Please note that
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making any important decisions. The author is not an expert in any
by Howard Goodie
I am not quite
sure whether it is the passing of the Millennium, the advancing of the years
or merely end-of-winter SAD, but two lots in my February auction have put
me in a rather reminiscent mood for the start of this article. I hope that
this reminiscence will lead you into the primary purpose of attending auctions
- buying that bargain!
What have I seen from my rostrum and in
other sale rooms that have provoked a hindsight recollection of what good
buys there were? I quite frequently remember from the days when I was selling
for the British Rail Property Board the long, thin strips of land which they
offered which sometimes turned out to be tremendously useful and at other
times did not. Before now I am sure I have cracked the hoary old joke about
needing brochures of unusual length (or width) to cope with the long, thin
site plans. In the days when I was selling for BR, British Rail had an urgent
and justifiable need for the cash and therefore some of their sites were
offered before the possibility of obtaining planning consents and negotiating
rent reviews or renewals due or shortly renewable had been explored. I feel
sure that with more time in the buyers' hands than in the vendors', many
of those sites with additional research and work by the purchasers showed
that they were bargains. There is no need to think that the British Rail
Property Board in those days were the only vendors who could put cash readily
available to an immediate and appropriate purpose, and it was in their interest
overall to see a quick sale. There are plenty of vendors around today who
also have the same need. Incidentally, I understand that many of the plots
of land previously owned by the British Rail Property Board are now being
offered by their successors and are listed in the Internet, and rumours in
the profession suggest that only about 2,000 sites and investments are left
for sale. Look out for two or three auctions coming up during the year 2000
including many of these remaining sites. Evidently the intention is that
the majority should be sold before the end of the year - unless the politicians
change their policies again!
part from frequently being long and thin,
when I continue reminiscing about railway holdings I begin to think about
how valuable cuttings or holes in the ground can be for taking fill, once
you have overcome the problems of planning associated with pollution and
the current level of tax on landfill. If we look at the reverse of cuttings
and think of old embankments from railway lines closed many years ago, these
can often contain valuable fill material for sale on, before the flattened
site is ready for a saleable use. I frequently pass a site in Greater Manchester
- not a British Rail one - where the lucky purchaser came to tell me what
valuable sand that heap contained, and what a bargain he had. That was before
I noticed that he had obtained planning consent for a car showroom, making
the site even more valuable. It should have been, when I look at the prices
on the windscreens of the Mercedes that are now displayed there, with many
a model now priced at more than the land cost in the first place. There is
the story, not apocryphal, of the six acres of land bought in a West Country
sea port, which the purchaser intended to be used by his daughter for horses.
The horses presumably now forage elsewhere, since on the site is one of the
larger supermarkets - a lucky purchaser indeed. A similarly lucky, but not
as profitable purchaser, at one of my auctions recently, bought (after the
sale) a municipal lavatory - then closed down - which now hosts a major
advertising site adjoining a trunk road junction. It was only last week I
was reading of a property about to be auctioned, previously used as a lavatory,
which had a planning consent for a café - my taste buds squirm at
So where do these reminiscences take me?
How should I be advising you to weigh up auction catalogues? Here are a few
Are there some small plots of land of
obvious value to a larger development? I have not caught up with their subsequent
history, but just before Christmas Clive Emson had two small plots (if I
remember rightly, they were offered without reserve) which had no apparent
use. Was one of our PAN readers the lucky individual who bought them, or
did they perhaps not sell? Clive Emson, for all his charisma, selling from
the south of London, was offering those two small plots up in the Greater
Manchester conurbation. I keep on trying to persuade Clive that he should
be encouraging his clients to put anything in the North West in my auctions,
just down the road! But I do wonder whether either of those two plots had
a ransom value, or were they just a waste of time.
This does prompt me to the next category
of property which is often worth researching, and I have seen several letters
from readers of PAN who have talked about the matter, and that is properties
located in your own area being sold at auctions held outside the district.
It is always worth while looking at many of the larger brochures, particularly
of sales held in London, where occasionally lots might go cheaper because
they are being sold outside their geographical area.
I was talking just a little earlier about
clients who need immediate cash, and with no time to weigh up the future
prospects or research the future of the properties they are offering, and
do not have the time perhaps to carry out rent reviews. This leads me on
to what should be your constant search for the properties that are being
sold by mortgagees in possession. 'Repossession' is not necessarily to be
considered synonymous with 'bargain' - you should still thoroughly and properly
research your target - but it appears from their success rate that there
are certain finance houses who trim their reserves in the interest of not
continuing to hold repossessed houses for a long time, for the sake of reaching
a high price. Thorough research of auction results, combined with critical
analysis of the auction brochures, may help you to discover these special
sources in the future. I must warn you however that in my experience of selling
repossessed houses the prospect of obtaining a bargain is not always there,
and I saw in roughly one in five cases of repossessed houses offered in my
sale room that the price was more than the figure that had been asked for
the property when it was offered on the market by private treaty, so don't
be carried away in your bidding merely because you know the property was
repossessed. Back to that recommendation - do discipline yourself to fix
your upper limit before you start bidding!
