiate with, or accept, the second offer, the solicitor/estate agent, because of the Law Society Guidelines, has to withdraw from acting on the seller’s behalf and instruct them to find a new solicitor.

What are the consequences for the seller?  It can cost the seller money.  The solicitor is likely to want to be paid for the work done to date in marketing the property.  Then a new solicitor will have to be paid to negotiate the offer, re-market the property if the deal falls through, and of course to do the conveyancing when the property sells.  It means that you don’t have the solicitor whom you trusted and shopped-around for to negotiate your sale on your behalf.

Might this obligation to withdraw from acting on the seller’s behalf provide solicitors with a bit of a conflict of interest?

Most solicitor/estate agents’ fees depend on them actually selling the property.  If they sell the property, they will be paid their fee when the sale settles, at the date of entry.  So where a second offer comes in and their client is inclined to go back and start negotiating with this second potential buyer, they are more likely not to be paid the estate agency fees, plus of course the conveyancing when the property sells.  Might this affect their advice?

As it happens, this doesn’t affect us now at MOV8 Real Estate because we charge a low fixed fee that isn’t dependent on sale.  It used to affect us though, in the days when we charged percentage-based commission on sale.

The official answer is that it should not make any difference because solicitors are bound, ethically, to always act in their clients’ best interests, regardless of their own self-interest.  However, I have heard the view expressed that where that solicitor is going to lose a sale, lose the client to another solicitor and potentially wave goodbye to their estate agency fees, this might have some effect on their ability to be completely impartial in the advice that they give their client.  Whether or not this is the case is slightly irrelevant: it doesn’t look good.

Are These Rules Fair to Property Sellers in Scotland?  How to Redress the Balance.

Do I think that these rules serve property sellers in Scotland?  No, I don’t.  Remembering that the buyer, until missives are concluded, can walk away at any time from the deal, I don’t see why a property should be ‘off the market’ until missives are concluded.

Do I think that these rules serve property buyers in Scotland?  Well, yes!  They provide an incentive to sellers to disadvantage themselves by taking their property off the market or refusing to discuss a potential offer with a second buyer (through their solicitor), even if it’s only to prevent inconvenience to themselves when their solicitor would have to withdraw from acting for them.  And all the while, the potential buyer can be looking at other properties, trying to find something better, and stalling on concluding missives.

Does this seem fair to me?  Absolutely not.  It’s unlikely that buyers will make a promise to take themselves out of the market!  However, to take the property off the market during the negotiation of missives, even if only for a couple of weeks, seems grossly unfair when the buyer can still walk away at any point prior to missives being concluded.

Part of the problem here is that many conveyancing solicitors in Scotland still operate in the way that the profession did 50 years ago.  They have small high street practices, many don’t use email, some seem to believe that 3 days or more is a respectable time-frame for returning a phone call or email, and many aren’t available or in the office for several days at a time.  This means that the conclusion of missives is a torturous and drawn-out process when in reality, most of the time, it should be a simple exchange of a couple of letters.  Points of debate can be hashed-out by email or phone call then a letter issued that actually encompasses all these points.  However, many solicitors in my experience are resistant to that.

Another part of the problem is that most solicitors submit conditional offers in writing.  This means that, even if they subsequently amend their offer verbally, the selling solicitor has to send a ‘qualified acceptance’ of that original offer, referring to the amendments that were made verbally.  This puts it in the buyer’s solicitor’s hands as to whether, and when, they want to issue the letter that formally accepts all of those changes and therefore concludes the contract.  All of which leads to massive frustration for the seller and their agent.

There are ways around all this, and we’ve tried them all.  However, every time we try to do this, buyers’ solicitors are not only up in arms, but often threaten a complaint to the Law Society of Scotland:

  • that the buyer pays a non-refundable deposit which will be deducted from the purchase price when the sale is concluded;
  • that you want a ‘clean’ offer, not subject to any conditions, with all conditional clauses removed from it, in writing, before you will take the property off the market (because, technically, if the seller’s solicitor has this, they are able to conclude the contract by returning a letter and it’s within the seller’s control as to how long that takes);
  • that you accept their offer but that you will continue marketing the property until missives are concluded and will remain open to offers and this is a condition of even conditionally accepting their offer at this stage.

These rules are so counter-intuitive and so widely-misunderstood amongst the legal profession that, sadly, sometimes they do lead to disputes and all sorts of.

Indeed, the misunderstanding of these rules is so rife that I have spoken to solicitors who have taken the rules even further than they were intended to go…

How Some Lawyers Misunderstand the Anti-Gazumping Rules and the Problems This Causes for Their Buying Clients and Other Solicitors

I spoke only a week or so ago to a solicitor (who will of course remain nameless!) who had advised his client to take a complaint to the Law Society of Scotland alleging a “serious breach of Law Society Rules”.  The allegation was that we had breached the anti-gazumping guidelines by informing our client that we had received an offer by fax, after we had accepted an offer from this solicitor’s client.

The rules here are simple: I have to inform my client of that offer.  I can’t tell someone that they can’t or shouldn’t make an offer on my client’s property unless my client has instructed me to do this.  To do this clearly only serves me, not my client, and is a conflict of interest.

Fortunately the buyer got in touch with us directly and I was able to put him straight before wasting a huge amount of time.  However, between dealing with that buyer, educating his solicitor on the rules and speaking to the Law Society to make absolutely certain that we were correct, I wasted the whole of a Friday afternoon.

All of this is made worse by the fact that, although many solicitors think they know the anti-gazumping rules stated above, they ignore the fundamental bit below which also is part of the same guidelines:

“Solicitors acting for purchasers who have received a verbal or qualified acceptance – whether following a Closing Date or not – should advise clients that although an initial acceptance may have been given by the seller, the contract will not be binding until Missives are concluded. Solicitors acting for prospective purchasers should advise their clients that noting an interest may not guarantee the clients an opportunity to offer, and if the clients are not in a position to put in an early offer they may not be allowed an opportunity to submit an offer at all.”

By not advising their buying clients fully on exactly what can go wrong, even when an offer is accepted verbally, they panic when the seller accepts an offer from Buyer Number Two and start blaming the other solicitor’s conduct.  This happens so regularly that I am absolutely sick of it.

