An Estate Agent ( file photo) Undervaluing hitting home sales.
Property sales and remortgage deals are collapsing because some mortgage lenders and surveyors are deliberately undervaluing homes, estate agents say.
So the nasty banks are not believing them when they say what a property is worth and off they go to stamp their loafer clad feet. Well no shit Sherlock.
Now to me 'value' particularly when it comes to materiel things has always seemed to be a purely subjective on the part of the valuer, it has no intrinsic basis in the actual 'cost' of a thing.
Say you make a product, you think it's the best thing since sliced bread, you R&D, market it, price it ( materials, manufacture, R&D, marketing plus a bit of profit.) You put it on the shelves priced at £100.00.
Nobody buys one, not a single one. Now, what's its value? We know what its 'price' is, you know what its 'cost' is, but it has no value, because nobody wants one or is prepared to pay £100.00 for it.
Or it can go the other way, say everyone wants one, so many that in fact you can't produce enough, people start reselling them for £200, because it now has a perceived 'value' , the price is still £100 , it still costs the same to make it, but the perception of it's 'value' has now gained it's own momentum.
Let's get back to houses, property in this country was massively overvalued, I knew it , the banks knew it, the BOE knew it, Gordon as Chancellor knew it. If they say they didn't they are lying. The perception of properly 'values' was massively ramped by TV and Press , plus cheap lending.
But they were riding the crest of the wave and didn't want to rock the boat ( sorry to mix metaphors there)
I got sick and tired of hearing "Oh my flat cost me £170,000 but I just had it valued at £300,000" and I'd say " But that's not real money is it, you can't 'realise' that money unless you sell up and move into a dog kennel, plus all the others have gone up in price similarly, so you 've not 'made' anything"
Only to be told that "I knew nothing about the property market"
Back to the whinging Estate Agents, you just don't get it, banks are in the business of making money, they won't lend unless they have a very good chance of getting their money back plus interest ( well now at least, once bitten as they say).
So if they lend money to buy a house, they want to be pretty damn sure ( now at least) that if the worst happens and the customer defaults, they will be able to sell the property and recover at least the full amount of the loan and hopefully some of the lost interest and they think that will only happen at the lower valuation.
So you see Estate Agents, they don't perceive the same 'value' to property at the moment that you do, and that's not a bad thing. If you put a property on the market valued at say £300,000
and nobody wants to buy it at that price, what's its 'value' well at that price its value is NOTHING. However put it on the market at £250,000 and it sells, what's its 'value' now, well its value is now £250,000 to the person who bought it and the bank who lent them the money and only them. It has not been 'undervalued' if it didn't sell at the higher price it had in fact been overvalued.
I still think property in the UK is massively overvalued ( but that is as I say only my perception), in some part this is due to lack of properties at the bottom end of the market and also people trying to cling onto the fictitious supposed 'gains' they made in the boom.
So in short Estate Agents SHUT THE FUCK UP
If you found these demented ramblings confusing ( I know I did) the excellent Mark Wadsworth has a more numberly and less wordy dissection over at his place.
.
Property sales and remortgage deals are collapsing because some mortgage lenders and surveyors are deliberately undervaluing homes, estate agents say.
So the nasty banks are not believing them when they say what a property is worth and off they go to stamp their loafer clad feet. Well no shit Sherlock.
Now to me 'value' particularly when it comes to materiel things has always seemed to be a purely subjective on the part of the valuer, it has no intrinsic basis in the actual 'cost' of a thing.
Say you make a product, you think it's the best thing since sliced bread, you R&D, market it, price it ( materials, manufacture, R&D, marketing plus a bit of profit.) You put it on the shelves priced at £100.00.
Nobody buys one, not a single one. Now, what's its value? We know what its 'price' is, you know what its 'cost' is, but it has no value, because nobody wants one or is prepared to pay £100.00 for it.
Or it can go the other way, say everyone wants one, so many that in fact you can't produce enough, people start reselling them for £200, because it now has a perceived 'value' , the price is still £100 , it still costs the same to make it, but the perception of it's 'value' has now gained it's own momentum.
Let's get back to houses, property in this country was massively overvalued, I knew it , the banks knew it, the BOE knew it, Gordon as Chancellor knew it. If they say they didn't they are lying. The perception of properly 'values' was massively ramped by TV and Press , plus cheap lending.
But they were riding the crest of the wave and didn't want to rock the boat ( sorry to mix metaphors there)
I got sick and tired of hearing "Oh my flat cost me £170,000 but I just had it valued at £300,000" and I'd say " But that's not real money is it, you can't 'realise' that money unless you sell up and move into a dog kennel, plus all the others have gone up in price similarly, so you 've not 'made' anything"
Only to be told that "I knew nothing about the property market"
Back to the whinging Estate Agents, you just don't get it, banks are in the business of making money, they won't lend unless they have a very good chance of getting their money back plus interest ( well now at least, once bitten as they say).
So if they lend money to buy a house, they want to be pretty damn sure ( now at least) that if the worst happens and the customer defaults, they will be able to sell the property and recover at least the full amount of the loan and hopefully some of the lost interest and they think that will only happen at the lower valuation.
So you see Estate Agents, they don't perceive the same 'value' to property at the moment that you do, and that's not a bad thing. If you put a property on the market valued at say £300,000
and nobody wants to buy it at that price, what's its 'value' well at that price its value is NOTHING. However put it on the market at £250,000 and it sells, what's its 'value' now, well its value is now £250,000 to the person who bought it and the bank who lent them the money and only them. It has not been 'undervalued' if it didn't sell at the higher price it had in fact been overvalued.
I still think property in the UK is massively overvalued ( but that is as I say only my perception), in some part this is due to lack of properties at the bottom end of the market and also people trying to cling onto the fictitious supposed 'gains' they made in the boom.
So in short Estate Agents SHUT THE FUCK UP
If you found these demented ramblings confusing ( I know I did) the excellent Mark Wadsworth has a more numberly and less wordy dissection over at his place.
.
Thanks for the link. In this case it's not so much the estate agents that annoy me (they would say that, it's their job) but the fact that the BBC turns this non-story into a headline story.
ReplyDeleteYou are quie right Mark , it is a non-story, I don't know why it got me so het up, I think maybe I had visions of it all starting all over again
ReplyDelete