Choose your agent with Care!

Clients Warned to be Wary of Struggling Agents – Shaun Cafferty

Across the UK over recent years there has been quite an increase in new estate agents setting up to take advantage of what was then a property boom.. Today’s more difficult market will not only test their ability and their resolve, but also their financial strength and flexibility. Other parts of the country have seen a number of agents folding, and in South Cheshire we have already seen job losses and cutbacks in newspaper advertising. After prolonged buoyancy in the sales market, there is a whole generation of estate agents who have not had the experience of selling houses in what is very much a buyer’s market, and they will undoubtedly find it challenging, whilst those agents who always had a pro-active sales culture will find it easier to adapt.

Agents who are struggling to find buyers for properties (and therefore at risk of losing their clients) may start suggesting to the owners that they consider letting instead. In hard times, selling agents have traditionally turned their attentions to lettings to boost their cashflow with more regular income. Legislation changes in how tenants’ deposits are dealt with, however, make this less attractive than before. Lettings itself has also become more sophisticated and legally complex since the last time the housing market was flat, and this will make it harder for a selling agent to deliver the required level of lettings service to clients. .

Whilst on the face of it, there are similarities between selling and letting houses, the two markets are very different and work to a very different economic dynamic. The skill sets required are also different. A letting agent will need to be able to judge a tenants ability to pay and look after the property, how to safely document the transaction, and ensure that their clients legal interests and responsibilities are covered. Likewise, managing a rental property and collecting rent requires robust systems and processes – and lots of experience and legal knowledge. It is hard for some selling agents to justify an investment in good letting systems and training, or to quickly develop experience in what is only a part time or occasional aspect of their business.

Letting, though, can be an ideal and viable way for people to move without selling their property, and there are still some good buy-to-let mortgage deals around which can significantly reduce the monthly mortgage costs and also release equity. I would though recommend that any homeowner considering this as an option should use the in depth advice and services of a lettings specialist, rather than a house sales specialist with a bit of lettings bolted on! We have been involved in a number of these transactions now, and it has helped clients achieve the move they wanted without having to sell first. The property will still be there when the market recovers, and they can then sell it at a sensible price. We have an information leaflet available on this, so please contact us if you would like to receive one.

The lettings market is often stronger when the housing market is weak, and in any case has been strengthening steadily over the last ten years. That doesn’t mean though that all agents offering lettings are necessarily stable – the Jordans network of lettings branches has just been sold for the second time in four years. And the growth in popularity of renting has also encouraged a lot of small operators to set up as rental businesses who all call themselves ‘specialists’, but care should be taken to make sure that the rental property – and their rental income – is in safe hands. Clients should expect their agent to subscribe to one of the two voluntary bodies offering self-regulation within the lettings industry. For example, Martin and Co are members of NALS (the National Approved Letting Scheme), which is a government backed body designed to guarantee standards of professionalism, ethics and financial standing. The most important part of this is that all NALS members have to provide Client Money Protection (CMP).

CMP is effectively an insurance system which guarantees payments to landlords of the rent received from tenants. If an agent faces financial collapse for example, CMP will ensure that landlords do not lose out. It’s rather like having ABTA/IATA cover when booking an expensive foreign holiday. Agents offering CMP have to pay a premium and submit to regular audits of their finances to show that landlords and tenants monies are properly and safely handled. Although relatively cheap and simple to comply with, surprisingly few local agencies with lettings operate CMP. And in a worsening business environment for the property sector, it’s becoming more than just a peace of mind issue. Estate agent failures in the south east have left landlords facing losses, because rent paid to agents by tenants has been swallowed up before it could reach them.

With deposits and rising rents, even modest sized agents are receiving and processing large amounts of money. The Government has legislated on deposit handling, but seems reluctant to work on the same basis with rents. For now, Government policy favours self-regulation, but with so few lettings operators taking the simple steps to provide CMP, further regulation may be inevitable at a later stage. In the meantime, however, I would strongly advise any prospective investor or landlord to put CMP at the top of their list of details to check when selecting an agent to rent out their property.

If anyone has any concerns or would like to have more information about the points raised in this article, please do not hesitate to contact me personally on 01270-611333 or by email at creweandnantwich@martinco.com

Thursday, 10 July 2008

TOP AWARD FOR CREWE AND NANTWICH

Top Award for Martin & Co Crewe and Nantwich

Martin and Co (Crewe and Nantwich) have plenty to celebrate this week after they were named winners of a top award at the group’s AGM.

They were named Martin and Co’s agency of the year, beating off stiff competition from right across Martin & Co’s 130+ nationwide network. They were presented with their award by the company’s founder and chairman, Richard Martin, at a glittering award ceremony held in Warwickshire last Saturday.

So, if you’re thinking of becoming a landlord, or you’re looking for property to rent in Crewe or Nantwich, your choice is an easy one. Go to Martin & Co, and you’ll be dealing with winners – literally!

Thursday, 10 July 2008

Can lettings save the housing market?