The Danger of Accepting an Offer ‘Subject to Survey’: Taking Your Property Off the Market and Increasing the Chances of Falling Foul of the Anti-Gazumping Guidelines

When a buyer submits an offer that is subject to a survey being carried out, subject to a Home Report being approved by their lender or indeed subject to any other condition else, and that clause is completely conditional on the buyer, subjectively, being satisfied with the results of that survey or whatever it is that they have asked for, the offer isn’t really worth the paper it’s printed on.

It means that the buyer can go and get their own survey done, or not even bother, view other properties in the meantime.   Effectively, the offer is nothing more than a ‘sounding out’ of whether you, the seller, are happy with key elements like the price and date of entry.

However, in the meantime, if the seller indicates acceptance, or indeed just acceptability, of this offer then they are considered to have entered into negotiations with this buyer.  This means that the seller’s solicitor/estate agent cannot negotiate or accept on the seller’s behalf another, better offer from another buyer.

So whilst the buyer is gets first dibs on the property, the seller has to take it off the market or risk having to instruct their solicitor to withdraw from acting on their behalf if another offer comes in.  This might only be fair when the buyer is paying hundreds of pounds for their own survey: undertaking to taking the property off the market for a day or two to allow that to happen might be acceptable to the seller.  But in most other circumstances it seems to be incredibly unfair.

This is why we have to fully advise our selling clients on exactly what it means to say that an offer, subject to survey or Home Report approval, is accepted or acceptable.  We have to make it perfectly clear to the buyer’s solicitor that, until they submit a clean/unconditional offer which is in terms acceptable to our client, our client will continue to market the property and be open to other offers, and even then there is no guarantee that the price that their client has offered will be accepted at that point.  It causes all sorts of aggravation with other solicitors who feel that what we are doing is somehow contrary to Law Society guidelines or at least is just unjust.  However, it’s our selling client who we have to look out for and, in our opinion, taking your property off the market when you have a completely conditional offer is not, usually, in their best interests.  Of course, some clients instruct us otherwise, and then we follow their instructions to the letter.

Do the Rules Need to be Changed?  Clue…Yes!

My personal opinion is that the Law Society of Scotland’s anti-gazumping guidelines are stacked completely in favour of the buyer, that they penalise property sellers, that the public at large can be forgiven for not knowing that such a system exists when they put their property on the market with a solicitor/estate agent, and that the guidelines should be scrapped and replaced with something that creates a level playing field.

I can also see an argument that the guidelines could be accused of creating a financial conflict of interest for solicitors who have to choose between offering impartial advice and walking away from a large estate agency and/or conveyancing fee and/or losing their client forever to another solicitor and that they therefore don’t engender trust in our profession.  I can see an argument that the guidelines conflict with the right of the public to choose their own legal representation, regardless of the circumstances.  And I know from experience that the guidelines are widely misunderstood and often not followed within the legal profession.

The reality is that solicitor/estate agents do not hawk a property around further buyers after having agreed a sale.  In every gazumping situation that I have experienced, the whole process has been completely client-led, usually with the Second Property Buyer being known to the seller or communicating with them outwith us.

Our selling clients often seem quite shocked when we have to withdraw from acting on their behalf, but with the exception of a handful, they go ahead and take the significantly higher offer, and we can’t blame them!  Any who don’t go ahead with the higher offer, I’m left wondering whether it was because we told them we would have to withdraw from acting for them and they just thought that this was too much hassle.

If that is the case, however, then I can see an argument that a regulation that is designed to prevent an unpleasant situation for property buyers is clearly preventing our selling client from getting the best result for themselves.  In that case, there is an argument that our actions as solicitors in following the Law Society’s guidelines has actually prevented our client from getting the best price for their house and therefore that the guidelines are forcing us to act against the best interests of our clients.

Gazumping is not illegal.  My argument would be that if it was such a big problem at a national level, our own parliament would have created laws to prevent it.  In reality, our clients make the decision that they want to accept another offer or negotiate with another party after verbally accepting an offer.  By all means, if the buyer is going to spend a lot of money on a survey then they can ask that the seller commits not to accept another offer in the meantime, but in any event this still doesn’t prevent the seller from (a) going back on his or her word, or (b) allowing those few days for the survey to be done and THEN withdrawing from the deal.

So How Do I Suggest to Fix This Problem?

I would suggest the main problem here is not so much gazumping as (a) buyers’ solicitors not managing their expectations correctly, and (b) solicitors not concluding missives quickly enough after verbal agreement of the key parts of the deal (price, date of entry etc) which leads to there being no binding contract until several weeks into the process.

Everything in the process of buying and selling a property in Scotland, particularly where the seller is being represented by a solicitor/estate agent who is bound by the anti-gaumping guidelines, is stacked in favour of the buyer.

The solution as I see it is as follows.  Buyers’ should have to submit an offer, in writing, that the seller is, on the face of if, happy with.  That offer should have no conditional clauses in it that are subject to the buyer’s subjective position.  This means that, in theory, the seller is in a position simply to accept the offer.

It is at that point, and only at that point, that a solicitor acting for a seller should be obliged to withdraw from acting if the seller wants him to enter into negotiations with another party.  Up to that point, the property should remain fully on the market.

When a buyer is committing themselves to expense such as a survey, a proforma contract can be drawn-up whereby if buyer gets the survey done within an agreed time and decides to go ahead with the purchase, but the seller decides to sell the property to someone else at any point prior to conclusion of missives, they will reimburse the buyer for the cost of the survey.

Solicitors should be bound to a simple Service Level Agreement which applies to their behaviour between each other, with phone calls and emails having to be returned within 24 hours unless there is a good reason.  Solicitors should be forced to have to have an email account and to use it when the other solicitor wishes to communicate in this way.

Whilst I acknowledge that some measures to prevent gazumping are welcome, I feel that depriving a client of their solicitor is a serious step to take.  It should therefore only be done where the buyer, and their solicitor, have taken all reasonable steps to ensure that their offer can actually lead to a concluded contract.  Otherwise, the offer isn’t worth the paper it’s printed on and yet leads to all sorts of legal ramifications for the seller if he says that a couple of the main provisions are acceptable.

I do not anticipate however that any of these ideas will be adopted!  So in the meantime, I hope that this article has helped to clarify some of the areas that you have to look out for as a property seller and that you might find it useful.

Jun 21

Great article here from Merryn Somerset Webb of Moneyweek magazine on her blog saying that there really aren’t more cash buyers, they just form a larger proportion of buyers than before due to depressed numbers of property sales.