And how do you judge that a property is
repossessed? Maybe the auctioneer makes the job easy for you and in the brochure
it has a phrase similar to "by order of mortgagees in possession". Quite
frequently brochures carry the logo of the finance house for which the property
is being sold - Lloyds, Halifax, Abbey National etc. This of course is likely
to be an indication that the property is a repossession, but it will not
always be so. Some banks and building societies are very coy about the public
knowing that they have repossessed properties, and take considerable steps
to avoid it being known, but you can still look for the clues. Does the principal
advert for the auction contain a general list of the clients for whom the
auctioneers are acting? Do the names of building societies, finance houses,
or banks figure in that preliminary part of the advert? Is there an indication
that certain properties are being sold on the instructions of an LPA Receiver
(LPA is Law of Property Act) or 'on the instructions of a liquidator' or
Without these clues, there can be more
subtle indications. The solicitor acting may have as his address the head
office of a building society or a bank. Even without that direct indication
it is possible that the name of the building from which the solicitor operates
is an indication of the Society for which he works - "Nationwide House" or
similar. It may even be possible to link the solicitor's telephone number
quoted, or that quoted for access to the property. If all else fails, an
outright enquiry at the auctioneers' office or at the co-agent's office may
reveal that the lot you are considering is the result of a
Finally, as a guide to looking for those
bargains, how closely are you thinking in the year 2000 of the fringe areas
of those that are in demand, that are likely to be 'on the up'? Over my period
in practice there have been certain uses that have been in vogue. My immediate
thought goes back to petrol stations, post offices and launderettes in the
'70s and '80s, and more recently car wash sites, residential investments,
mobile aerial sites, and buying-to-let, at the end of the last century.
Unfortunately as yet, Internet sites don't seem to need a property base,
and although we are now reading of the sale of internet domain names, they
do not yet seem to be coming into the general purview of property
And lastly, I promised to talk to you
about my two recent lots which provoked these reminiscences. I have to be
a little careful, since my editor is not too fond of too much personal promotion
of my business, but in mid-February my brochure starts with two lots which
are titles to the Lord of the Manor. There has been an increase in sales
by auction of such titles recently. Robert Smith, of the Manorial Society,
is well-known for his promotion and auctions of this type of title. Although
a specialised field, there still are bargains and profits to be made out
of buying such titles.
The two in my latest brochure are little
more than an ego-trip for the buyer since they do not appear to have any
extra rights, but it is not unusual for Lord of the Manor titles to include
title to road verges, which can subsequently be turned into ransom strips,
or at worst produce rent from telegraph poles (or, presumably, in this day
and age, mobile telephone aerials). Certain other Lord of the Manor titles
contain restrictive covenants which can sometimes produce fruitful negotiations
when development or re-development of land in the Manor is taking
A few titles include the right to hold
a market. It is a specialised field, but well worthy of research for those
with a historical bent. The titles are conveyed with a contract and completion
in a similar way to the title for ordinary property. They are not registered.
The titles date back to medieval times. Of the two that I am selling, the
original Manor of Poughley in Berkshire was called a manor in 1366 and there
is succession throughout the years right up to date. As far as I know there
are no manorial rights attached to the title. The second is the Manor of
Knossington in the county of Leicestershire, and here the title starts as
early as 1086, which was the date of the Domesday Book, and its ownership
has been recorded all the way through to the present day. Any manorial rights
that might have existed lapsed by the end of the 19th century. With my sale
only one day after St Valentine's Day, I have suggested that buying the title
of either of these to turn one's beloved into a Lady of the Manor would be
a unique and romantic idea.
Enough of my self-promotion. All auctioneers
have unusual lots, all of them occasionally sell bargains - I hope you find
one that falls cheaply into both categories. Ring my office on February 16th
if you want to know the prices those Lords of the Manor sold for - or heaven
help me - if they remained unsold, you will be able to discover how much
it will cost to treat your beloved to a title.
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There are many paths
in property, and all are exciting and interesting. For a start, some of the
paths in property you could choose from are in the menu.
