All About Property Valuations

The basics of property valuations, why landlords need them, and how to get accurate projections. 
Discussed by haus & haus MDs Luke and James, joined by our Al Barari Property consultant: Megan.

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Transcript

Hello and

welcome to Dubai real estate unplugged brought to you by the team here at House and house real estate. I'm Luke Remington managing director for the house and house group. I've been working in real estate for over 20 years and here in Dubai since 2012. Today, I am codeless. So I haven't got the flu and I don't sound nasally like I did on the last podcast, so you'll have to forgive me for the previous episode. But today I'm joined by James Perry. Hi, my name is James. I'm one of the managing directors here at House and house. I spent almost 18 years in real estate or a state agency as we like to call it in the UK. I'm from a small town called Cheadle Kim in Cheshire, in the northwest of England, which strangely has been the hometown to a number of top brokers, and at least for directors of some of the top companies in Dubai, it must be something in the water, but have good. So you have been researching

Negan Flook is joining us. So I'm really excited to have here today. Tell us a bit about him again. Hi, I'm Megan. I am a real estate broker in Albery. I've been working in real estate since 2016. I started my career in London working for one of the biggest international agencies there. And a fun fact about me is that before that I actually grew up in Dubai.

Very interesting. Nice to have you back. Thanks for joining us. Today's an interesting one, we're going to be talking about property valuation, why it's important and the best way to go about it. And there's lots of different ways brokers do go about it. So valuations, why they're important. How do we normally go with them? It's changed a lot over the last 10 years, in my opinion, certainly in Dubai, where we've all come from the UK, traditionally, you would go out and meet Mr. or Mrs. Smith, you would have appointment booked weeks in advance. And this probably has was certainly the case when I started in 1997. Whereas here, we were dealing with a lot of investors, they weren't necessarily living in their homes, but now I feel over the last five to 10 years each year. We've had more call to go and meet Mr. Mrs. Jones at their property. But there's a big difference between what broke raiders and broker B does. So explain how the valuation goes who wants to kick me off with that. I'm having to kick it off. I think first of all, it's probably good to define what we mean by valuation and actually had a quick look this morning get the English dictionary, which said that it was an estimation of the worth of something especially one carried out by a professional valuer. Simply put the property valuation is an expert's opinion on current market rate for a particular property based on local expertise, recent comparables recent transactions and experience. From an owners perspective, typically what will happen is they will get a feel themselves in the market by speaking to neighbors, their contacts or friends in the community and perhaps potentially brokers. Also by having a look on the portals at current live listings to get their own feel of the market before coming up with their own speculative number or value for their property. This can be way off the pace of the Market Plus or Minus due to inaccurate or limited data only being available to them. Poor pricing strategy of inexperienced brokers online therefore distorting the market, old listings still being on the portals which are factually incorrect fake listings alongside a whole host of other issues. From our perspective as a as an agency and as brokers a proper valuation, as Luke quite rightly mentioned before, would be face to face at the property. So we can see if there are any upgrades that aspect the plot the condition of the property, the location, alongside a whole host of other things which can which can increase or decrease the value, we will take a good look around the property have a sound discussion with the owner on their expectations both on price and us as an agency and then give our opinion for pricing based on real time data and our own localized experience. With modern data analysis platforms in the market such as valued which we'll come on to shortly, we now have quantifiable data from the key market stakeholders to backup our own view as brokers at house and house and as a company. So let's dig deeper. Megan, the valuation stage you've been doing it you actually I think everyone knows we're from the UK but I think about 90% of the audits probably know a place called Notting Hill Yeah. Where you're from so and you actually going into estate agent sales negotiator list of value

You, manager, you actually were a valuer. Yes. So let's break it down. James, given a great overview, but let's break it down. Mr. Mrs. Jones wants a valuation Have you been speaking to them for if you've been speaking to they call you the day before have you been it's been some six years and advanced data is out there, we all know data is out there because we keep getting hounded.

Break it down for us. So you would expect to have been speaking to these people most of the time for a while, and you've maybe you sold it to them, or, you know, maybe you sold their friend's property, and you've stayed in touch with them. And people want valuations for all different reasons. It's not always to sell, as you mentioned, James. But generally speaking, you will have already have built some kind of rapport with these people before you go and meet them.