Jun 21

I stopped posting on this blog a few months ago as it became overwhelmed with spam comments and, frankly, I didn’t have the time to be manually approving or rejecting 500 comments per day. Meantime we’ve changed the website name (it used to be my personal blog, but pretty much all I was writing about was property anyway!), switched off comments for the time being and it’s time to start commenting regularly on property-related matters again. So welcome back!

Dec 01

If you look at any major property website at the moment, it is clear that there are a lot of adverts for properties with reduced prices or prices well below Home Report valuation. December is usually a great time to be buying a property. However, this year property buyers have another tool up their sleeve to help them pick up a bargain: the snow!

As the winter holidays draw closer, some property sellers start to panic. Most solicitor firms will close for the Christmas and New Year holidays, a period of two full weeks. This means that property buyers can’t even submit an offer during this time, a genuine concern for property sellers. Many sellers also believe that the property market only starts moving in early spring. This isn’t really true but this perception persists.

At this time of year therefore, many property sellers will feel that they have a choice of accepting your offer now or of waiting several weeks until another offer comes along.  This worry might persuade some sellers to accept a lower offer than they otherwise were looking for.

However, this December we can add another factor that further tips the balance of power in favour of property buyers: the snow! If property sellers perceive that December is usually a quiet month, the fact that nobody can physically get to their properties certainly won’t help to ease their worries.

December is definitely a good time to be getting an offer in on a property. Timing and hard bargaining are always useful tools for picking up a great buy.  However this year it might be that a warm coat, snow boots and a 4×4 are the real key to picking up a property bargain!

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Nov 29

Ho Ho Ho, Welcome to the Christmas Property Market Update!

‘Tis the season to be jolly, tralalalala la la la la.  ‘Tis also the season to look back at the housing market in the year gone by and to make some predictions as to what might happen in the year to come.  That, admittedly, is less exciting and less traditional than being jolly.  But I’m an estate agent, not Santa, so it’s hopefully not entirely unexpected and I’ll do what I can to keep this Update more ‘It’s a Wonderful Life’ and less ‘Scrooged’.  Double dip recession and housing market crash…bah humbug to the idea!

2010 Has Generally Been a Decent Year for the Property Market

Recently released statistics, reported in my November market update, have showed that 2010 has not been quite as good a year for the property market as 2009 in terms of sales volumes.  There have also been reports of lower levels of mortgage lending in 2010 compared to 2009.  Anecdotally, however, we have been finding that properties have been selling just as quickly, if not more quickly, in 2010 than in 2009.  And, perhaps as importantly, we have seen First Time Buyer-type properties attracting more interest than they did in 2009.  Indeed, from my perspective that has probably been the most heartening thing that I’ve seen this year.  Of course, a healthy property market relies on First Time Buyers being able to buy properties but it also relies on First Time Sellers being able to sell their property and move on up the ‘ladder’, stimulating activity further up that ladder.

Volumes of property sales, according to most statistics, seem to be down on 2009 levels.  Indeed, the statistics that I reported in my November update suggest that we are still seeing about half the number of property sales per year that we saw at the height of the market in 2006/07.  However, as I said in my last update, I think that for a few years to come this might just be the new reality of the property market.  Equally, it might be that this lower level of activity is not something to be concerned about.  After all, a lot of transactions in 2006/07 were borne of unsustainable lending practices and a belief that property trading was a way to make a fast buck rather than being a long term and steady investment in a home or rental property.  Perhaps 2009/10 have seen us return to property being ‘safe as houses’ in investment terms, rather than a short term gold mine.  And, after seeing the consequences of people buying at the wrong time in a ‘boom and bust’ property market (negative equity, financial ruin), I’m tempted to see stability and perhaps even stagnation of property prices for a while as being welcome.

Has Press Coverage of the Property Market in 2010 Accurately Reflected What Has Been Happening in Reality?

The reporting of the property market in the newspapers in 2009 gave me some cause to be grateful.  2008 saw a lot of journalists seeming to revel in the bad news surrounding the property market and property prices.  2009 saw more balance and this, I felt, helped to restore a bit of confidence.  2010 has seen a bit more of the type of reporting that we saw in 2008, with many elements of the Press seeming to enjoy scaremongering around the prospect of a double-dip recession and double-dip in property prices.  Very often the same journalist is writing a piece one day about prices rising and within days they are writing another piece about the prospect of prices falling.  I’ve likened it to the way the Press reports Charlotte Church’s weight gain one week and then fears over her weight loss the very next week.  The tone of the Press with regards to the property market in 2010 has, I feel, been more negative than in 2009 and I hope that in 2011 it will return to the way it was in 2009 as the property market is a confidence-based market and unnecessarily negative reports, based purely on speculation or misuse of statistics, does nothing to help maintain a healthy property market recovery.

So, Most Importantly, Have Properties Actually Been Selling in 2010 and Do They Continue to Do So?

Most importantly, properties are still selling.  And property sellers still have confidence that they can sell their property and are bringing properties to the market.  2010 has been a fantastic year for my own firm and I’m really proud of everything that we have achieved against a backdrop of what remain very challenging general economic conditions.  That wouldn’t have been possible if the property market wasn’t moving.

Properties ARE selling!  Buyers have more choice than they did a few years ago and can afford to be a bit more discerning.  Obviously location is important and properties in the most desirable areas are still in high demand.  Good properties in good areas are still selling.  However, across the board there are buyers for every type of property.   The key is to make sure that your property stands out from the crowd…in a good way!  Properties that aren’t in very good decorative condition and which would have sold a few years ago are now struggling to sell.  However, if your property is a great example of its type then the chances are that it will sell as long as it is sensibly priced against the competition.  So, take it from me, in spite of what some estate agents (of all people!) are telling people when they visit their properties, properties ARE selling!  In the last week of November, traditionally a quiet time, we sold five properties, all of different types.  Our average time on the market is under two months.  There is plenty of doom and gloom around, but there is also good news…you just need to know where to look for it!

So, What Are My Predictions for the Housing Market in 2011?

On paper, it looks like 2011 should be a tough year.  The Government’s spending cuts were announced in late 2010 and tens of thousands of public sector jobs will be cut.  It continues to be a tough economic environment for businesses.  We’re all going to be less well off in the coming years than in previous years and many people at the moment can only afford to remain in their homes because their mortgage payments are affordable due to historically low interest rates.  So it’s a very gloomy outlook for the housing market for the coming year, isn’t it?

