Tag Archives: estate agent

I’m a real FRIC.

 A Valuer FRICS

Gordon Brown continues to speak with the conviction of a condemned man reading from a hurriedly-conceived briefing paper  This time it is mortgages (again).

No more 100% mortgages? I think that it is about time that the Prime Minister carried out a simple calculation as follows:  Suppose that the Government (sorry, Northern Rock) lends 80% on a £100,000 property – that is an £80,000 mortgage. Then let’s suppose that the property falls in value by 20%. That means that there is an £80,000 mortgage on an £80,000 property. That is what they call a 100% mortgage. When a householder has  no equity in his property – that is also a 100% mortgage. Negative equity just means that the mortgage is over 100%.
 
That brings one rather neatly to one organisation which has kept its head down throughout the whole sorry mortgage  mess. The Royal Institution of Chartered Surveyors. They should have come out with their hands up many months ago. Why? Because their members have been the ones who have been valuing properties. The most deflationary thing that the Government can do as far as property prices are concerned is to ignore the sulking banks for a while and have a serious chat with the RICS.
 
There was a time when the RICS was a leader – an organisation whose valuations were sacrosanct. The RICS has now become a follower which does exactly what the banking industry tells it and has contributed more than any other organisation to the ridiculous house price rises of the last 10 years. But wait – their blind slavishness to the banks is far worse than merely following orders.
 
Imagine that you are a Bank and you want to lend and you also want to make sure that the properties that you lend on have the benefit of  a high-enough valuation. How do ensure that there will be no problems with house valuations? How do you make 100% sure that  the valuation will be exactly the one that you need?

 Simple – YOU BUY YOUR OWN VALUER!
 
For example, Halifax  valuations are carried out by Colleys. Who owns Colleys? The Halifax. One is not suggesting naughtiness but when valuation fees are a function of the valuation and the value of  properties in-mortgage represents a lender’s assets, the temptations do not have to be spelled out.
 
The RICS should assert itself – otherwise there is a real danger of the property inflationary spiral replicating itself in a few years time. Independent property valuations and a return to more objective valuations will have an immediate impact. Currently, there is far too much reliance on the “supply and demand” argument and incidentally, the “drive-by” valuation – but that’s another story.
 
In the last few years, the pressure on valuers has been to “value up”. The valuers value up and then the accountants come along later and value down. Not an ideal system.
 
Time for the RICS to make a stand – if that’s all right with the banks.

Stop behaving like FRICS!

So who is responsible for the rise in property prices over the last few years? Is Mr Inflation really to blame?

There was a time when a surveyor would come along and value a property in accordance with certain rules and criteria – ranging from the size of the property to amenities such as the size of the plot, toilet arrangements and heating.

There was a formula for calculating the value of a house. As much objectivity as possible had been built into the process. This meant that a house valuation was sacrosanct. The surveyor was in charge and his word was final.

The Royal Institution of Chartered Surveyors has now become a follower instead of a leader. How often is a property down-valued nowadays  – unless it is about to fall over ? ( Of course in the present climate, the surveyors are able to flex their muscles a little bit but only if the banks let them.)

Valuations are now totally subjective and very often carried out by unqualified staff who then have the valuation “signed-off” by FRICS ( Fellow of the Royal Institute of Chartered Surveyors – they have a very good restaurant at their palatial offices in Birdcage Walk).

Inflation is not just in the extra noughts that have appeared in the last 30 years – it is in the attitude of the surveyors. It is also in the survey fee which is directly linked to the value of a property.

Unless the surveying community reasserts itself, lenders will realise that surveyors are just an unnecessary overhead.

Very soon, more unqualified twenty-somethings in Next suits and Ford Mondeos will be dispatched to “value” the property and there will be no-one to apply the brakes.