Tuesday, March 31, 2009

How much is it worth?

How much is it worth?
I am asked this question nearly every time I visit a house, sometimes even by friends when on a social visit! Many factors affect the value of a home. Many other factors have no impact at all on the value. Some people find it hard to distinguish between these two sets of factors.

The most important things that impact on the value of a home are:

Location – The old adage “Location, location, location” always holds true. Houses with the same accommodation and design in one estate will have a different value in another estate. Even within the same estate, different locations will have slightly different valuations. Sub-factors such as orientation, a green area to the front, nearby parking or the condition of adjacent houses have an effect.

Condition - The condition of a home can have a large impact on the value. Buyers will sometimes offer thousands less for a few hundred euro in necessary repairs. People are afraid of having to hire builders to fix problems as they think the cost might be much more than it actually is, so it isn't unusual for them to offer €5-10,000 less when the home needs repairs that might cost €1,000. That said, it is unwise to embark on a large project if you are thinking of selling your home. You rarely get the value of it back. Minor renovations or redecorating to spruce up are ok though. They can pay back many times over.

Size – Most valuations will take note of the square footage of a home. However, not all space is equal. Most buyers want good living space in both the kitchen/diner and the sitting room. Bedrooms are a secondary consideration, as long as there is one larger one. Location aside, a poorly-designed house, with larger bedrooms and a constricted living area does not have the same value per square foot as a better-designed house.

Supply and demand – Sometimes global factors affect the demand curve more than anything else, but mostly, all property is local. At the moment in Clonmel, there is a demand for 3-bed homes in good locations...that are properly priced. For the first time in ages, we are now seeing multiple offers on homes that meet these criteria, with mortgage-approved bidders starting low, but bidding up towards the Guide Price due to competition. Last year there were too many homes on the market, but now the overhang is gone. So expect more competition for properly-priced homes.

Many people have differing views on what affects the value of a home, here are some things that don’t:

How much the last owner paid for it - People always say “But I paid €x for it a few years ago.” Sorry, this does not matter whether the market is going up (as it was up to 2006), or down (as it has since!).

Special Features – This can be very personal. Some people can get offended if the sauna, (which cost a lot of money, takes up the third bedroom and nearly crashes the local electricity grid), is not fully appreciated by a prospective buyer. Home gyms are another like-it or hate-it feature. If investing substantial money in creating a putting green in your back garden, remember that you do it mainly for yourself. Do not expect a buyer to pay you more for it. Some might, but the majority won’t.

The value of a neighbouring property as listed on an agents web site - Don’t believe what you read is the best maxim here. Lots of houses are currently vastly overpriced. Combined with the Internet and almost every agent having a listing site, this has lead to entire neighbourhoods being over-valued, as the new to the market owner decides to pitch his house at the same level as his neighbours, even though his neighbour’s house has not sold for the past 18 months. The best comparison is an actual sale. A lot of agents have sold very little in the last 12 months. Make sure that the information you are being given is backed up by results!

How much the current owners owe on their mortgage - This is obvious. It may stop them selling at the real value, but it does not affect the value.

Sellers can price a home at any level they want to but if it is priced too high buyers will ignore it. Lenders are being very conservative. Buyers can only borrow 85-92% of the purchase price. At current local price levels, a twenty-something first-time buyer is expected to have their own independent funds in excess of €20,000 to secure a mortgage! Sometimes the buyer can’t borrow enough money to buy the home. Sometimes they do not have enough savings.

How much is it worth?
At the end of the day, the market decides. Whatever the owner or their agents think, a home is worth as much someone will pay for it. Buyers drive prices, no-one else.


Friday, March 20, 2009


I am all for negotiation.
I am involved in it every day, working and non-working.
Without the possibility of negotiation, upwards or downwards, us agents would be out of a job.
We all negotiate in most aspects of our lives.
With our spouses.
With our children.
With nearly everyone we meet.
And in these times, almost every time we have to part with money.
At our recent First-time-buyer seminar, I stressed that the bidder should not be put off by the asking price.
I said they should research the market.
View homes similar to the one they liked.
compare prices.
They should make an offer they thought reasonable.
If it was rejected, ask for the logic behind the rejection.
If none is forthcoming, move on.
Make an offer on another property.
Repeat the process, it will work.
If you do it often enough, you will buy a home.
But principally, research the market.
No point in making an offer that is not at least nearly reasonable.
You need to get the seller thinking about your offer.
To do this it must be at least nearly reasonable.
The seller must think there is a chance of doing a deal, otherwise they will not engage.
No-one will make progress.
Nothing will be sold...or bought!