Well, I’m not totally sure that’s the case to be honest.  Everyone has known that cuts have been coming for some time and the fear of cuts will have informed people’s decisions in the last couple of years as to whether or not they want to move home.  The flip side of this of course is that people now know where tey stand.  Therefore, many people who may have been waiting to see just how severe the cuts would be and just how much the cuts would affect them personally know exactly where they stand.  This may in fact give them some confidence that they can afford to move home.  The housing market, certainly on the east coast of Scotland, seems to have defied logic in the past couple of years when it comes to the relationship between house prices and the general economic conditions.  I think therefore that anyone’s guess is as good as mine as to what will happen…so, in spite of that, here are my guesses as to what will happen in the Scottish property market in 2011…

  • property prices in Scotland and throughout the UK will rise very slightly or stagnate because interest rates will remain untouched for several months to come and there appears to be no prospect of lending conditions for property buyers changing dramatically;
  • the outlook for first-time buyers is unlikely to improve dramatically over the next 12 months on the basis that the lending conditions for first-time buyers are unlikely dramatically to improve in that period which will lead to a property market relatively similar to what we have had in 2010;
  • the proposals in the Financial Service Authority’s mortgage market review will probably have a short-term adverse effect on the market and on First Time Buyers in particular as the intention seems to be to impose far more affordability tests than we have previously seen however, in the longer term, these regulations should help prevent people buying properties that they cannot actually afford in the medium to longer-term;
  • interest rates will remain very low for the coming year because low interest rates have been one of the most important factors in minimising the effect of the recession on the UK population in the past couple of years and the effect of raising them significantly in the short term would lead to a repossession crisis amongst the thousands of people throughout the UK who have been able to remain in their properties because of low interest rates;
  • the Scottish Government and UK Government, as far as I’m concerned, should not do anything to artificially stimulate the housing market in Scotland: instead we should aim at a general economic recovery which will see us return to normal but responsible lending conditions which will ensure that the health of the housing market takes care of itself;
  • some months will be better than others from the point of view of house prices and the Press will report how wonderful things are one month and how awful they are the next;
  • transaction levels will remain at roughly the same level they have been at in 2010;
  • repossession levels will probably not go up as dramatically as everyone has been predicting for the past couple of years, simply because interest rates will probably remain low for several months to come and new legislation continues to make it increasingly difficult for lenders to repossess properties;
  • 2011 will continue to be a buyers’ market.  We will therefore continue to see an emphasis on Offers in the Region of/Offers Around and Fixed Price asking prices in 2011 with the asking price reflecting the Home Report value.  Offers Over might continue in high demand sectors such as the market for family homes in very popular residential areas but otherwise is a bad idea because buyers don’t like it and property sellers would be well advised to do everything to make their properties as attractive as possible to buyers given that it’s a buyers’ market;
  • Home Reports, in my opinion, continue to underpin the housing market in Scotland: they are probably the most crucial factor in determining the asking price and they also give buyers some confidence that the property is actually worth what they are considering paying for it.  Two things will ensure that they continue to be effective: (1) surveyors’ valuations need to be audited and checked for consistency to ensure that buyers can continue to have confidence that the valuation in the Home Report is actually accurate, and (2) lenders need to continue accepting the Home Report for the purposes of the buyer’s mortgage, which saves the buyer money and makes the purchase more affordable than if they had to instruct their own survey/valuation.

2010 Wrap-Up: Have a Very Merry Christmas and a Wonderful New Year!

I hope that, in spite of all the negativity that you can find amongst other estate agents, the Press, the man/woman on the street, you will have found that some of my property market updates in 2010 have been cautiously optimistic and that they have reported not only what I have been seeing in the Press but also what I see happening in real life from my privileged position of running an estate agency business and that they will have reassured you, perhaps, that the property market isn’t such a bad place as some people make out.

Most importantly, I hope that you will have a wonderful Christmas and a very happy New Year and I look forward very much to chatting with you all again in 2011.  Here’s wishing the very best of health and happiness to you and yours for the festive period!

Best wishes,


Nov 22

November’s Good News…Housing Market Stabilises!

After getting a healthy dose of pessimism thrust at you in my October property market update, I am delighted to report in October that the property market in Scotland appears to be a bit healthier.  That is not just my anecdotal experience but also based on fact.  Well, on statistics from Lloyds TBS actually.  One has to be very careful indeed with using the Halifax, Nationwide etc house prices indexes when making sweeping judgments about the housing market (only part of the market, some are based only on mortgage offers which then may be withdrawn, include remortgages etc etc) but the Press in general doesn’t seem to care much for such caution.  So, on the back of headlines in October like, “3.4% slide in Scots house prices is the worst in UK, say analysts” (Scotsman), this month we had the welcome headline of “Scottish Housing Market Stabilises” (Lloyds TSB Press Release, widely reported).

According to Lloyds TSB’s figures, the Scottish housing market’s recovery from the recession has stabilised after the price fall of the previous quarter.  Scottish house prices have increased by 4.6 per cent annually and, in the three months ending October 2010, the quarterly price index for the average domestic property in Scotland rose by 3.7 per cent.  So all good news?

Well, not quite.  The reports stated that the latest house price movement has been generated from a market with a low number of sales.  The number of house purchases in the last quarter of the year was 17 per cent down on the last quarter and 10 per cent below the same quarter of last year.  It also reported that the number of housing transactions in the Scottish market is around half of pre-recession levels.

Lloyds TSB stated that: “The Scottish housing market has adjusted to this changing economic environment. Sales have halved but have now stabilised while prices, after an initial fall, are now showing an annual increase comparable to retail price inflation.

“There are no signs of a precipitate fall in house prices. Likewise there is little prospect of significant house price gains in the immediate future.”

House Prices Not Rising Quickly, Transaction Levels at 50% of Pre-Recession Levels…Is This Actually Good News or Bad?

If I were a property seller or buyer at the moment, and if what Lloyds TSB is saying turns out to be correct (and only time will tell on that one, but they have a heck of a lot more of a bird’s eye view of the property market that I do), I would actually be quite encouraged.