These of course are
not all of the routes you can take.
is mainly focused on residential and in the UK only. Once you have reviewed
each path, you have lots of planning to do to make sure you are maximising
the benefits of each route. It is best to try to be focused, pick a path
and learn as much about it as you can. Once you have enough experience, then
if you want to expand you will have a good base to start from. I have found
that most people in property who have not been successful, have been so because
they tried to do a bit of everything, and bit off more than they could chew.
They also had unrealistic low budgets for any refurbishments or upgrades
(just look at the twee tv programme property ladder). No one can tell you
what is the right path for you. This is something you have to decide yourself.
Research this site to find out more about buy to let and property investing
in the UK.
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you can exploit prior to submitting your scheme for Planning
When looking at
buy to sell, you want to make profit in your deals.
When I look at buying
to sell, I am looking to buy in my property with 1st day value in it - so
that if I was to sell it on right away without doing anything, I would make
a profit. I look for different types of deals to give me different returns.
For example - if I had a desperate seller I do not worry about the condition
of the property but what I can achieve for it if I put it straight back on
the market. I call 3 local agents - describe it in the way it was described
to me, and tell them I want to sell it in 4 weeks, and hope they can pick
up the phone, call about 10 people and sell it. You can look at buying to
sell fast, buy in below market value and put on the market at full market
value without doing a thing (maybe tidy up). You can look at adding value
to make the property worth more.
What are reversionary
is where an investor buys the reversionary interest in someone else's property,
usually their home. This means they are buying the rights to own the property
when the owner dies or leaves. All property has some value. By unlocking
the value in their home in this way, they convert from owner to tenant. The
tenant can stay in the property, possibly gaining a monthly income or cash
lump sum. The current owner is granted a lease that lasts the rest of their
life. When an investor buys a property in this way, they are usually getting
it at a discount of around 50% or more. This discount is in effect a single
lump sum payment for the whole time it is anticipated the tenant will live
in the property. The tenants continue to live in the home as if it was their
own. It is the responsibility of the tenant to maintain it. One of the advantages
of being an investor in this way is that the tenants are totally liable for
all outgoings, maintenance and insurance. Whereas with buy to let property
the landlord has lots more responsibility. As soon as the property is vacated
possession reverts to the investor. Reversionary property investment should
be viewed as a medium to long term investment.
How can I do
this? To read and learn more on this topic, we suggest you visit
http://www.propinfo.co.uk/ and have a look through the Cavendish Properties
website. This company specialise in this field. There are other companies
on the web that term this as Equity Release - you may want to contact them
different aspects of but to let and property investing.
Buy To Let can be
great fun, but it can also be very hard work. You are looking at an option
where you are responsible for property that people live in. This is not a
responsibility you should take lightly, and you should take as many precautions
as possible to make sure your tenant is safe.
When you are looking
for your first buy to let property you should push out of your mind that
you are buying it for you to live in. It is easy to get carried away and
not buy a property because you think you would not live in it, yet it could
be a good investment. I always adopt a clinical approach.
Researching an area
is simple. I call up several local agents and ask them what is in demand.
There is no point in buying a 2 bed flat in Birmingham if there are 20 on
the books, and they are not rented - if you do buy one, you may end up forcing
the rental prices down in the area, making other investors suffer. You need
to take responsibility for what you invest in, and respect other investors
in the market.
Look closely at what
is needed, and aim for that. If it is out of you price bracket, look further
a field - the Internet is a fantastic source of information for you to find
area that may suit your budget. In your research, it is good to look at deeper
issues of demand - are tenants requesting furniture? What level of furnishing?
Do they demand car parking? What levels of involvement can you manage in
letting? Using a letting agent to manage your property.
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By far the less hassle
route of buy to let. You need to find a good letting agent. Once you have
bought your property a good letting agent will help you prepare it for the
market. They will require an inventory of items to remain in the property
and of the overall condition, gas certificate and most now expect an electrical
The letting agent
should vet your tenant and prepare the tenancy agreement. The agent should
manage any calls regarding your property, and chase any overdue rent, depending
on the level of service you have agreed with them. Different agents charge
different management fees ranging from 5% for multiple property to about
15% for a single property.
your own property
like a hands on approach. I would suggest if you are new to the market that
you use a letting agent for the first on and monitor the process. This should
give you a guide of what to do yourself once you go it alone. There is a
chance that this option can be very time consuming and demanding. You need
to decide if you have time to spare for this. Use a company to source and
manage your property.
The easy way out
maybe? Well not always. If you find a good company who do what they promise,
you could be set for life with a fantastic portfolio. It saves you time and
energy - and though you may have to pay a premium for the property, it lets
you have a hands off and feet up approach. Beware there are many companies
that do not do what they say. You should research all companies very carefully.
