Monday, 13 May 2013

The rollercoaster ride begins

I hate rollercoaster rides. Always have. Always will.

If you're in property, however, I guess you have to expect the violent ups and downs of the sales process.

The euphoric highs when a great offer comes in. The sick making punch in the gut when it falls through.

After only one viewing of our first property, I experienced both these emotions.

That one viewing produced an offer. A solid offer, apparently. From an investor, not an unreliable individual buyer. And at the full asking price.

On the advice of our agents we reluctantly agreed to keep it off the market (we hadn't even actually put it ON the open market at this stage) for 10 days, while they exchanged.

It all looked good. Draft contracts and information went out. After a week, I even began to feel a slight sense of confidence and was making that fatal mistake of calculating the profit.

Then the sickening call from the agent:

"The client has pulled out, I'm afraid."


"They are worried that it doesn't have a bath, just a shower."

"So? Isn't that absolutely normal in a small flat?"

"They think it might affect its future resale value."

"It only had a shower when they saw it. What's changed?"

"I know."


There's not a lot else you can say in this situation.

It's probably not even the real reason. But they had to come up with something when they changed their minds.

I wouldn't have minded so much (really, I wouldn't) if it had been a normal private sale. But here was an investment company, guided by a buying agent, supposedly acquiring three small prime flats for long term returns and apparently absolutely committed to our flat.

There's something wrong with a system that allows this to happen, in quite this way.

Perhaps we need to introduce a new financial layer to property acquisitions, such as a significant non-returnable deposit in the event that a buyer simply changes their mind mid-way through the process.

If there was a problem in the survey or a legal glitch or the information provided wasn't up to scratch, then of course the deposit would be returned.

But if the offer is made just to get the property off the market while a buyer thinks about it, that isn't good enough.

The "buyer" for our flat stopped the property being properly launched on the market and may have permanently damaged its chances of achieving a full price. This shouldn't be allowed to happen, without some form of financial consequence for the potential buyer.

At our last home, in Fulham, we had two buyers pull out for reasons that had nothing to do with the house. And by the time the third (and final) one came in our price expectations had dropped quite considerably because we'd lost confidence and the agents were desperate to get the house off their books.

I reckon the first two, time-wasting offers on that house cost us around £50,000. The cost to the agent of this drop was, however, only about £750.

And there's the rub.

The agent loses only 1.5% -2% of the drop! We lose 98%.

Interestingly, one of the agents we didn't appoint on our first 'doer-upper' came up with a clever commission offer.

He would take a lowish percentage up to £1m and 10% of anything over this. This really incentivised him to get the highest possible final price. And only at the top end of the proposed asking price did he get near to a 'full' commission.

It's a good idea. And one I hope more agents will take up.

But I still think there should be some kind of penalty for buyers who simply put in offers to get a property off the market while they consider it more seriously.

I know I've been tempted to do this in the past. And if I have, you can bet everyone else has.

So which agent did we appoint? Well, anyone with a google search box can quickly see that we chose W A Ellis.

This so-called 'boutique' Knightsbridge agent has a great record in the market and has sold several similar properties to our own over recent months, achieving very good prices.

I also liked the fact that it's a single office agent, that it's focussed on a narrow area of the local market and that it has a very high-end profile (even within a high end market).

In an ideal world, I'd have appointed the other agent too.

But it's not an ideal world, as the collapse of our first offer only goes to prove.

Yes, it only has a shower. But you are bathed in natural light all day long.