The old expression ‘safe as houses’ characterises property as a steady, safe investment.  Housing in that context is not meant to generate spectacular gains.  Of course, that impression was more than challenged in recent years where easily-available mortgage finance with a low, or zero, deposit meant that people could easily look at buying property for short term gain rather than as a longer term investment.  Property became a way to make a lot of money, even if you actually put no deposit down whatsoever.  Eventually that had to end and we had the crash.  Then property became a way to LOSE a lot of money quickly!  So much for ‘safe as houses’.

So, against a backdrop of property becoming a way to make a lot of money or lose a lot of money, depending on your timing, a return to property prices tracking retail price inflation (in other words, the cost of other stuff we buy) would be quite welcome if you were thinking of investing in a home today and weren’t interested in making loads of money but were certainly interested in not losing any.  After all, when you are investing your life savings of £100,000 into the deposit for a £400,000 property, perhaps you aren’t interested in making tons of money in a couple of years: you plan on being there for several years and the investment is also your, and maybe your family’s, home.  Equally, you don’t want it to drop in value by 25% and effectively wipe out your entire life savings either!  A return to property prices tracking the retail price index would probably be a return to the days of ‘safe as houses’ and that probably wouldn’t be a bad thing.

Is the fall in the number of properties being sold (about half the number that there were pre-recession) a problem?  As long as everyone who wants to move home can move home then I’d say it probably isn’t a huge problem.  The problem is if there are more buyers than houses for sale (drives prices up) or more properties for sale than buyers in the marketplace (leads to prices going down and people not being able to move home).  It’s a problem for estate agents, of course, because they have half the number of transactions to share-out amongst themselves!  However, pre-recession, a lot of property transactions were being driven by unsustainable and in some cases irresponsible lending practices which caused all sorts of problems in the end.  So to return to half the level of transactions that there previously were could just indicate that the market has found its natural level, given that we are still in a pretty bad shape economically, now that the property speculators have exited the marketplace.

Conclusion: There’s Cause for Optimism in the Property Market

Of course, we could be about to have a double dip recession.  And we could be about to see house prices fall sharply.  Or we could be about to see prices go sky high because the property market recently has rarely showed any kind of sensible relation to the general economic conditions.  It’s all coulds at the moment and of course nobody can be certain exactly what is going to happen.  Of course, that doesn’t stop people saying that they do know exactly what is going to happen!

Concrete statistics showing steady and unspectacular house price movement and levels of activity that are consistent with where they’ve been for the past few months are, to me, more encouraging than Press stories reporting that prices are either going through the ceiling or going through the floor.  I think that the property market and most property buyers and property sellers would exchange the yo-yo and uncertainty of the past couple of years, along with the sensationalist reporting of these price variations, for some stability and certainty in the next few years.  And I, for one, would second that emotion!

We’ve seen activity to continue to be steady through November even though most people feel that property activity starts to tail-off towards Christmas.  Whilst people certainly have other things on their minds around this time of year, from the level of phone calls we are receiving from buyers about properties that we are marketing it’s clear that those people who are determined to find a property before the year is out are still very much out in force.  I can only hope, but am optimistic, that this will continue into 2011 and that we will see a more stable, unspectacular and yet hopefully more reliable property market continue to develop.

Oct 28

October, October, why have thou forsaken me?

In August we were reporting the busiest month that we’ve ever had and I was questioning whether the old wisdom about spring and autumn being the best months in the property market really applied any more.  And then October happened…oh, October.

A Link, Finally, Between General Economic Conditions and the Property Market?

I’ve been saying for ages, to anyone who will listen and to many who won’t, that there seems to be absolutely no sensible link between broader economic conditions and property price movements.  There are certain predictions that would seem to most people like they are just common sense.  For example, you would think that an increase in unemployment, cuts to the wages of people who are in work and the worst mortgage lending conditions for a decade should all mean that property prices take a nose-dive, wouldn’t you?  Well, in Edinburgh and the Lothians and, from what I can see, on the west coast of Scotland too, this hasn’t actually been happening.  The property market stalled prior to wider global financial concerns becoming well known.  Job cuts have been happening in significant numbers since the financial/banking crisis, large-scale redundancies have been taking place in the financial sector which underpins the Edinburgh economy in particular and yet the property market has started to rise and recover in the last year or so.

So, having given up completely on looking for links between current events, economic conditions and house price movements and housing market health, I was rather surprised this month to see that there perhaps IS a link between all of these after all?

But what has happened in the last month in the property market to make me think this?

The Property Market Took a VERY Sizeable Shudder in October But, Touch Wood, Seems to Have Recovered Its Balance Again

Obviously November and December start to slow down a bit towards the Christmas and New Year holidays so a good October is important.

We were sailing along with a great August behind us and then September got a bit quieter.  Nothing to be concerned about because October is traditionally one of the busier months for property market activity and maybe we’d just had a bit of a lucky month in August.  Then it all went a bit wrong (I wrote this post about it at the time http://robert-carroll.co.uk/is-the-scottish-property-market-tightening-its-belt/)…

It was a Tuesday, near the beginning of the month.  I came into the office, asked how things were going and was told that the phones had been very, very quiet.  The next again day I was told the same thing.  Then the following day.  Then the following day.  On some days the phone hadn’t been ringing for a couple of hours at a time.  Now, as anyone who works for any company will tell you, having a bit of a break from phone interruptions is a nice thing.  However, after a couple of hours it becomes a bit of a concern from a business point of view.  And it wasn’t just the phone but the internet too.  Web-based enquiries dried-up.  Valuation requests dried-up.  Things got so suddenly and seriously quiet that we checked all our phone lines, website forms, web portals and advertising.  I’m not joking.  I started phoning around other firms, asking what they were experiencing.  They all said that they were seeing the same thing.

I’ve never seen anything like this before.  Obviously the property market naturally has peaks and troughs and, in the last three years, we’ve got used to the idea that it can come to a crashing halt.  However, the suddenness of this blip was what was outstanding here.

So, what could have caused such a sudden drop?

