AT BLACK BRICK
Q.Dear Camilla, I am looking to sell my house in the near future and I was wondering how the property will be valued.
A.The process of valuation in the current property market has become a very tricky business. Traditionally, valuers have depended, at least partially, on sale prices for similar properties in the neighbouring area in order to gauge the worth of the property that they are valuing.
This gives a pounds per square foot measure that estate agents typically use as a benchmark to value the property that they are looking at. But with fewer transactions occurring, it has been particularly difficult for valuers to determine a property’s true worth. It’s important to remember that ultimately a valuation is just somebody’s opinion, even if it is based on measurements. I would recommend getting valuations from at least three estate agents and then taking an average as the best guide.
If you think the estate agents are mistaken, you could pay for a surveyor to value the property. However, estate agents will do them for free and will tend to favourably value the property to gain the instruction. An independent surveyor is unlikely to significantly hike the valuation.
When you apply for your mortgage, the bank will also deploy somebody to assess the value of the property. He will then give the lender the value of the property, which will be used to determine the amount lent.
This can be a problem in the case of a down valuation – ie, when the valuation on the property you are buying comes in lower than the price you have agreed to pay and less money is lent. This can be a common outcome, particularly in an uncertain or falling market as valuers tend to be more cautious. However, a down valuation doesn't necessarily mean the deal falls apart – we would use it as ammunition to renegotiate the price on a property. Of course, this isn't always possible.
Buyers who are buying a property as a home shouldn't be too scientific about value. I've seen many buyers lose out on properties over the difference of a few thousand pounds. If you have managed to find your ideal home, the price shouldn't be the sole determining factor of whether to buy or not.
Q.Dear Camilla, I am a top-rate earner who is thinking about investing in some property. What will this week’s Budget have meant for me?
A.Well, the big announcements in terms of property in the Budget were the changes to the stamp duty tax. There will be a two-year stamp duty holiday for first-time buyers while from April 2011 those buying houses worth more than £1m will have to pay 5 per cent stamp duty rather than 4 per cent.
But it is unlikely that Labour’s “mansion tax” will have a significant impact on buyers. If you are buying a £3m property, an extra 1 per cent of tax is hardly going to put you off. And the rise is certainly not going to deter foreign buyers who are benefiting from a weaker currency. However, we may see a slight increase in buyers trying to bring transactions forward ahead of next April. And there may be more people looking to rent rather than buy, which is good news for property investors.
Thankfully, the budget didn’t include any major changes to capital gains tax so if you buy an investment property and then sell it, your profits will still be liable for the 18 per cent. On the other hand, if you are earning over £150,000, any rental income from your property will be subject to 50 per cent tax as of next month.
Camilla Dell is the managing partner at search and acquisition consultancy Black Brick. www.black-brick.com.