I suggest that taking a personal recommendation is a good approach - but
make sure its not a set up - and its someone from the company. This
is just a taster of buy to let - to get you mind focused on possibilities
and options. There are many more options in this area of investment that
you will discover, the more you read and network.
Bust the jargon code!
The sale of a tenants entire lease to another person.
Adverse Credit : A poor credit record. APR : APR stands for Annualised Percentage Rate. A lender is always
required to quote the APR rate when advertising a loan / borrowing rate.
The lender will usually also quote the headline rate, and the APR next to
it. The headline rate states the rate of interest you pay per month or per
year on the mortgage, but the APR calculates the total amount of interest
that will be paid over the whole term of the loan. It should also take into
account any charges, which the borrower has to pay during the loan period.
The APR is therefore always higher than the headline rate, and is a realistic
representation of the cost of the mortgage over time.
Arrangement Fee : The charge some lenders make for providing a loan.
ASU : Accident Sickness & Unemployment Insurance.
Base Rate : The UK's core interest rate, set by the Bank of England.
The lenders Standard Variable Rate (SVR) is higher than the Base Rate,
but is often adjusted by reference to it.
Bonding Scheme : An agreement by members of a profession or trade to
establish a central compensation fund which consumers can draw on in cases
of fraud or insolvency.
Booking Fee : The charge paid on application to secure funds, usually
required for special deals such as capped or discounted rates.
Broker : A person that advises on a mortgage or loan that will suit your
needs. They usually work from a restricted range of deals. BSA : Building Society Association, the trade body for building societies.
BTL : Buy To Let.
Building Insurance : Insurance cover which protects the holder against
damage to the property itself (although it can be linked with contents insurance
in a combined policy). The amount insured may vary from the purchase
price/valuation of the property depending on the type of location of the
property. The valuer will usually provide a rebuild cost for insurance purposes.
Building Survey : A detailed survey of the property you are planning
to buy. Also known as a full structural survey.
Buy To Let : The practice of buying a house or flat for investment purposes.
Income is provided by the tenants' rent, and capital growth (if any) by the
property's increasing resale value. Buy To Let Mortgage : A loan to buy an investment
The amount of money borrowed to buy your property.
Capital & Interest : In the context of mortgages, a capital and interest
mortgage is also known as a repayment mortgage. It involves paying all of
the interest plus repayment of a little of the capital each month; an interest
only mortgage involves only paying off the interest. Capped Rate : A mortgage which allows your interest rate to climb
or drop no higher or lower than a specified level, usually for the first
few years of the loan.
Cash Back : A mortgage that provides a borrower with an immediate lump
sum payout on top of the sum borrowed to buy the property. This has to be
paid for one way or the other, so cash back mortgages will typically be at
a higher rate than other mortgages and will usually have redemption penalties
for several years. CAM : Current Account Mortgage. CML : The Council of Mortgage Lenders, which has devised the Mortgage
Code to ensure lenders treat customers fairly.
Compulsories : This is shorthand for compulsory insurances. Some lenders,
at least for certain mortgages, insist that you take out their buildings
insurance which neednt necessarily be the most cost effective
on the market. Our Mortgage Wizards allow you to select out these products
if you wish to (although sometimes of course, the mortgages can be so good
that it outweighs the potential disadvantage of taking the compulsory insurance).
Completion : The final stage of the house-buying process, which comes
after exchange of contracts. The sale must proceed after Exchange, but Completion
occurs when the property's agreed sale price (less any deposit already paid)
safely reaches the seller's bank account.
Contents Insurance : Insurance covers which protects the personal belongings
your home contains. In the case of rented accommodation, the landlord is
responsible for insuring those contents, which he owns, but not those owned
by his tenants.
Conversion : Can refer to a property that was once a house but has been
converted to a flat. Also could refer to a loft that has been converted to
a room. Changing from one use to another.
Conveyancing : Normally carried out by a solicitor or licensed conveyancer
on the buyer's behalf, conveyancing includes proving the property is really
owned by its seller, making sure that all the loans secured on it are discharged,
establishing its legal boundaries and searching local planning information
for upcoming developments which could affect the property's value.
Council Tax : A local authority charge, which replaced the Community
Charge in 1993/94. Generally speaking, the more valuable your property is,
the higher your Council Tax bill will be, although the amount for an identical
property can vary considerably between different local authorities. In rented
or buy to let accommodation, the tenants are usually responsible for the
CCJ : County Court Judgment. If a County Court rules against you for
defaulting on a debt, that ruling is listed on your credit record. Having
such a judgment listed against you may mean you are turned down for future
loans, or be expected to pay a higher rate than other customers. The Scottish
equivalent of an English CCJ is a Decree.
