…is learned from prolonged experience…” [sic]. So writes the 2002 Nobel Prize winning psychologist, Daniel Kahneman. For those of you who may not quite be up to speed in their identification of those in the pantheon of psychology and its study, (putting the world to rights with Dave in The Dog And Duck, after ten pints and Wales having been beaten by South Africa doesn’t count), Mr Kahneman specialises in heuristics. These are simple rules that people frequently use to form judgements and make decisions; invariably focussing on one aspect of a problem whilst ignoring other relevant factors. Sometimes they work well, sometime they do not. The resulting errors from this decision making are known as ‘cognitive biases’ and are what affect peoples’ choices in situations such as valuing a house. I appreciate that gentlemen of the calibre of a Nobel prize winner probably don’t have the time nor the necessity to visit the fertile study grounds of South Wales, but should you ever Mr Kahneman find yourself with a spare half hour whilst venturing westwards on the M4, pop into 10 Chapel Street (I could meet you at the Parkway if it would be easier) and let me show you how heuristics and cognitive biases affect selling a house in Ty Canol. All vendors – wholly understandably – want to sell their property as quickly as possible for as much money as possible. It is my job, as an estate agent to advise them how this can best be achieved. It is invariably a matter of compromise; the quickest sale does not necessarily mean the most profitable. One cannot ride two horses in the same race. Professional opinion based on, ‘prolonged experience’ of selling houses, delivered with comparable evidence of such sales, does – if followed by the vendor – allow an agent to achieve the best price for the property working within an appropriate timeframe. In layman’s terms; let the agent get on with their job. Healthy discussion of the many contributory factors is to be encouraged, but cognitive biases – often delivered along the lines of, “I have to get £130k so that I can buy the house that I want”; even if the property for sale is only worth at best £118k – can truly warp a vendor’s intelligent appraisal of their house sale, in particular its value. Similarly, vendors who – with the best intentions – hang about whilst a property is being viewed by a potential buyer (who, I may add at Cheshire and Co will always be accompanied by the agent – unlike some other agencies), offering ‘helpful’ comments, do not always aid the progress of a sale. Canada has a very sensible policy on property sales; when a property is being viewed, the vendor/inhabitants must be out of the property. Very sensible for the health and well-being of all parties. There I was thinking that the best thing to be exported out of Canada was Pamela Anderson (and all the attributes that just about fitted into a 2-sizes too small red swimming costume). Now tell me, on what other property website can you leap -without leaving the page – from a colossus of the intellectual world to the pneumatic (and slightly plastic) figure of a lady who fuelled the fantasies of many a pre-pubescent (middle-aged) male?
Today’s announcement that the Yorkshire Building Society is launching its own range of 95% loan-to value mortgages has been met with a mixture of opprobrium, hysteria and much teeth-sucking from the harbingers of doom. The main concern being voiced is that such lending will contribute to the country shouldering another burden of debt and it will be 2007 all over again. Let us make one thing clear: 95% mortgages have been around since the 1960’s and the era of mods, rockers, bell-bottoms and mohair suits. More pertinently, they didn’t cause a problem because they were used in conjunction with responsible lending. The financial catastrophe of 2007 was aided and abetted by irresponsible behaviour of the lenders. 125% mortgages, whereby the qualifying criteria was linked to your pulse rate (or even evidence that you had one), fuelled by the hunger of bankers selling securitised mortgages as investment vehicles, had no small part to play in the fiscal drama; they were actually jostling for lead billing. Ask Fannie Mae and Freddie Mac.
The ‘experts’ commenting in the media today, are convinced that small deposit mortgages i.e. 95%, will bring financial hardship to those who had foolishly succumbed to the advertising of the likes of the Yorkshire Building Society. Having lived through more than one financial crash, I am of the opinion that a correctly underwritten 95% mortgage is far less risky than a low loan-to-value mortgage taken out by someone who may have been somewhat disingenuous in revealing their actual income. I was always intrigued in the pre- August 2007 era of how many road-sweepers were on £150k annual salary. If you meet the criteria of a 90% loan-to-value mortgage, then the step to a 95% loan-to-value is not an unachievable target. That unused 5% invariably finds it way back into the local economy via carpet fitters, plumbers, tradesmen or even the local hostelry. The point is that the 5% is not saved or put away as it would be used in house in a bank or building society to protect their balance sheet. The feared 5% does not benefit the economy, it just makes the lender look healthier by increasing their cash reserves.