Definitely in the UK market, they would call you for evaluation.

I think it's becoming like that more and more. So here.

When, when you're there, I think a lot of it is they want to know what you have sold, they want to know what has sold on the street, they want to understand the market. And so you'd go in with that kind of knowledge. First of all, just to give these homeowners an idea of what has happened, what has transacted in the market, what is currently listed, what offers we're currently getting on those properties that are listed. And that's where data is so important, because it's factual, these are not numbers that we're pulling out of thin air.

At the same time, you you do want to go and meet them in person A, because I think they want to choose the right agent who they feel will match their energy or will be the best fit for their property and for what they're expecting out of their agent. So it becomes a bit of a pitch at the same time. So where you can back it up with data, you still do need to go, you need to be present, you need to make them believe that you are the broker that is going to deliver that is going to sell the property for them. And that's what I spent a lot of my time doing in the UK before I came out here was going out constantly meeting clients, giving them an appraisal on their property.

And trying to bring them on on a sole agency basis with the company that I was working for there. And definitely I think even in the time that I've been here over the last two years, it's changing. Here, more and more homeowners are wanting that personalized service want to know exactly what their property is worth, with the upgrades with the positioning that they've got within our community or the view that they have in an apartment, which you can't always get accurately from looking online. Yeah, yeah, no, I get that. And you're up against other brokers. So what would you assume? How many other brokers if you're going out to meet mister Miss Jones? What would you assume, Mr. Mrs. Jones are doing? Are they speaking to just Megan? Or they speak into Megan and for others? Or? Well, I think it would be wise of a homeowner to speak to multiple agents, you know, to get maybe an average of what people are saying, I think the trouble is, is that not all agents have the same experience. Not all agents are as good as each other. And so what I would always hope is that when I do go to meet somebody, my advice and the knowledge that I have in the data that I'm giving them is truthful, is transparent is is honest. And, you know, of course, when you're in any kind of bidding situation, or maybe pitching for property, that unfortunately, our agents who just haven't been in the market as long aren't as knowledgeable or might twist the truth a little bit to try and

get that client on board. So over valuing a property, for example, which must be happening in this market where let's counteract Megan with her experience, and if I don't have the knowledge, I'm just going to tell the owner 20 or 30% more, let the market catch up. But what is the problem with that the sellers gonna get 30% more. That may take what depending on how quickly the markets rising. But what is the problem with given the owner higher valuation? Probably what's important to know is that when there's conversations around pricing, there is a balancing act and some sense of conversations definitely around owners expectations, buyers expectations, and tangible data comprising recent comparable transactional evidence as well as current listings on the market. Charlie, our sales director was calling me a dinosaur the other day, which is the reason why we've got Megan here. He's definitely closer to the call base. But I think you're right the market has definitely changed. It's definitely developed over the years when I was working day to day as a broker rather than being office bound. Honestly, the way that you would

Give her valuation was on what you were selling personally, what your company was selling personally. And if you had friends in competitor agencies, you would get these little, you know, pockets of information from them. Maybe surveyors working on behalf of the bank for mortgage valuations, you know, you would build rapport with those guys. But it was quite limited in terms of what you actually had. Whereas these days, that is a lot more tangible evidence that we have at our fingertips as an agency and as brokers. So you can actually give proper data, not just a very small localized area in terms of your circle of friends or acquaintances, but actually, what's happening directly in that specific geographical location that you're working in and where the valuation is taking place. Yeah, I get that.

So we've got the data. What I see an awful lot is brokers going out meeting the owners. And although I can't guarantee it, I'm pretty sure they talk about everything. But the data, let's say they're 75% talking about themselves, how many verified listings they have, how many awards the company's won, how many brokers are in the team? I've got X, Y, and Z. So why aren't we just drilling on the data rather than talking about all this faff? Because, do Mr. Mrs. Jones really care about the awards? And all these brokers? Or are they is it make it and do we do I want to know what Meghan's done to it. She's the one I've got to have the trust in Megan. So, again, the talking we like to talk, we're real estate brokers, but I was always told by my boss 25% Talking 75% listening. So what happens make a new but you're out there at the moment? You were talking to your listener? I'm a massive talker, but I've been taught.