Credit Reference Agency : When assessing your application, a mortgage
lender will study your credit records. These records are held centrally by
credit reference agencies, and contain information from many different aspects
of your life.
Current Account : A bank account linked to a cheque book and/or debit
card. In exchange for instant access and the ability use cheque or debit
facilities, most pay little or no interest on the balance they contain. Deeds : The formal written document, which lists exactly who owns
a property and enables transfer of a property's ownership from seller to
buyer. A mortgage lender will record details of their mortgage on these deeds
(which means they can take ownership of the property if you default on the
Deposit : In the context of mortgages, the deposit is the initial lump
sum payment, which the buyer must contribute to the property's total purchase
price. Disbursements : The costs of the legal process that your solicitor
or conveyancer will have to pay for on your behalf and which are added to
their bill. (i.e. land registry searches).
Discharge Fee : A fee charged by a lender for releasing its charge over
a property once you have paid off your loan. You may incur this fee if you
move to another lender.
Discounted Rate : A mortgage which has an interest rate below the lender's
standard variable rate (SVR), Bank Base Rate or Libor rate, typically for
the first few months or years of the loan. The rate payable may move up and
down, but the discount on SVR remains constant.
Diversification : The principle that wise investors should spread their
risk among many different types of investment. A properly balanced portfolio
will contain elements of share, deposit-based and property investments. Fund
performance and objective achievement are not guaranteed.
Drawdown Facility : The ability to borrow extra money through your mortgage
later on, possibly after you have paid some off. You can be issued with a
cheque book for this.
Early Redemption Penalties : Fixed-rate, capped-rate, cash back and discount
rate mortgages commonly carry early redemption penalties which can in some
cases persist long after the initial special rate itself has expired. This
can make it prohibitively expensive to move to a rival lender in the first
few years of the loan. The Charcol online web site shows you the size of
any redemption penalty and how it changes over time.
Employment Status : A term used by lenders to describe potential borrowers'
working arrangements. Self-employed applicants are sometimes seen as a greater
risk than employees are. But many specialist lenders and mortgages have emerged
in recent years designed specially for different types of employment status,
and the Charcol online website has a wide variety of these in its database.
Endowment Mortgage : A mortgage funded by an insurance-based savings
plan, which may give you a bonus payment or additional returns by the end
of the loan's term if it performs well. Equities : Another name for ordinary shares. Equity : The difference between the value of your property, and the
amount of loan secured on it.
Exchange Of Contracts : The terms of a property's purchase become legally
binding for both parties when contracts are exchanged. The buyer is then
committed to buying, and the seller to selling. As a buyer, you should normally
ensure that building insurance from this date covers you, because even if
the property were damaged badly, you would still have to buy it.
Execution-only : A service, which offers no advice, but merely carries
out the customer's orders.
A form of legal title applicable only in Scotland.
First Charge : The legal charge a lender has over your property. They
have first call on funds available from the sale of a property.
Fixed Rate : A mortgage, which fixes your interest rate at a specified
level, typically for the first few years of the loan.
Flexible Mortgage : A mortgage, which allows borrowers to make
overpayments when they have spare cash. Other features could include the
option to reduce or miss payments altogether when times are tight, and to
re-borrow any overpayments. Not all flexible mortgages offer all of these
features. Often useful for self-employed people, whose income varies from
one month to the next. The most flexible form of mortgage is a Current Account
Mortgage (CAM), which can potentially save you money by linking your current
account and mortgage together.
Freehold : Ownership of the land on which a property stands.
Full Status Loan : A loan where complete checks are made on your credit
history and income.
Gearing : Using lenders funds to fuel your investment growth. Remortgage
to buy more, realising equity and keeping it moving.
Gross : Before tax.
Growth : A growth strategy is one, which seeks to maximise the capital
value of your investment without the requirement to generate any minimum
level of income. Any income may be reinvested.
Ground Rent : Annual rent paid by the owner of a leasehold property to
the person who owns the freehold.
Guarantor : Someone who agrees to guarantee your loan or payments should
In the context of mortgages, a lender's estimate of the monthly payments
you would have to make under a particular loan arrangement, together with
the costs to set it up.
Impaired Credit : Impaired credit mortgages are specialist loans for
customers whose credit problems disqualify them from using mainstream lenders'
standard products. Some lenders specialise in loans like these, which are
also known as adverse credit loans. IFA : Independent Financial Adviser. Income Multiplier : How a mortgage lender works out how much you can
borrow usually by multiplying your income.
Interest : The premium, which a borrower must pay a lender in return
for use of the lender's money. Interest-only Mortgage : With a mortgage like this, your monthly
repayments cover only the interest element of the loan. You will normally
need a repayment vehicle, such as an ISA, endowment or a personal pension,
to repay the capital.