The best bit of financial advice that I ever heard being given to a first time buyer, (by a traditional old-fashioned bank manger of the type that no longer exists), was, “When buying your first home, always buy a house that you can’t quite afford” (sic). Why? Because it instilled in the borrower a sense of achievement, responsibility and satisfaction, when in 5 years time, the fruit of their labour to make the monthly payments was a house that was worth more than when it was purchased by them.
This week’s star Cheshire and Co Conundrum: name the first time buyer. There may be a prize, then again there may not.
Not on this occasion twelve drummers drumming, eleven pipers piping, ten lords a leaping nor nine ladies dancing; (actually the last one isn’t strictly incorrect if you count the site team from Shiny New Homes R Us doing an inebriated performance to ‘I Will Survive’ at the Christmas shindig at The Parkway); instead, if a recent report is to be believed, many potential homeowners should aim to be surrounded in the festive season by an army of estate agents estate agenting, negotiators negotiating, solicitors shuffling fixtures and fittings lists and title deeds, surveyors surveying (and not valuing up – you know who you are) and lenders shattering the dreams of everyone in a hundred mile radius. Forget the partridge in the pear tree, there is one in the Japanese knotweed at the bottom of the garden. According to a recent report in a national newspaper, sellers across the country will be slashing the asking price of their property in the run-up to Christmas in a desperate bid to secure a sale by the time ebay is in meltdown with unwanted pairs of slipper socks, novelty jumpers or some foul smelling perfume ‘created’ by some C-list celebrity. This frenzy of future conveyancing is apparently reflected in the figures of various property listing websites that show homes across the country being reduced in price.
Aside from the normal hysteria that is now endemic to any news regarding the property market of the United Kingdom, the article did make some very valid points. One of the most pertinent was for potential purchasers ensuring that their ability to buy was sorted before seriously looking at properties, never mind making an offer. Being immediately able to proceeed with a mortgage in principle is a big fillip when negotiating on the purchase of a property and indicates to sellers and agents – when making the initial enquiry to view a property- that you are a serious buyer. As a serious buyer, who may yourself also be a vendor, you must also ensure that if are going to be part of a chain that your own house sale is in order. Putting your property on the market at the right price with the right agent is absolutely essential if you want things to move at anything other than a funereal pace. Resisting temptation is difficult at the best of times, but choosing the wrong agent purely on the basis that they propose the highest asking price (in order to secure the instruction), is guaranteed to lead to disappointment and frustration. Similarly, ignoring the advice of your chosen agent who may – through their professional knowledge and experience – have suggested a more realistic price, is another way to ensure that the season of goodwill is swiftly replaced with a variety of other sentiments, none of which would come under the banner of ‘Festive Greetings’. The article also encouraged potential purchasers to constantly scour the internet and property websites to find what could turn out to be someone’s ideal home at a relatively cheap price. As we have said in previous blogs, the footfall in an estate agency is lessening all the time; over 95% of house sales now begin on the internet. The days of people walking into an estate agency office and buying a property that is listed in the window (without having first looked on the internet), are almost as rare as walking into the office and seeing Mary, Joseph and the three wise men looking at buy-to-lets in Abertillery.
All of the points raised are wholly valid, but they are truisms that are applicable 365 days of the year. The presence of tinsel, fake snow, bored looking eleves and Mariah Carey yodelling about all she wants for Christmas do not make them any more apposite. Finally, in an effort to knock myself off every legal professional’s Christmas card list, does anyone really subscribe to the view that any house sale begun within the coming days would be completed before everyone disappears off for the festive season holiday period (that now appears to run until Shrove Tuesday). If you do believe that, then you should hurry up and finish that letter to Father Christmas.
For those of us who can name all the hosts of Family Fortunes (with extra points if you can also name their ‘celebrity’ spouses), we can all empathise with the moment Les, Leslie, Vernon et al turned and said, “Our Survey Says…” and the results of the said survey did make one wonder what bunch of inbred, intellectually challenged, ‘I’ve got six fingers.. on one hand’ hapless individuals they had surveyed. This week a litany of the written word from the property sections of every newspaper (whatever their politics), to Toytown Weekly, Bunty, Pony and Pooch to those cellophane-wrapped publications that one has to stand on one’s tip toes to reach, all screamed the news that, “house price rises more widespread than at any point for 11 years” [sic] (Mail Online 12 November 2013). To paraphrase Rumpole, Kavanagh or even Perry Mason, may I draw the jury’s attention to the actual evidence presented. The Land Registry, whose figures are based on actual completions, show that in Wales, house prices fell in September by 0.4%. For the year to September, house prices across Wales fell by 1.7% from September 2012; whereas in London the comparable figure was a rise of 9.3%.