And I think I think salespeople naturally are, but it also they're not. And I think it's about asking questions. I mean, you know, if you go on a on a valuation, it's important to know what that client thinks their homeowner thinks that their property is worth. And it's important to understand why they think their property is worth that amount. And I think a good question also is where, you know, to understand where they think the market is going as well, because, yes, we're in we're in them. This is what I do every single day I see property I've the data is there, it's, you know, that's tangible things you can call, like, quantify. Homeowners are intelligent people. And I think they do have opinions on the market. And I think that becomes really important to not talking to not just telling people what their property is worth and understanding why they're selling, I think the value of your property can change, depending on how quickly you need to sell. And if you can, in a rising market hold out a little bit, then we can, you know, test the market at a higher price. At the same time, if if the market was returned, and it was in a downward market, you wouldn't want to wait at all you'd want to sell very, very quickly. So it really depends. And just trying to understand and going back to the point of just talking about the data, and whether homeowners think that all the awards matter or not think of course they do. They'd want to know that they're working with someone where there's a team of people who can help sell the property. But I definitely think it's down to the individual. Yeah, yeah. Okay. I just want to get back to what you mentioned on the market and the impacts that could happen if the market changes because the markets do change. We've seen it happen. So let's say someone is going 50% over and the market change. A broker's honest, the brokers mentioned this at the valuation of brokers given the process, or do they not want to let sell us that I'm sore seller might understand this, but are they being upfront? Are they actually explaining, you know, the valuation may come in low at the mortgage company, you've got to come out. I can probably explain this one because I was actually having this conversation with one of the brokers a couple of days back. And what he was saying is that, and what we're seeing in the market recently is vendors almost setting their prices above realistic current market values, whether that is the actual correct pricing for the market, whether it's data, whether it's properties that we've sold, the owners are actually setting their prices and then actually achieving them. They may not be achieved in them that day, that week or two weeks later, but in some instances, the broker has gone out to value the property, given them an honest factual opinion in terms of realistic tangible data of recent transactions. They've almost had a conversation where the owner said to them, Look, I'm not interested. It's fine at your prices. I want my price. The brokers then gone away from the property and actually that the market has caught up with them and

That's due to a surge of prospective buyers limited stock in the market, and activity just caused by the frenzy of brokers work in that particular area. So in some cases, we've seen that traditional proper and accurate market valuations are almost going out the window. Because brokers are sometimes at the mercy of the vendors due to the rhythm and dynamics of an upward market. I think human nature is that you would definitely want as much money as possible when you're selling probably your life's biggest asset. I think that's completely right of the owners. I think as brokers though we have to, as vendors, we have to understand that there's no market in the world that continues in an upward trend. And this will stop at some point, for sure. What I'm trying to get at here is if I'm a seller, and I ask some brokers to come to my house, and I want evaluation, and they talk for 75% of the time, and they don't listen more, they do not know that I've committed to do something in you know, whatever, it could be major surgery, and I need to sell my asset because I need the money. I can't wait for three months for the market to pick up. I don't know, though, maybe the property goes stale.

Are brokers mentioning this? Are they saying Mr. Mrs. Seller? You know, tell me more about your circumstances. Tell me about you know, how quickly is this happening? I mean, they should be right, that I mean, that is why a an owner would want to deal with a good broker that they trust, you know, it is one of life's biggest things in terms of purchasing or selling a property. And also from the brokers perspective, that's why, you know, they should be well trained in asking the right questions at the right times, and building that rapport and having that, you know, trust factor and professionalism that an owner actually wants to open up to them, because it works for both sides. If an owner is keeping things that potentially would help or hinder the transaction, and the broker doesn't ask the right questions and only finds out at a later date. You're absolutely right, it can be too late. And it can cause problems for both sides of the coin. You know, okay, valuations can take a long time, we do like to talk and we like to have you know, a cup of coffee and sit down and talk about all things of life. But there are alternatives out there at the moment. We've seen it, we've launched it ourselves, there are tools valued. I think they've been going for years. Now, if you want to sell your car, you can fill out a few details and they can give you a price. It may be within 10% 20% 30% You're not sure. So the value tool? Is it a good thing for property? I think it's amazing, because it's, as we mentioned earlier, data is something that underpins everything, it's fact. And the tool is really clever, in the sense that it, it's not perfect, nothing's perfect, but it does know the position of a property and you can select what view that particular unit that you're inputting has, and you know, it will show you the tool will show you what sold what's on the market, the valuation averages of that property. And in terms of valuation averages, that's from

surveys, bank surveys, and mortgage surveys.