ISA Mortgage : A mortgage loan funded by contributions to an Individual
Savings Account. ISAs provide tax-free growth, generated mainly by stock
market investment. The ISA aims to repay the loan's capital at the end of
its term, but the interest element must be paid separately as you go along.
It's important to remember that past performance is not necessarily a guide
to future performance.
K : Symbol for a thousand when added to the end of a sum of money ie
£13k is £13,000.
Land Registry : The official body responsible for maintaining records
of property ownership.
Leasehold : Ownership of a property, but not the land on which it stands.
When the lease expires, the property reverts to the freeholder. Lenders Reference : An endorsement from a previous or current lender
to say if you have maintained your payments.
Letting Agent : A property agent who can help landlords locate suitable
properties for purchase, and who finds tenants to occupy those properties
and can manages the rental process which follows. LIBOR : London Interbank Offered Rate, the rate at which banks notionally
buy and sell money to each other. LIBOR-Linked mortgages are susceptible
to a change in interest rate every three months. LTV : Loan To Value This is the amount you want to borrow divided
by the purchase price. In other words, it reflects the size of your deposit.
Generally, the lower the loan to value, the safer the lender will view the
loan. Missives : Scottish equivalent of exchanging contract. No deposit
is required but it is legally binding. MIG : Mortgage Indemnity Guarantee This is an insurance premium which
you have to pay for some mortgages, usually when the Loan To Value is higher
than a certain figure. It protects the lender to some extent if you default
on the mortgage for any reason. It is important to understand that although
you have to pay the premium, the lender benefits from any payout, and that
if the payout doesnt cover their costs they may seek further money
from you. With many mortgages you can add the MIG to the loan, unless this
takes your Loan To Value over a certain figure. The insurer may pursue the
defaulter for reimbursement of any monies which have been paid out in respect
of lenders claim.
: Where the size of your property loan is greater than the market value.
Net : After tax has been deducted.
No money down deal : Using Finance to place a deposit, or finding finance
that covers whole purchase. Some lenders offer Loan To Value and so if you
buy a reduced price property, you may not have to put money down.
OMV : Open Market Value The price a property fetches when there is a
willing buyer and willing seller. PPR : Primary Place of Residence, also known as Primary
Repayment Mortgage : A mortgage loan funded by simple monthly repayments,
calculated to repay capital and interest usually over a term of 25 years
(less if preferred).
Retention : Holding back part of a loan until repairs to a property are
Reversionary Interest : This is a contractual ownership where people
sell their house but they are allowed to remain living in it until some future
date, usually until they die.
ROI : Return on Investment.
RSL : Registered Social Landlord. (Housing Association).
Sealing Fee :
See Discharge Fee. Search : A local authority search is an examination of local planning
records to uncover details of any upcoming developments near the property
which could affect its future value or existing restrictions on the site.
SHEP : Second-Hand Endowment Policy Endowment policies part-way through
their term can sometimes be sold on the open market. Disposing of an unwanted
policy in this way often produces a better price than the traditional route
of early surrender. Also known as Traded Endowment Policies (TEPS).
Secured (loan) : If you should default on your mortgage, the lender can
ultimately repossess your property to recover their money. The loan is hence
said to be "secured" on the property.
Self Build : Where you design, manage and build your own property. Self-certification : Where no proof is available, prospective borrowers
are sometimes allowed to vouch for their own income. Self-employed applicants
who lack the two years' record of accounts that lenders would normally require
most commonly use this process, known as self-certification. Many lenders
charge a small premium on self-certificate business to reflect the extra
risk involved. Sitting Tenant : Someone who has a legal right of occupation, even
if the property is sold to someone else, and can apply to the local authority
to have a fair rent set.
SVR : Standard Variable Rate. A mortgage lender's main interest rate.
Fixed-rate and discount loans usually switch to SVR when the special offer
period expires. Conversely, tracker mortgages switch to a fixed percentage
above Bank Of England Base rate (or LIBOR). Status : A shorthand term for the borrower's credit record and employment
situation. See "Non-Status Loan".
Stamp Duty : A government tax on property purchase. Some property is
exempt from this. Sub-Prime : Borrower with adverse credit.
Surrender : The process of cashing in an unwanted endowment policy with
the insurer who sold it to you. Doing this often produces a poor return for
the money invested to date in the policy's early years.
Survey : An expert examination of the property you are considering buying,
aimed at discovering any structural flaws or repairs needed which you may
have failed to notice yourself.
Term : The period of time over which your mortgage will run. Typically
25 Years or to expected retirement date if that comes first.
Title Deed : Legal document assigning ownership of a property or land.