Yet again, the survey results do not tell the full story. As always though, people are adopting the lemming mentality and are starting to believe the headlines. Only yesterday, I had to pour water on the bonfire of enthusiasm and optimism of a lady whose house I was asked to value. Her declaration that, “Well, house prices are soaring, aren’t they?” [sic] would have been music to the ears of every news editor who ponders whether their paper is read by the masses. (Forget whether what they are publishing is accurate or even an approximation of the truth).
Meanwhile in Cwmbran….. More people are looking, there is definitely more confidence and our sales have increased. A fellow estate agent blogging from his office in Belgravia may well be finishing his epistle before catching the flight (turning left as he gets on the plane) to Monaco, but for those of us working in the less salubrious areas – throughout the country- we are still on Stavros Airlines to Malaga.
So said Khalil Gibran (look him up). As we listen and read the various panegyrics that have (quite rightly) been put forward about Tony McCoy and his record-breaking achievement of riding 4000 winners as a national hunt jockey, I do wonder what it is that makes people behave as they do and achieve success, or failure in their chosen field. His sporting triumphs are indeed a tour de force and will almost certainly never be surpassed. He is though only human with human foibles and characteristics that are not always attractive to other humans, ( never mind the horses). Having stood at the wings of the last ditch down the back at Wetherby, or in the unsaddling enclosure at Southwell and listened to him holding forth, in his own inimitable way, it is not always a speech that you would wish to repeat to an impressionable young soul, (or an aging grandmother who has been round more corners than Sebastian Vettel). But that is the point; having spoken with him several times over the years, he doesn’t want to be your friend, he wants to beat you, or ride your horse that can allow him to beat someone else. (AP, if you read this, it isn’t intended as grounds for a libel case). Which segues neatly with my next musing on the behaviour of the human species. Having been around the block almost as many times as the aforementioned grandmother, I am more than used to fellow estate agents traducing myself and my skills as an estate agent; not my skills as Cwmbran’s resident lothario, (but that is the subject for another blog…). It does though still does irritate me when a member of the public accuses me of being unprofessional in my behaviour. Of course, the customer is always right, to a point; but when a catalogue of evidence is produced to prove that certain actions did occur and the aggrieved individual still insists on claiming you to be at best, incompetent and at worst mendacious, it really does give me the Donald Trump. Of course, we all screw up. I have watched a certain A P McCoy fall off a seasoned handicapper, (and before you ask, no, it wasn’t mine and I’m not talking through my pocket), but he falls off them less than anyone else. That is the point. To err is human, admitting to errors is a characteristic that not everyone chooses to display and to learn from one’s errors is, if not essential if you wish to achieve, but highly recommended. Rather like not asking the horse at the end of the 3-mile chase in hock-deep mud to come up outside the wings at the last. Stop looking for the picture to go above the mantelpiece, get over and have the picture of you receiving the winning jockey’s trophy. Anyway, back to estate agency and property matters. We all try to please the customer, after all we are in a service industry. But after thirty years in the game, this week I have again had it made perfectly clear that to quote a friend of Mr McCoy’s, “there really is no helping some £$%*’s”. If you can guess the friend, you might win a prize. Maybe.
“Because a lazy person will find an easy way to do it.” [sic] So said the richest man in the world (according to the Bloomberg Billionaires List 2013), Bill Gates. Much discussion has taken place on the twittersphere and other forums about what he actually meant (duh – it was obvious) and whether his statement was accurate and was truly representative of how to get something done. Firstly, far be it from me sitting here in Pontnewydd to query the sense and intelligence of a gentleman who has made zillions; and secondly experiences this week in the hot bed of estate agency in South Wales have further made me think that he had a point. I have always prided myself and have tried to instil in employees that what sets us apart from some of our competitors is the willingness to go the extra mile and aim to provide the best – thereby the most professional – service to our clients. One of the ways of doing this is trying to match the right tenant to the right property, not putting in any old scuffer who is going to wreck the joint, who has chosen it due to its proximity to the nearest ‘Spoons. The lazy way of finding a tenant for a property would be just this, whereby the administration and set up fee is pocketed and after that, when the house has burnt down in a cloud of cannabis and cider fragranced smoke it is a case of, ‘Oh dear. Not our problem’. Actually, technically, it isn’t. The problem resides with the owner of the property who at the outset of the rental process accepted our professional methods and guidance on finding the right tenant, but 48hrs in was demanding an explanation as to why it had not yet been rented and wanted a tenant in yesterday. So they got the tenant that their demands deserved.
Perhaps though it is good business sense and not giving a toss is what makes you money. Just a thought for the weekend.