Our national obsession with property means that it is never far from the news. Because there is no news like bad news, in recent months we have seen a spate of depressing property stories and it would be easy to think that the entire property market is disappearing down a big black hole. However, not all property news is bad, and as always, the reality is more complex than the headlines!

Everyone is aware of the potential for economic damage caused by rising home ownership and mortgage costs, the credit crunch and higher food and domestic fuel bills. It was not surprising to see repossessions rising to 30 000 last year, with analysts forecasting a repossessions figure as high as 45 000 in 2008. As I write, the Bank of England has lowered interest rates to alleviate the problem, though with growing inflationary pressures, they could eventually find themselves caught between a rock and a hard place. Fingers crossed for a ‘soft landing’.

But events in the UK housing market have a disproportionate effect on our economic confidence compared to our European neighbours, where homeownership is less prominent. When analysts talk about ‘the housing market’ they pretty much mean ‘the owner-occupier market’. Yet nearly 1 in 5 of us now live in houses actually owned by other people! The rise and rise of renting, and its increased social respectability, brings us closer every year to a more continental model of living. If continued, it might reduce the economic volatility caused by high levels of home-ownership and consequent debt. As a ‘good news’ story, it’s not one that hits the headlines too often!

The lettings market has grown consistently over a 20 year period, and traditionally does even better when the selling market is slow. Nervousness and high entry cost means that more people look to rent rather than buy, increasing demand. On the supply side, people who can’t sell may try renting their homes out instead, and we have helped a number of such clients move in recent months. Despite the headlines, funding arrangements remain available to ease this process and make it a financially viable option. Anyone interested should call us for a fact sheet.

Landlords of course are not immune to economic variances. Since rental levels reflect local supply and demand rather than house or mortgage costs, they can become squeezed between static rents on the one hand and rising mortgage costs on the other. Investors who bought in the last three or four years without adequate advice, or who did not allow sufficient flexibility in their finances, are finding things tricky.

But sound buy to let property investment usually requires a minimum investment of seven to ten years to be truly effective, so it makes sense to hang on to investment properties if possible. There are competitive buy to let mortgages still in plentiful supply, which can reduce monthly payments. Some of our clients have already taken this option, and we will happily provide more information to any interested investors.

In contrast to all the negativity, we have never known so many of our experienced clients to be actively acquiring investment properties. The South Cheshire rental market still offers good yields and good future potential, and investors are taking advantage of the many bargain buys coming available. They are also spending money with local firms to bring them up to the standard now required for professional renting.

On the downside, the slowdown on house sales may also bring casualties amongst estate agents. The buoyancy of the housing market over the last decade has spawned lots of new players, not all of whom have proven business ability in a difficult market. Despite having had limited exposure to the complexities of the rental market, some of them may turn to lettings as a way of bringing in funds to tide them over.

The government has already legislated to prevent agents using tenants and landlord deposits as a source of unofficial borrowing. In this new economic climate, landlords should also satisfy themselves that the rent being paid by tenants to agents will still come to them if that agent suffers financial difficulty. It is a risk to use an agent who is not part of a scheme which guarantees payment to landlords and tenants in these circumstances.

These schemes usually involve insurance cover known as Client Money Protection (CMP), which pays money due to landlords or tenants if the agent fails or otherwise misappropriates the rent. For CMP, the agent pays an insurance premium, and is subject to regular audits and assessments of their financial practices and business ethics. If an agent handling your money is not part of such a scheme, you should be asking yourselves why. I would also be cautious of any agent who expects their fees in advance of letting or selling the property.

It would be wrong to claim that all is rosy in the housing market garden right now, but there are some bright spots: Buy to let and remortgage finance remains available, letting rather than selling may enable people still to move, and the rental market is thriving. Experienced and larger investors are still buying strongly, which might just provide the boost that our local housing market needs. Much of this investment is coming from other parts of the UK, so it’s not just a question of local folk looking at the area with rose-tinted specs. Perhaps we still have something good to shout about in South Cheshire!

STOP PRESS – In association with other investment professionals, we will be hosting a Buy to Let Seminar at Rookery Hall on 10th April. See our website for details or contact us for your complementary invitation.

Tuesday, 11 March 2008

MARTIN&CO SURPRISE LOCAL NURSE!

Crewe nurse Tracey Jordan received an early Christmas surprise when she signed up for her new town centre apartment – a bottle of vintage champagne!

Tracey’s swish split-level apartment at Hightown in Crewe was the 500th property rented out by local letting specialists Martin & Co in 2007, so they asked her to celebrate this achievement with them by presenting her with the champagne on her visit to their office on Nantwich Road in Crewe.

Senior Partner, Shaun Cafferty commented: “ To rent out 500 properties locally in under 12 months is a tremendous accomplishment, and the staff here have worked really hard to achieve this. We were delighted to involve Tracey in our celebrations. As far as we are concerned, the doom and gloom about the housing sector has been overstated. We focus entirely on property investment and lettings, and the rental sector in Crewe and Nantwich has been going from strength to strength – so much so that we often have would-be tenants waiting for decent quality properties to come available! People who cannot sell their houses might want to consider renting them out instead.”

Tuesday, 29 January 2008