The Penny Has Finally Dropped That We’re All in a Bit of a Financial Pickle (aka George Osborne, is a Big Bad Nightclub Bouncer)

Here’s my theory: what we’ve just seen happening in the past month is the economic and housing market equivalent of a big, scary bouncer telling you that it’s ‘chucking out time’.  Why?  Please bear with me…

You’re in a bar and you know that it closes at midnight.  The bar calls last orders, giving you a very good idea that it’s closing time very soon.  The staff then tell you that it’s closing time.  It’s midnight, you look at your watch and you know you should do take some action.  However you stay a bit longer.  The staff start putting chairs on the tables and sweeping the floors and you absolutely KNOW that you have to go.  However, there’s a huge difference between conceptually knowing something and actually taking any action.  Finally, the massive bouncer comes from the front door and tells everyone remaining in the bar that they have to go.  ‘No manners, some people,’ you might think, but this guy means business and you know that he’s the one person who, out of everyone involved in this scenario so far, can actually do anything about it.

What the heck am I going on about and what relevance does this have to the incredibly sudden and serious blip that we saw in the property market?  Simple…

George Osborne, Chancellor of the Exchequer, is the bouncer.  The UK population is the customers.  The UK economy and our economic security is the bar we frequent.  The chairs have been going up on tables for quite a long time now: we’ve seen the signs and known, conceptually, that there is a problem in the bar and that we should do something about it but nevertheless we’ve just continued about our normal business in the meantime.  However, the Big Scary Bouncer, George Osborne, has just told us all through the medium of the Conservative Party Annual Conference that it’s ‘chucking out time’.  And he’s outlined to us exactly how he is going to go about it.  And now, for the first time, we actually believe that it’s real.

The Conservative Party Annual Conference took place from 3 to 6 October 2010.  It coincided almost exactly with a sudden paralysis in the property market.  For about a week, nobody wanted to sell and nobody wanted to buy any properties.

I believe that, finally, the penny has dropped: we are all in this together.  Cuts will affect all of us, not just ‘other people’.  The benefits that are being cut now affect the middle and upper-middle classes.  Public sector cuts will affect the jobs of middle and upper-middle classes.  And now that the scope and specifics of the cuts have been clarified, it’s real.  The property market is all based on confidence.  I believe that these announcements fundamentally shook the confidence of the UK economy and property owners as a whole.  And as a result, we saw a sudden paralysis caused by people looking around themselves, realising that they were going to be noticeably less well-off in the coming months and years, and wondering whether they really did want to move home after all.

So Is This The Beginning of a Property Market Slump and How Will the Property Market Respond to General Economic Factors in the Near Future?

I don’t think that this will have a longer term negative effect on the property market.  I do think that it was a significant blip though and that it perhaps signals, finally, some correlation between general economic conditions and the housing market.

Why won’t all of this have a huge effect on the housing market?  I think that people have finally realised that they will be less well-off in the coming months and years.  However, I believe that most will still not be put-off moving home simply because there’s often something else that can be cut from their lives before they will consider not living in their ideal property.  Golf club membership, dinner in a restaurant every Friday evening or a home that’s big enough for your whole family to live in?  That’s an extreme example, but even on an emotional level, a person’s home is a very high priority in comparison to other things in their lives and other things will make space for the home move.

I do think that it will have some effect on the property market because not everyone will be able to make cuts in other areas of their lives to justify either moving up or getting onto the property ladder.  Will that effect be negative or, is it possible that it might be positive?  Now that the Big Bad Bouncer has outlined it, spelled-it all out to us, we at least know what £86 billion looks like as far as we are individually concerned and it’s easier to make decisions.  All of which might even have a positive effect on the housing market as people are no longer just waiting in limbo.

Time will tell, but I believe that we will now see a clearer relationship between general economic trends and the property market and property prices.  This view was backed today by a major UK property consultancy (see end of this article http://www.guardian.co.uk/business/2010/oct/28/uk-house-prices-fall-faster-expected).  I am interested in your views, so please do click through to MOV8′s Facebook Page and leave your opinions about what you think is going to happen (http://www.facebook.com/mov8realestate)!

Oct 22

I’m the Managing Director and a solicitor at a rapidly-expanding firm of solicitors and estate agents with its Head Office in Edinburgh. We sell properties in Edinburgh and the Lothians, Glasgow and the Scottish Borders and have an innovative feeing model that puts the focus on transparency and value for money. I’ve long thought that the way that most estate agents charge their clients is completely unfair and that it does not represent good value for money.

So, do you want to get back at these greedy estate agents and save yourself thousands of pounds? Well, at the risk of making myself very unpopular with some colleagues, here are my Top 10 Insider Money Saving Secrets about how estate agents make money, hide fees and basically charge you more than you really should be paying.

1. Why are you paying a percentage fee? Negotiate hard, especially if you have a more expensive property.

Most estate agents charge a fee that is a percentage of the selling price. This varies hugely but in Edinburgh it’s usually between 0.7% and 1.5% and in Glasgow it’s usually more like 1% to 2% (there are exceptions, of course, lower and higher). A 1% fee on a £100,000 property is therefore £1,000 and on a £500,000 property it is £5,000. Bear in mind that the level of work involved in selling a £500,000 property is not necessarily more than in selling a £100,000 property. Estate agents will often stress that they can’t budge from their standard percentage fee. Remember though, it’s not the average percentage fee but rather the total amount of fees throughout the year that matters to the business. Even 0.6% of £500,000 is £3,000 and that goes a long way in the current financial climate. Therefore, negotiate hard, especially if you have a more expensive property. Look at the total amount of the fee rather than getting fixated on percentages. And, indeed, ask yourself why you are being charged a percentage fee in the first place: push for a flat fee! Percentage fees do not, contrary to popular perception, give an agent more incentive to sell your property for a higher price. That extra £1,000 on the selling price makes a large difference to you. However, it translates to an extra £10 on the estate agent’s fee. Are they really going to jeopardise the chance of getting their £££ commission for the sake of an extra £7?

2. Beware of fees quoted without VAT included

Most estate agents quote their fee level without including the VAT. Even though we don’t get to keep the VAT element, you still have to pay it and, unless you’re a VAT registered company, you can’t claim it back. So just beware that when the agent quotes you a fee of 1% of the £300,000 sale price, you will actually pay 1% of the sale price PLUS 0.175% of the sale price in VAT. So you are effectively paying the agent 1.175% and not 1%. As of 1 January 2011 when VAT rises to 20% this figure will be 1.2%. In real terms on a £300,000 property with a 1% fee this means that you will pay £3,600 and not £3,000.