Yesterday, I showed a home to a couple, listed at €350,000.
It is a 4-bed detached.
They liked it and asked about making an offer.
I explained the process.
I suggested they research the market and make an offer.
I gave them details of similar properties.
They live in a 3-bed semi.
I suggested the value of their home was around €200,000, based on recent sales.
They said €200,000 would be the lower end of their expectations.
This morning, they rang me and made an offer...of €200,000!
I thought I had misheard and asked did they mean €300,000?
No, they meant €200,000.
They essentially want to swop a 3-bed semi for a 4-bed detached at no cost.
Clearly, this is going nowhere.
Negotiation is part of life.
But both sides need to feel that they have benefited.
Research, research, research.

Wednesday, March 18, 2009

Buy Up The Town Launched

A new initiative to generate business in Clonmel town centre called the “Buy up the town” Campaign was launched recently. Promoted by the Nationalist and South Tipp Today, the campaign is designed to create extra footfall in Clonmel town centre. The campaign lasts for four weeks starting on the 26th March and 30 shops will participate. The participating stores will be identified in both papers every week and will have a ‘Buy up the town” poster displayed at the front of their premises.

It works as follows: it is effectively a lottery-type competition with a prize fund of €6,000 distributed in the form of vouchers to be spent in any of the 30 participating outlets. People can enter as often as they like. They receive coupons in the participating stores (no purchase is required!) and entries are then sent to the Nationalist offices at Queen Street or South Tipp Today offices at Irishtown.

Every week, two finalists will be picked from the Nationalist and two from South Tipp Today. There will be 16 finalists in all and a draw will be held for a first prize of €2,000, a second prize of €1,000 and four runner-up prizes of €500, which will be given in vouchers to spend in the participating shops.

This initiative should create additional foot fall to all participating retailers. The objective is to highlight the value and range of shopping available in Clonmel, and how buying local supports local jobs and businesses.

Details from Siobhan at South Tipp Today (086 1637240) or Eimear at The Nationalist (086 1535032).


Posted by Picasa

Clonmel Chamber Plan Music Festival

Clonmel Chamber of Commerce announced last week that it is working with a promoter to stage a large end of summer festival in Clonmel. This is just one of the initiatives conceived by the Chamber to promote Clonmel as a tourist attraction.

It is envisaged the music festival will comprise one main night of music entertainment as well as other ancillary events around the town associated with the festival.

This is in addition to the long running and successful Junction festival and will hopefully allow Clonmel become a regular venue for music and art festivals in the South East.


Posted by Picasa

Thursday, March 12, 2009

My brushes with death – Part 1

They say that many of us have a near-death experience/incident most days of our lives. We don’t see them all the time, but they happen all the same. That speeding car that just misses you as you cross the road is easy to spot. It would have hit you if you tripped while running across in front of it. The car that pulls out in front of you, but you are far enough back to avoid or brake. What if you had not slowed momentarily half a mile ago, you would have been straight into it. The falling slate in a storm, the items dropped from scaffolding on a building site (come back the building boom!). If we stopped to analyse each situation, we would see how tenuous our existence on this planet actually is...we would also get nothing done and probably go insane.
Our business has us out and about a lot. To me, this is better than being chained to a desk all day. We do however get into more potentially dangerous situations.
We put up a lot of mileage, with a high proportion on smaller roads and are sometimes under pressure to make appointments.
We visit building sites regularly.
We make arrangements to meet total strangers with nothing more than a contact mobile.
We visit homes where there are dogs (and on one occasion, snakes, but that’s for another day!).
We walk farms where we come into contact with cattle and other farm animals.
We visit vacant homes.
The last one may not seem so threatening, but on one occasion, in the 1980’s, I was doing a valuation for the County Council on an abandoned house on College Avenue. I had a key to the boarded-up house and entered it around 11am. This is a built-up area and I did not feel unsafe. As I peered around in the dark, trying to make use of the limited light that came through the boarded windows, I saw what looked like a dead body on the floor. I squinted more and as my eyes adjusted, I saw a man lying on his side, fully-dressed, with bloodstains on the floor, under his head.
This was pre-CSI days and I had recently done a CPR course, so I went closer to see if he was really dead. As I leaned down to see if he was breathing, he sat up, grabbed me and asked why I had hit him. He had a bad cut on his head and there was broken glass all round. Mindful of the fact that there was a broken bottle nearby, I assured him that I had not hit him, that whoever did was long gone and asked why someone in a suit and tie would attack him!
This last point seemed to sink in. He asked me what the f... I was doing there. I told him I was valuing it for the council. He stood up, brushed off his clothes, cursed the council, pushed open the back door (which was unlocked), shouted “See ya ‘round” and staggered off, dazzled by the sunshine.
Shock was starting to make my hands shake, so I made my exit by the front door without seeing the rest of the house. I told the council to get someone to secure it properly and when they were there I went up again to value it.
In those days in provincial Ireland, drink was the drug of choice. Today unfortunately, the substances abused are very different. Instead of being hung-over, my nearly assailant might have been well-pumped and the outcome much worse for me than a fright and a funny memory.