Tracker : Tracker mortgages link your interest rate to a benchmark,
such as Bank of England base rate. The rate you pay moves up and down in
line with the benchmark selected.
TEP & SHEP : Traded Endowment Policy (TEP) Another name for Second-Hand
Endowment Policy (SHEP). Under Offer : A term used when a seller of a property has provisionally
accepted a buyers offer.
Valuation : A very basic survey of a property to determine its value.
Mortgage lenders insist on this before lending on a property.
Variable Base Rate : The basic rate of interest charged on a mortgage.
This may change in reaction to market conditions, so your monthly payments
can go up or down. Vendor : Seller.
Yield : Profit or return on investment.
Do you really ned a valuer? by Howard Goodie
Did you absorb that
article in Developers Notebook on tax saving ideas? It really gave
me reminders of quite a few legitimate tax items that are worth considering.
I gave it a second read the other day and felt the time was still well spent.
It reminded me, too, that I have just received the news that we have secured
a speaker from the accountants WJB Chiltern for our next Conference on May
25th. If you dont note it elsewhere in this edition of PAN, we shall
all be at the University of Westminster at 309 Regent Street (easily accessible
in the West End) from 8.30am to 11pm - if you stay for the networking supper
at the end. As I have been saying to all the enquirers, I look forward
to seeing you there. I am sure Peter will be warning you as the Order
Forms go out shortly we have already received nearly as many expressions
of interest as there are places, so make sure you book early.
Thinking about other professionals has
encouraged me to consider again the facet of my own work which I enjoy a
close second to standing on the rostrum building surveying and valuation.
Strangely enough, I am going to encourage you to think very hard about how
often you will need an expensive and thorough valuation and survey before
you go out to buy at an auction. Later on in this article I am going to
plagiarise part of my own book and for this I apologise to all of our readers
who already own the printed word or the CD ROM.
If you are buying
for restoration and resale, unless you are very confident of your own abilities
and judgment you may well feel you need guidance from a builder on costs
and from a selling agent on your eventual realisation figure. I would hope
that you already have both in tow on the basis that they have an opportunity
to profit from your endeavours as well as you. You might already have decided
to cut your builder in for part of the profit, although this should not stop
you from ensuring that he is fully aware of how his costs are quantified
and how the profit, or dare I say, any loss, is to be split. With a common
sense approach you should be able to get a pretty good idea yourself of what
needs doing to a property or, alternatively, be capable enough to decide
whether you need the advice of a building surveyor or structural engineer.
Let me run through many of the items to look for that a surveyor ran through
at our last Conference.
The first look. Always
start by a slow, and I mean slow, general look round inside and out to get
your bearings and familiarise yourself with the property. If you can, choose
a time when its raining (and if it isnt the first time, go back
when it is). Theres nothing like a cold wet shower down your collar
to draw attention to faulty rainwater
Now start to use
your common sense and start looking about you more
1. Structural failures.
No one needs to be a surveyor to judge a wall is out of true or a window
frame is crooked. Who straightens all the pictures in you house after the
dusting? Look for noticeable cracks at the corners of door and window frames,
the line of mortar in brickwork being crooked or bent and for settlement
over window and door arches. Look for ceiling cornices that have cracked
and crooked door lintels inside. If you must be like an old-fashioned surveyor,
carry a marble in you pocket to check how sloping is the floor that your
sensitive feet have already detected or if you must, take a spirit
level, just in case! Be particularly suspicious of cracks in walls that run
beneath the damp proof course level. For good measure it is worthwhile giving
a cursory look at other houses nearby to see whether they are suffering
settlement. If they do, go back and check for incipient cracks in the same
places in the structure of the one for which you are thinking of bidding.
Only now is the time, if you are suspicious, to start talking to a surveyor
2. Damp. Damp should
be obvious. Smell it or feel the humidity; look for old and new damp stains;
run your hands over the lower half of the ground floor walls or indulge yourself
in a damp meter, if you are feeling adventurous. Then trace back the reasons
for any damp you find. Leaking roof or gutters? Faulty downspouts or overflows?
An old and faulty damp proof course? Faulty plumbing? They are all curable,
at a cost. Then go out and find out that
3. Wood. Faults.
Look carefully for the flight holes and you will know you have found woodworm.
Make sure you lift the carpets and the linoleum and that you look in dark
small corners, under stairs and in roof spaces. If there is fresh dust and
clean holes then specialist treatment is necessary. Once you find it somewhere,
suspect it elsewhere. Any self-respecting woodworm turns into a little fly
in its third year and goes prospecting! Thats when it has bored
its way out through the clean hole you have found. Woodworm is treatable.