3. What is actually included in the ‘estate agency’ service?

What exactly does ‘estate agency’ mean? If you ask ten different people what they expect from their estate agent, you will get ten different answers. Some of the things you pay an estate agent for are for advertising and marketing materials, much of which comes from 3rd party companies e.g. For Sale Board, property particulars/schedules, newspaper advertising. However, what do you get for your estate agency fee? There are several agents who cannot really answer this question because, beyond preparing the marketing/advertising materials, once the property is on the market, that agent doesn’t do a huge amount. Providing Rightmove, Zoopla, Primelocation advertising, following-up on viewings for feedback and cross-selling your property to potential buyers takes time and therefore costs the agent money. However, if they don’t do these things, you have to question what the agent is actually doing. You may be happy with that level of service, but be sure you’re not paying thousands of pounds to someone who really only takes some photos and pops your property in the newspaper and a website!

4. Watch out for ‘extras’ that should be included as standard in your estate agency fee

Some agents charge for photographs, floor plans, design and layout of property schedules/sales particulars and the like. Many other agents class these things as part of the estate agency service and don’t charge separately for them. If you are being charged separately for certain items that some other estate agents include in their standard estate agency fee then ensure that (a) you are getting something of a decent standard (e.g. photographs that are better than you could have taken yourself) and (b) that the estate agency fee is sufficiently reduced to take account of you having been charged for things that other firms would include in their standard estate agency fee. I am aware of one agent in Edinburgh who charges hundreds of pounds for photography and schedule design, even if you are not having any schedules printed and they still charge one of the highest fees anywhere on in the marketplace.

5. Beware of being sold extra advertising that you don’t need

In spite of the predominance of property websites, print media is still an effective way of raising awareness of your property amongst property buyers. Beware, however, of estate agents who have bought an entire page in a newspaper and who are trying to re-sell parts of that page to you. Some agents charge several hundreds of pounds for a newspaper advert that only runs for one week! Many are highly incentivised to sell this to you right at the beginning of the process because their firm has already committed to paying for a full page in that newspaper and they have to sell that space come hell or high water. I’d usually suggest giving the basic advertising package a couple of weeks to work before rushing into spending several hundreds of pounds on a newspaper advert. And beware that you can buy a LOT of ‘Featured Property’ add-ons on the big property websites for the cost of just one newspaper advert!

6. What is this up-front Marketing Fee and what is this ‘Termination’ or ‘Exit’ fee?

You’re already paying for an estate agency fee. And you are often paying several hundreds of pounds for photographs, schedules, Home Reports and the like. So what is this additional ‘Marketing Fee’? And what is that ‘Termination Fee’ in the small print? If you put your property on the market with this agent, hate them and want to move to another agent, you will already have paid several hundreds, even thousands, of pounds and they didn’t even sell your property. If your agent is charging you a substantial percentage fee anyway then push them hard to reduce or remove these fees from the contract. Most will accept if it’s the difference between winning and losing that business and you will save yourself hundreds of pounds.

7. Beware of empty claims of estate agents having buyers on their books

One of the most common claims of estate agents is that they have buyers on their books who are looking for a property just like yours. Check this claim and ask for proof. I know of so many people, friends and family, who have been told this same story by every single agent who they have tried to sell a property with. None of them have ever actually asked to see any proof of who these buyers are. And none of the agents ever came through with any of these (probably mythical) buyers. So ask for proof. And if an estate agent DOESN’T have a database of buyers, question what on earth you are actually paying an estate agency fee for and how proactive that agent really is.

8. Be suspicious of estate agents’ valuations of your property

One of the most common techniques for getting your business is to claim that your property is worth more than it really is. Flattery, in some cases, gets the agent everywhere. So few property owners ask estate agents to show them supporting evidence for their valuation. You don’t need any qualifications in Scotland to be an estate agent. And there’s no magic to valuing a property: it’s based on what comparable properties in the area have sold for. Estate agents do perhaps know more about property and the property market than you do, but don’t make the mistake of treating them as experts on the same level as doctors or quantum physicists! Question them and make them justify their claims. Remember: if your property is over-valued it will sit on the market for a long time and, if you then decide to change agent, you might have to pay a Termination Fee and you might already have paid for photographs and schedules and a Marketing Fee (though not if you follow the advice above!).

9. Look out for expensive conveyancing fees and fee ‘estimates’ rather than quotes

Beware, particularly when the estate agent is also a solicitor’s firm, that a very cheap estate agency fee might be offset by a very expensive conveyancing fee. Ultimately, the firm is owned by the same people so if one part of the fee is low to attract business and the other part of the fee is higher to offset that, they won’t care: it’s the total fee that matters. Beware also of solicitor firms providing you with an ‘estimate’ of fees rather than a quote. Many firms will quote a certain amount of conveyancing on the proviso (usually in the small print) that it goes totally smoothly. If the transaction isn’t ‘regular’ then they’ll charge more. I’ve seen a solicitor firm completing the transaction THEN raising a big invoice at the end of the transaction when it was too late for the client to move to another solicitor or negotiate the new fee. Make sure to ask the solicitor, prior to them doing the work, in what circumstances they will charge an elevated fee and ensure that it is discussed with you before they go ahead and do that work.

10. Don’t choose an estate agent solely on the number of properties the agent has on the market

One of the most common ways of choosing an agent is to pick one who seems to have a lot of For Sale Boards up in your area. And a lot of agents market themselves to potential property sellers on the basis of market share. However, big market share can mean one of two things. On the one hand, they are amazing and everyone in the area loves them. On the other hand, they are not very good at selling properties so they just keep piling up. My firm is now well beyond the point of being one of the smaller agents and is fast becoming one of the largest so I’m not saying this because I have any axe to grind about big firms: quite the opposite, we aim to be the largest around by offering the most sensational value for money in the marketplace. I’m just saying that, in this context, big isn’t always beautiful.

I hope that some of the secrets and tips in here help you to save a lot of money. None of this really is rocket science. However, there can be a tendency to look upon professionals (and I include estate agents in that category) as ‘experts’ and just to swallow everything that they say. I hope that perhaps some of these ideas give you the confidence to ask the questions that need to be asked and to know why you are asking them. If you do have any other questions though, please don’t hesitate to get in touch with me.

p.s. until the end of 2010 my firm, MOV8 Real Estate, is offering FREE estate agency.  It’s not too good to be true, honestly.  Please go and check it out on our website at www.mov8realestate.com.

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Oct 11

There are signs, just an inkling of a feeling, that confidence is dropping in the property market.

