Valuations before purchase - experiences?

The Irish Property Bubble (2006) Sell, Buy or Rent?
1

So I’m bidding on a rural-ish property in the south GDA, outside the M50 with no local services or public transport links. This would be a trade-up from my current cheap and cheerful suburban legoland west-Dublin semi.

Bidding is currently at 50% above 2011/2012 prices for properties on the same road of similar size with less architectural appeal but much bigger sites. This extra 50% represents my entire housing equity and life savings.

I like the house a lot as it suits my very particular and fairly unusual preferences and would plan to live there a long time but have some concerns.

Firstly, it will be something of a stretch financially (by my own very conservative standards) and should something bad happen (business or personal crisis) and I had to sell it, I would like to avoid losing hundreds of thousands of euro.

Secondly, I suspect (as do all paranoid pinsters) that the other bidder is a phantasmagorical construct, and that my social proof of value is therefore meaningless. I know for a fact that the house was bought and renovated at peak madness, and there is some evidence that the supposed expensive renovation ran out of steam after the structural work was done, leaving some low-quality finishes. I think the owner is therefore desperately trying to limit very heavy losses.

Thirdly, the site is very small by rural standards although bordered by farmland, and I can imagine the locals looking wide-eyed at the ridiculous money this idiot city-boy is prepared to spend on an old house on a poxy little blob of land.

So basically my question is: is there any point attempting to determine relative value (to the rest of the market) by engaging professional advice? Like, with the agent that sold the house down the road? How diligent will the bank’s valuation be in a ~60% LTV situation, and can it be relied upon?

I do understand that something is worth what someone will pay for it, but I want to know what the value would be if that person is not me, preferably without having to wait on the PPR entry.

On a related note: I’m told by another agent that buyers for houses in my current area are down around half since the new CB rules kicked in, and that if I don’t shift it by end of May I’ll be holding on to it for some time.

3

Local market knowledge that isn’t captured by a two data points on the PPR.

For myself.

4

A few points to consider:

  1. Data points on the PPR replace the old system of heuristic knowledge whereby the local estate agent says that because he has 3 houses on his books worth X, your house must be better or worse than X because the house is better or worse. Past performance is no indicator of future value, but it is better than what someone simply believes a property is worth while waiting for the right buyer.
  2. They also replace the hearsay of “oh I heard Jimmy down the road sold one for X”. If Jimmy did sell one it will be on the PPR, if Jimmy did not, or did not make that price, then it won’t be and Jimmy’s lie will not dictate the market.
  3. Long term experience and valuation is of limited value in present circumstances, given the volatility of the last few years, and of course don’t forget Keynes’ addage that in the long term everyone dies.
  4. Work out what the monthly rent for a similar house is by way of comparisons on Daft etc. Adjust a bit depending on how easy/hard it might be to get tenants and also for likely increases or decreases in rent in the next few years. The old 12/20 Rule (sometimes the 10/20 or 10/15 or some other combination of them is used, but I prefer 12/20) that if the purchase price is 12 times the annual rent or less then it is a good investment, if it is 20 times the annual rent or more then it is a bad investment. In between, it is better to be closer to 12x than 20x.
  5. If it is the house you want to live in / house of your dreams / forever home etc, then there is a value to that which cannot be translated into money, so go for it and don’t worry about what happens if things go wrong. If the last few years have taught us anything, it’s that the government favours property owners.

So I’d do my own calculations and not rely on an agent.

5

My sixpence worth:

  1. Don’t get a valuation. Almost worthless post PPR, and ultimately you are asking someone whose income stream is hard wired to the absolute value of the assets, to value your asset. The result is self fulfilling and the only hard facts that it can be based on are from the PPR.

  2. Try and talk to EVERY local agent in the area - don’t be specific about the house initially but on the area in general and a couple of houses (which would include your target). You sometimes find that the agents not chosen to sell the house are more critical of it (for obvious reasons). More importantly however, you may come across ONE agent that you really does impress you. All of this can be done for free. Sometimes speaking to the local banks in the area about agents is also helpful (as you will see the ones that they rely on)

  3. It is also useful to pick another similar area which you are not interested in and do the same excercise. As long as the are some similarities with the areas, it can help you calibrate general deal flow and how much money is chasing things in your category. It is hard to do 1. above properly when it is your chosen location that you are excited about, but you are more likely to listen dispassionately on 2.