So it's amazing. And it's really great that homeowners can do it themselves, if they want a quick understanding maybe of where the market is. But it doesn't factor for upgrades and the level of upgrades. You know, it could be the difference between tiled wood floors and real hardwood floors, or an Ikea kitchen and branded German kitchen, you know, there. That's what the data can't take into consideration. And that's where I think that it's useful for homeowners, but also it won't replace having a good knowledgeable broker, come and physically meet you and see the house themselves.

The problem that I see with it is the tool can never actually understand the people that Megan is talking to. And the tool can't understand that Megan actually has a client that lost out on that last one. And it's so keen to buy it or buy the next one in the street because there's kids are starting school. And it just can't determine the buyers that are out there kind of understand the supply and demand. Is it going to replace brokers in 10 years? We're talking about the metaverse and all this kind of stuff. Should we be worried? Absolutely. For me personally, no.

You know, I think we're safe. I think well.

That's blockbuster.

Yeah, I think.

I think it's a nice tool to have. I think it's an advantage not only for us as brokers. I think it's an advantage for owners as well.

only gives real factual genuine advice. I, as you said before, quite rightly, I don't think it's it necessarily paints the whole picture. I think there's certain things that a broker can add to conversation, or conversations that they're having with other people that can definitely push or pullback a transaction depending on what's happening. So yeah, I think it's a positive for sure. I think, you know, if I think back to when I was working as a broker day to day, you just didn't have these things, you know, at your fingertips, they weren't available in the market. So it can only be an advantage. But I do have to, you know, I do think we have to be cautionary when it comes to using them. are we lucky, James, because the amount of experience we've got, and you know, making going back years that we didn't have this data, so we had to really learn our craft and become black belts at understanding the German kitchen from this and understanding that this one back to the park, and this one has a larger plot. And going into really detail one thing with Megan that I really believe is she loves her clients, and she loves her property. And she explains that So are you going to be able to is it going to come in either you're going to have lots of questions where you can say it has got a gym in kitchen, and it's going to put it up by 10% or 20%. Or, you know, is it still going to have that human touch, I hope it keeps the human touch. That's what I love about, you know, property property and working in real estate is about it, of course you have investors in the market, but even then it's about putting the perfect person with the perfect property and you need the human element, you need to be able to use your personality and to get along with people and to have that knowledge of you know what else you've done in the market and to be able to appreciate what people have done to their homes, and to be able to appreciate the value that they put in their own home. You know, whether that's more than you think it is, as we said earlier, it's a rising market, if someone had a price, and I thought maybe it was a little bit too high, you know, there is the option there to say, look, well, it's rising. If you don't need to sell tomorrow, let's try and get you there. Let's see what happens. And you need that conversation, you need to be able to bounce off each other to achieve a happy result for everybody. And I don't think that technology can replace that human element of the relationship that you have between a broker and a seller, or a buyer, I can probably tell you a story. It's not one that I'm particularly proud of. But very, very early on in my real estate career in Dubai, I was selling houses in the community that I was working. And I found a lady one day and I was trying to take on a property. And I kind of went in all singing, all dancing, tried to give her a valuation over the phone, British lady, and quite rightly, she put me in my place by saying how can you possibly value my property when you haven't been out to the property and put the phone down on me?