Not from buyers. We have sold more this month already than last month. The more concerning factor is that supply seems to be weakening. Statistics that I saw today suggest that the number of properties coming to the market in September was lower than the number in August and by a full 10 percent. Our own experience almost exactly mirrors this. More concerning from our point of view is that so far in October we have seen the number take a small nosedive. Our stats are usually pretty representative of what’s happening in the wider market at least in Edinburgh and the Lothians.

It remains to be seen whether this is a little blip. However, one would usually expect the numbers to go up from August to September then stay pretty level through October only to fall back towards Xmas. Not the case this year. It’s only a hunch but I’ve not seen numbers of potential sellers fall this sharply since March 2008 and that was the month before the market crashed.

Time will tell. However, a petrol station will know of a problem in the oil industry before drivers do: they only find out when they eventually run out of fuel. A lack of people putting their property on the market is the first indicator that there’s a problem, a while before buyers catch on to that lack of confidence.

My hunch is that, particularly in the aftermath of the Conservative Party conference, the middle classes have finally realised that the cut backs are going to affect all of them and that they are waiting to see the full extent of the cuts prior to making any decision about moving house. However, in the meantime they’re staying put.

Ironically of course, this means that it’s a good time to put your property on the market: buyer confidence is as yet unaffected and there’s a dwindling stock of properties on the market.

Interested in what you all think about this though.

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Sep 29

As always, I’ll give you a little indication of what I’m personally seeing happening in the property market at the moment and then an overview of what the wider Press is reporting has been happening.  I’ll start with what I’m actually seeing, based on my experience as the owner of a solicitor/estate agency firm.

Not Much Change Since August: Traditional Property Market Patterns and Wisdom Are Out the Window for the Time Being!

It’s been a bit of a funny month has September…

We haven’t seen the usual huge flurry of activity in September that you would traditionally associate with what is supposed to be one of the busiest times of the year.  This might have something to do with the fact that the traditional seasonality that we have seen in years gone by just hasn’t been happening in these past couple of years, since the credit crunch/financial crisis/property market slump all took hold.

Activity for us, in terms of the number of properties coming to the market, the number selling and the number of new buyers registering with us has been pretty much the same as in August which, in years gone by, wouldn’t have been the case.

Now, obviously we only have about 130 properties on our books at the moment so we represent a snapshot and not the whole picture when it comes to the housing market.  For the time being too, the majority of our properties are in Edinburgh and the Lothians so we can only comment with any authority on what is happening there.  So, what might be the reasoning behind this trend?

My feeling is that property buyers and sellers have had their confidence in traditional housing market wisdom shaken in the last few years.  Traditional rules such as property prices never going down in certain areas and spring being the best time to put your property on the market have all taken a bit of a knock: people have seen the price of properties in those ‘safe’ areas go down and they’ve seen properties go on the market in spring, sit there for several months and then sell in November.  It seems to me that buyers and sellers now are more tuned-in to what the media and their own personal experience are telling them than they are on relying on such traditional ‘rules’: people see two properties selling in their street or they read a story in the Press that prices have gone up by 10% and they then have some confidence that theirs might have a chance of selling, regardless of the time of year.

I am still cautiously optimistic about the continued health of the property market in the Central Belt and Borders regions of Scotland, which is where we do most of our business.  The market seems neither to be hugely improving nor hugely deteriorating.  It was pointed out to me recently by a financial advisor that the fact that our firm is doing above-averagely well compared to our competitors perhaps adds a slightly rosy tint to my view of the property market at the moment.  He pointed out that many other solicitor/estate agents at the moment are really struggling and continue to down-size and make cut-backs to adapt to the new reality of the property market.  He’s of course right and many solicitor/estate agents ARE struggling to make ends meet at the moment because property market activity, particularly in terms of new properties coming to the market, is at a MUCH lower level than it was 3 years ago (probably about half).  So it’s a much smaller market but there are still the same number of estate agents chasing that lower level of business.

That said, I’m confident that good properties in good areas continue to have demand: it’s just a question of spreading the net wide enough, in terms of advertising and marketing of the property, to find those buyers.  I’d still however urge anyone thinking of selling a property that is not in such a desirable area or desirable condition to try and do as much as they can with the one, single factor they can influence in that particular equation if they wish to sell it: in other words, the property’s condition!

General Property Market News in the Last Few Months…Some Caution

In a more general sense there is, as always, some negative Press concerning the housing market: just today there was a story about levels of lending falling for the fourth month in a row and property prices leveling-off.  It has to be stressed of course that these are UK-wide statistics and I would urge anyone to treat UK-wide property market statistics with some healthy degree of caution.  Why?

The housing market has ceased, to some extent, usefully to be seen in such macro economic ways.  The property market now has to be seen much more in micro economic terms.  This means that UK-wide statistics are of much more limited importance than the Press, when reporting them particularly in Scotland, would make out.  Why?

During the property boom years, property was seen as a commodity that could be speculated upon, as a short-term investment where gains could quickly be made.  Property shows on TV and content in the wider Press reinforced that view and so there was a bit of a feeding frenzy, regardless of location.  The old adage of ‘location, location, location’ was secondary to ‘buy, buy, buy’, ‘do-up, do-up, do-up’, then ‘sell, sell, sell’.  We saw a concertina effect in cities such as Edinburgh where the price difference between two similar properties, one in a lovely area and one in a not-so desirable area, became closer than it would traditionally have been.  Those days are, for the time being, past us.  Properties in nice areas are selling more easily than those in not-so nice areas and the gap in the prices is expanding.  On a slightly wider scale, the Edinburgh property market has been outperforming locations such as Glasgow and West Lothian in recent months, for example.

Unemployment, availability of credit to certain demographic sectors, even the type of information that people are reading will vary from place to place and will have a direct effect on the local housing market.  If the local newspaper has a particularly anti-housing market slant and focuses on the negative statistics, would that not affect confidence in the market and therefore the level of prices?  If the local newspaper, however, has an editorial slant towards positive property market Press, will this not have the opposite effect and bolster confidence?

Property speculation and property profit hysteria has subsided as a UK-wide trend.  I think that the property market has once again become completely local: Glasgow will be different from Edinburgh and Aberdeen, London and Manchester.  I do therefore think that for local Press to focus on national statistics is, in many instances, less than helpful.  Although it does of course make for a good story, so I can’t see it changing any time soon!

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