Posted by Picasa

Monday, March 9, 2009

Why pay €10,000 a year in rent...that could be coming off your mortgage?

We had a great seminar last Thursday night at the Park Hotel, Clonmel.
About 50 people attended. I would estimate there were 10-12 parties interested in a purchase soon.
Claire McCarthy of Binchy Solicitors spoke on the legal process involved in the purchase of a home.
John Butler of Friends First spoke on Life Cover, Mortgage Protection, Critical Illness and Income Protection, one which is becoming more important in these uncertain times.
Frances O’Hanlon of FOH Mortgages spoke of the various types of mortgages that are available. She said that sadly, Tracker Mortgages were no longer available, but that for the moment she would have to recommend variable. With falling interest rates, this seems the most sensible current option.
I spoke about how it is now much cheaper to buy than to rent. A combination of falling interest rates and falling house prices have combined to make monthly repayments on house purchase cheaper than it has been for years. Most homes can now be bought with mortgage repayments (over 30 years) for approximately €200 per month less than the cost of renting the same house! You could sum up my presentation in one line:

Why pay €10,000 a year in rent...that could be coming off your mortgage?

A great Q&A session took place afterwards, with many questions of a legal nature for Claire. Eventually talk came round to the market and my forecast for it. Lots of buyers are fearful that if they buy now, prices will continue to fall and they will “lose money.”
I do not have a crystal ball, and if I did, would not know how to use it!
What I do know is that you buy your first home as just that, a home, not an investment.
Most people will pay a mortgage for 30 years of their life.
Why not start that process as soon as you are able?
Why pay €10,000 a year in rent...that could be coming off your mortgage?

Sure, house prices may fall...they may rise, who knows? But you need a home. You will be paying for it any way. Why not start now?
Why pay €10,000 a year in rent...that could be coming off your mortgage?

People who bought two years ago are facing a drop in value in their home, but they do not have less cash.
If prices fall, your “loss” will only crystallise if you sell.
If you sell your home, you will probably be selling to buy another one.
Logically, that will have reduced by the same amount in percentage terms.
So the sum will be the same.
What you “lose” in selling, you “gain back” in buying.
Why pay €10,000 a year in rent...that could be coming off your mortgage?

Prices are at 2002-2003 levels.
Interest rates are at unprecedented levels.
You can get insurance to protect your mortgage payments on an average house (in the event of unemployment) for €40 per month.
Why pay €10,000 a year in rent...that could be coming off your mortgage?

At the risk of sounding repetitive!
Why pay €10,000 a year in rent...that could be coming off your mortgage?
Think about it...today.

Thursday, March 5, 2009

Figures, figures, figures

As I am preparing my presentation for the first-time buyer seminar tonight, news is coming in of a further reduction in interest rates by the ECB today.
A full half-percent to bring the base rate to 1.5%, never before seen in Ireland... or too many other places either for that matter!
Of course it makes the figures I am using for comparing mortgage repayments with rent payments redundant, but at least it makes them better, not worse.
At a base rate of 2%, you could buy a house costing €175k (€235k in 2006) for just €612 per month, compared with a current rental value for the same house of €800 per month, saving just under €200 per month.
If the new rate is passed on, then the saving will be over €200 per month! Buying a house for yourself instead of buying one for your landlord.
Given this sum, to most people, purchasing a home instead of renting would be the logical thing to do.
But there is a problem.
Maximum Loan-to-value is currently 92%. So to buy a house, even priced at €175k, you need a minimum of €14,000. Add on solicitor and some furniture and you are really looking at €16-18,000.
Therein lies the problem. Very few young first-time-buyers have access to this much savings.
In the boom, there were 100% (and in many cases 115%) mortgages, with figures being "massaged" at all stages.
As an agent for almost 25 years, I could not see how someone who could not raise €5,000 for a deposit could borrow up to €300,000.
But this happened... all too regularly.
When 100% mortgages became unavailable in May 2008, many parents helped out their children by providing them with "loans".
In the current economic climate, with no one's job secure, this is not happening as much.
An average couple renting at present could save perhaps €1,000 per month or slightly more. Those that are buying at the moment have been saving for almost 18 months.
Those that started saving when 100% mortgages were abolished last May have approx. 8-10 months left before they can buy a home, however low the market goes.
That said, we are still selling well-located, properly-priced homes to qualifying buyers. They are buying homes at 2003 price levels.
And saving €10,000 a year in rent.

Posted by Picasa