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In dentistry, we often talk about cost versus value because one tends to scare patients and the other demonstrates to them why treatment is going to be beneficial. I’ve found that a similar concept exists in the world of property purchasing, although with more room for negotiation than in dental practice.
What’s it worth?
A lot of people make the mistake of thinking that the price quoted by an estate agent selling a property is representative of its true value. Actually, that is far from the truth. If you want a realistic idea of property values in a particular area, you’d be much better off looking at the price similar properties have sold for in recent months. As we know, demand ebbs and flows for all sorts of reasons, and the agreed, post-negotiation price will reflect that. You can do this easily on websites such as that of the Land Registry (see www.gov.uk/search-house-prices).
In addition, once you have ascertained that a property you are interested has the potential to be good value and you put in an offer that is agreed to by the seller, your next step will be to employ the services of a surveyor. They will value the property according to the state of the property itself, its location and the market. I always accompany my surveyor, as I don’t want them to down value the property unnecessarily (and trust me, very few surveyors value anything on a par with the asking price).
After this, you will know your numbers, the pros and cons of the property and the position of the seller. Which leads nicely onto the next issue – what is the property’s value to the seller
The seller’s situation
You may wonder why this matters. Very simply, it matters because if the seller is in a hurry to sell, then the property’s value to them dips and there is room for more negotiation. If they are happy to wait for the asking price to be offered, their price expectations will remain high and it’s time to walk away because there’s no deal to be done. Successful property investors look at the circumstancesof the people selling the property; amateur property investors look at the property itself and do not concern themselves with the reason why the sellers are selling.
At this juncture, when I mention this concept in my lectures, I’m often asked if valuing a property to the seller’s needs is ethically sound. The answer – the way I do it – is a resounding yes.
Look at it this way – the seller might have fallen into some financial difficulty. They may have a few outstanding mortgage payments. They have had the house on the market for a year and it has not sold, since it needs some work doing to it. And now, the seller is sadly facing repossession and will be evicted in 28 days. They don’t want the social stigma of a repossession or their credit history to be affected. And here you are, a property investor, prepared to complete on the house within 28 days. The seller may very well consider selling the house at a discount so they can move on and start afresh. In this situation, where you have what I call a ‘motivated seller’, it’s a win for both sides of the deal.
Assessing value
If you can move forward with the idea that cost and value are definitely not the same thing, you are heading in the right direction. That said, it’s not always easy to get to the bottom of true value, especially if you are starting out. So, if you would like further information about property investment,please do download ‘10 secrets to successful property investing for busy dentists’ at www.dentalpropertyclub.co.uk free of charge, email harry@dentalpropertyclub.co.uk or call 07711 731173.