  4. Remember that once you get outside of the main Dublin area you are back to cost of land and cost of build. You can build a new house outside Dublin with ok materials for 100 sq ft and A very nice one for 150 sq ft. Renovating an existing decrepit structure completely (but keeping the essential structure) can cost up to half the new house build. If you veer materially away from these metrics then you are always at risk. Therefore you should keep an eye in 1. and 2. above on the cost of sites in the area - the critical residual in the equation. If you have a very good feel for the general cost of sites in the area you can’t go that far wrong.

6

We’re going on the market at present and had a spread of over 100K in the valuations applied to a ca. (and I say ca.) 360K house. If getting valuations get lots of them

A neighbour across the road was being repossessed and managed to have his valued at 370 - which is about 50K over the odds. He’d put in for 350K himself with the bank but is fantastic at getting on with folk, got on with the banks valuer by way of telling him his sorry tale of post-Celtic Tiger woe, who said he’d “do him a favour” and bumped the valuation.

Moral of the story. You need to build your own picture.

7

Some good advice in various posts here. Particularly about trying to find a local EA who has worked for years in the area and who has no skin in your game. Or an old school solicitor. Some may be talkative if they think you might have some business for them or if you catch them in an expansive mood and may be mined for nuggets about the market. Also try the local pub!

On a different note moving from suburbia to a rural area, even if in the GDA, will be a big change for you. There are a few things to consider:

  • You target property may look really attractive to you now but are you really prepared for a future with no public transport services, maybe no shops or doctors locally to you, having to drive everywhere particularly as you get older?
  • I have heard anecdotally that one-off houses on the outskirts of Dublin are targeted for burglaries more often than is the norm in suburbia.
  • You say that the property is bordered by farmland, might be useful to consider what type of farming. If cattle farming then at a certain time of the year the local farmer will probably spread something quite stinky near your property that you may not like! Or the local road may often have mud on them if tractors are passing up and down. Also check if there is a local quarry and if quarry lorries use that road. In other words the things in rural living that may come as a shock to a blow-in.
  • If you are in the GDA, in any case Dublin may sprawl out over time to meet you. Check the development plans.
8

Thanks very much for all the advice.

So apart from the burglaries, animal stink, transport problems and dying alone in my old age, moving to the country seems like a brilliant plan.

I will proceed with caution.

9

I arrived back in Ireland from abroad having lived in capital cities whilst away. I’d lived in Dublin city previous to that. Naturally I wanted to buy my first house in Dublin city but soon got driven out by the prices (this was '99). I headed south and ended up in Bray, the first area south I could afford.

There was a certain feeling used to hit me every day on my commute home. It occurred at the Loughlintown roundabout where the greenery opened up, mountains in the distance and an utterly different kind of sense of peace and quiet (for all Bray’s reputation). Even though I didn’t venture off on the walks of Wicklow that much, there was the sense of countryside around you - you saw it in your travelling around getting stuff done. Going into Dublin city became something I didn’t want to do and when I went in, it felt crowded, noisy, dirty with this slight air of threat around. Concrete jungle

Came back the other night after spending the weekend working on a house for sale further south and coming into Bray was like coming into Dublin. Traffic, people, noise, aggro

I don’t think I’m ready for country life just yet but I imagine once you’re there you’ll never look back

10

+1 on the old school solicitor - can be a mine of information.

11

Your situation doesn’t sound that different to ours. We bought a house in 2013 just outside the m50. It’s a one off but we had difficulty valuing at the time, we ended up getting two valuers and talking to various solicitors and Eas at the time. My own view is that its best to value the site first and then add on the build cost and see where that gets you Clearly there is a fair bit of subjectivity in valuing the site unless a similar site was sold and you know how much for but it seems a more sensible approach to me.

If you’re the analytical type I’d say talk to as many people as possible as other pinsters have suggested. A solicitor who does a lot of conveyancing with an interest and knowledge of the area would be helpful.

I got prices off all houses that had sold over the previous 15 years or so(there wasn’t that many there were a few auctions and some estimates based on people in the know).

Ask the ea as much about the other bidder too but impossible to know ultimately whether its real.