TheComment


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Take the long view of property Decisions, decisions, shall we, shan’t we – move?


T


Nick Salmon is MD, Harrison Murray Estate Agents


he start of a new year is traditionally a time when people make a decision to move home.


This year, perhaps more so


than ever, that decision making process might have caused some headaches. At Harrison Murray our valuers


are being asked lots of questions by potential sellers: What is happening with the economy? Will the Euro survive? What are employment prospects in 2012? And of course, will house prices go up or down this year? We read the numerous press


reports of whether prices are up, down or sideways by what are often very small monthly percentages but what do these really mean to the average homeowner? The average house price is about £160,000. If prices went


down five per cent in the next 12 months then this time next year the average house price would be £152,000. That’s a paper loss of £8,000


but it would only become material if you had to sell. If you live in the property you may have


time – most commentators seem to think a small fall (1%- 5%) is possible. But what is more certain is that, based on price trends over many decades, in five or ten years time we will look back on 2012 and say ‘Weren’t properties cheap back then!’.


“It’s the long term that should always be considered when buying property.”


to pay the mortgage but the property is still yours in the long term. And it’s the long term that


should always be considered when thinking about whether or not to buy a property. No-one can be certain where house prices will be in a year’s


Buy a home to live in, take a


long-term view of the investment, and you’ll be glad you made the move. And if you have to sell, then do it sooner rather than later because if prices do slip a little this year you could end up losing if you wait too long or are too greedy with your asking price.


An issue of ethics Longer tenancies can cause conflicts of interest for letting agents. T


he public always has difficulty understanding what estate agents and letting agents do. Our


job, of course, is very simple; it is to get the best price possible for the people who pay our fees. Nevertheless I often hear


people making comments such as, “It’s outrageous that estate agents are forcing up prices or rents in the local area.” I think, of course they are, it’s their job. If the client is a purchaser or


tenant the agent’s duty is reversed and their objective is to buy or rent the property at the minimum possible price. The principle is simple, we act in the best interests of whoever is paying our fee, at least it used to be. The problem is that recent changes in the housing market have made it increasingly difficult for letting agents to act in the best interests of their landlords. Due to the difficulty of getting a mortgage, tenants are staying for longer and longer in the same property. Tenants often ask for tenancies of two or three years or more and landlords will often be pleased to grant them.


16 l April 2012 l TheNegotiator


“The principle is very simple. We act in the best interests of


However, whilst this is good


for the tenant and good for the landlord, it is disastrous for the letting agent. Most letting agents earn a significant proportion of their fees from tenant administration fees and set up fees and this means that one two year tenancy will earn them less than four six month ones. The loss of revenue on a managed property is significant but if the property is let on a let only basis then the loss of revenue is even worse. As a result of the recent


Foxtons’ case many agents now wrongly believe that they can no longer charge renewal fees. (This is, of course, wrong. The judgement merely said that the client’s obligation to pay renewal fees must not be hidden in the small print of the contract.) If renewal fees are not charged the


agent may receive a fee based on the first six or 12 months of the tenancy then nothing more for years. This gives agents a massive incentive to put tenants into the properties where they know they are unlikely to stay for very long. This has to change. I have three suggestions to


make. The first is that letting agents


should be required to make clear what their total fee will be for letting a property both as a cash amount and as a percentage of the annual rent. This would stop agents from quoting a cheap headline fee which is then cross subsidised by high set up fees and other mark ups. My second suggestion is that


the industry should move away altogether from high one off fees and instead charge a percentage of the rent for the whole time that


whoever is paying our fee.” Adam J Walker is one of the leading UK estate agency trainers.


the tenant remains in the property. This would mean that the agent’s interests would become realigned with the interests of both their landlords and their tenants. Finally I should like to see a


major press campaign, probably backed by ARLA, to explain the true meaning of the Foxtons’ judgement and convince the public about the fairness of renewal fees that are payable over the term of the tenancy. The only alternative, I fear, is


legislation similar to the legislation that was introduced by the Financial Services Authority to prevent mortgage advisors from churning investment policies. This would be a disastrous outcome for agents, landlords and for tenants.


E: adam@adamjwalker.co.uk l www.the-negotiator.co.uk


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