Wet rot is mere deterioration in timber which has been subjected to damp
and is treatable just look for the crinkled rotted looking timbers
and replace them after you have cured the cause of the damp which caused
it in the first place. Dry rot is vicious. Smell, if you are lucky, as you
walk into the property like a cross between wet seaweed and a clutch
of vile fungus up close. And thats what it is. A fungus that can grow
large coloured fungous mushroom-like growths. It starts with an airborne
seed that fruitfully falls on damp wood in stagnant surroundings. It then
grows long thin white tendril roots that go seeking dry fresh timber for
further sustenance. I have seen the roots grow through an 18in thick brick
wall and fill a dry cellar beyond with a thick cotton wool type mesh in 6
months. The roots will spread everywhere. You will really need a good and
thorough specialist to poison and eradicate this menace and cure the conditions
that fostered its growth in the first place. Make sure you get a contractor
who gives you a guarantee that is worth much more that the paper its
written on! Dry rot is not for treatment by amateurs and your future buyer
or mortgagee will certainly need to have the guarantee. Furthermore, that
guarantee is very likely only to cover the new timber that has been installed!
It will not cover you or your buyer or the mortgagor against future attack
of the timbers that have not been
4. The Cosmetics.
This perhaps is not an item which can be covered too lightly, but it should
be immediately obvious to you if the bathroom and kitchen fittings need
replacing. How are the plumbing and electric installations? Hows the
decorating, inside and out? Dont skimp on any of these and dont
use paint and wallpaper just to cover up any
5. The Exterior.
Too often I feel people dont think about gardens, paths and boundaries.
What was that about first impressions? In housing they always count. Think
of your first thoughts as you began the first
So now Ive
frightened the life out of you! If I have, maybe you should think about getting
a surveyor in anyway! There are really three
1. You can call in
a builder you feel you can trust. This has the advantage that you have the
practical approach and a chance of a realistically quick approximate costing.
On the other hand you probably have lost any chance of pecuniary recourse
if he misadvised you.
2. You can get a
full building survey. If you do this you should ask the surveyor to give
you a full and detailed structural survey. He or she will then carry out
a detailed inspection of the building and will give you a relatively
comprehensive report on the nature of, and defects in the structure. He should
be able to give you approximate costs for bringing the property up to scratch
and to advise you on appropriate specialist firms, if you require any. The
professional surveyor may well be able to advise you on market values as
well. This approach is relatively expensive and you may decide that your
own initial survey will be sufficient for you to decide whether you need
to spend on the cost of such a report before you go to the auction. 3. You
can obtain a House Buyers report of the kind promoted by the Royal
Institution of Chartered Surveyors. This report will certainly cost less
than the full building survey but is in my opinion of only limited value.
You get what you pay for and this report will only give you sketchy comments
on likely problems in you
And how, you may
ask, is a property valued? Avid readers of my past columns, or my book or
my CD ROM (see later), Im afraid may already be too well aware of my
answer to that question, so maybe I should avoid answering it this time.
I will instead treat you to a copy of my Valuers Checklist so that
you can do it for yourself.
Obtain as much
preliminary information about the property as possible, in
(b) Any tenancies.
(c) Size and extent of accommodation and site.
(d) Any peculiarities of the district, situation and site.
(e) Recent sales, purchases or lettings of the building or ones close
the property inside and out.
Ascertain any outstanding
defects and deficiencies that need remedying to bring the property up to
Make a provisional
estimate of the costs of curing those defects or deficiencies using specialists
I judge the effect
of those costs on the mind of a hypothetical
Obtain details of
recent transactions of comparable
Adjust those transactions
for any rise or fall in the market over the period in which they have taken
Compare and adjust
the information from those comparables so that it relates as closely as possible
to the subject property.
For vacant properties
use as far as possible values from other vacant
For investment properties
consider rental levels as well as yields of
Allow for differing
states of repair.
Come to a conclusion
in the light of your analysis which you would hope will equal that of a
And, finally, let
me give you the wisdom of the very first valuation lecture I ever attended
at Cambridge by a curly red-headed Chartered Surveyor, C.W.N. Miles, who
was so good that he subsequently became a Professor and the Principal of
the Department of Land Economy at Reading
said you are going out to value a property in a district with which
you are not familiar, talk about it over lunch at the local pub, ask where
it is in the local Post Office and make sure that you need to ask the way
at least three times before you get there. By then you should not even need
to go to see it, having been told all about it before you
the local pub and post office now gone, you may have to rely on the local
estate agent, the postman, your wits and my advice, but Im sure you
will come to the same conclusions! Good luck in your
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