That was quite a big lesson. Because a she was absolutely right, even though we get a lot of standardized types in the in the Dubai market, you know, so you get these general types, whether it's apartments or villas, she was quite right. And it was a big lesson for me for sure. And this is kind of you know, the reason why I'm telling you this story is it's kind of like these datasets in that. They tell you a lot of the story, but they don't tell you all the story, you still need to physically go out there. As I think you've both mentioned, you really need to understand holistically what the problem is for the client. And they may have you know, life issues. They may be looking at looking to exit Dubai, they may have cashflow issues, there's a whole host of other things that come into play, not just you know what the current worth of that property is in the market today or tomorrow? No great advice. One last question. And I'm going to send it to both of you. What should the seller ask all brokers if they come to their house, or their property apartments? What should a seller ask what you been in it? You've done it for years? If you were a seller? What would you be asking one question that you'd be asking the broker, and then another one that actually want to go into is, if you don't know the valuation, and you are the expert? That's it. That's that there is pressure, we are an expert. We've got to go out James goes out to meet the client, and he doesn't know the valuation, or he's not quite sure. Is it embarrassing to say anytime giving a valuation on the spot isn't always the best way to do it. I think it becomes a little bit easier in Dubai because of the standardized types. But definitely when I was working in the London market, we would meet the client who would then go away. We would compile a report. We would present them with a market appraisal report that we had digested

I really didn't like giving my opinion on the spot. Because as much as I'd done my research before I got there, I might have arrived. And it's completely different to what I expected. So I have to step away and rethink my pricing and my strategy. And so I don't think it's embarrassing, I think, you know, it shows that you want to make sure that you're absolutely accurate. If you wanted to give a ballpark figure, that's fine. But it does become easier in Dubai to give a price on the spot, but I don't think it's embarrassing at all. So you're gonna get about seller to ask one question to the next broker. What advice?

Why are you? You know, I definitely think that it is about the broker. And, you know, whether that's why you because what have you sold? Or why you because How hard are you going to work for me?

But I think it's important to understand why it is that broker, that should be the one who's listing your property. So asking, yeah, why should you be listing my house? Why should I use to my apartment? Yeah, yeah. James, I was actually going to say exactly the same thing, believe it or not. So you've thrown me making.

What I would elaborate on, though is, again, I think you touched on it earlier, these owners are probably getting a minimum of two or three top agents, top agencies in that local demographic to come out to value the property, if they are getting different prices for the valuation, which of course, they will get plus or minus,

if you will, one of the brokers who's given a lot lower indication of the price of the property. Again, I would be asking as an owner, why should I go with you as an agent, and potentially earn or receive less money for the sale of my property? Okay, explain that to me one more time.

So, as an owner, if you've got two or three agents in front of you, let's say within an hour, they're all giving you different prices for the valuation of your of your property, which therefore would potentially have different sales prices, I would want to understand why I would want to go with you as an agent, if you weren't given me the top level mix isolation, okay, okay, did you read it, the reason I threw out there was I always remember again, my old boss, who I started with at 17. And he said, if you can try and understand the pain points from the sellers in their last sale, it will eliminate not all the issues, but you've got to be 1% better than those other agents to get, hopefully 100% The Commission, it's just that 1% They're trying to understand what were the pain issues in that previous sale that you had and what they gonna say the broker didn't turn out, the broker didn't wasn't communicating, the broker didn't do that they did. And you know, you can try because ultimately, that's what they want, that they want the highest price, and they want the least amount of pain possible. And, and it can be painful. I think it's definitely different on sales. But what's quite interesting is, I would probably recall a couple of times in the last year, on the leasing side, where an owner has had two offers two independent offers from two separate companies, one being ours, as being the lower offer. And they still proceeded with us as an agency and the particular broker in house and house. Why? Because again, it comes down to trust, whether that you know, what service they received up to that point, you know, there's a whole host of different factors on the sales side, it could be that an owner actually, like, you know, has lived in a home, transform the home, but graded it, and they can see in a buyer that they absolutely love this home. I've personally had that, as a broker where I haven't had, you know, it's been close. I'm not saying it's been a million miles apart in terms of pricing, but I've had a slightly lower offer. And maybe I've been working on it for six months exclusive, or, you know, they just really liked the client, and they've just hit it off. And they want someone to look after their own home their own pride and joy in exactly the same manner. So there are dynamics to life, there are dynamics of the market, I would say. Great, James, thank you for your energy, they can thank you for your passion. I think that's all we have time for today. And thank you to our listeners. We're looking forward to sharing more with you via podcast in the coming months. So please let us know if there are any topics you'd like us to cover. Don't forget to subscribe whatever channel you're listening on, so you're notified when we drop new episodes. You can follow us at house in house on Instagram, Facebook and LinkedIn. And we also release a monthly newsletter with all our latest updates and insights. We include all the links in the show notes Talk soon