Local and national newspapers are filled with page after page of houses that are failing to sell. Those who don’t have to sell simply aren’t – it is a buyer’s market and the price a seller asks for is unlikely to be what they receive. At Stowe Family Law we are witnessing how the recession-hit property market is affecting clients who are separating or divorcing.
Saturday’s Daily Telegraph confirmed that not only have prices which rose slightly in 2009 begun to fall back, but also that further falls are on their way and that there won’t be any upwards movement in the market for some time to come.
Many sellers, especially those going through divorce, seem to believe that their home is worth what it was two years ago when the market was still inflated. Divorcing couples have negotiated and reached a settlement based on a false premise and are coming unstuck when they realise that their property will not fetch the figure on which they based their agreement.
I have been compiling advice for those who are trying to sell property in a difficult market – see the list of tips at the bottom of this post. I also asked estate agents from Savills for their thoughts. Savills has offices in the same locations as our own – Yorkshire, Cheshire and London – so the company is particularly well placed to comment on property trends that may affect our clients.
I would like to share some of their most striking insights with you in greater detail. If you are considering or are going through a divorce, and you have concerns about the housing market in your area, I hope that the following expert opinions may be of help.
Mark Holden, of Savills Cheshire, told us that two years ago the market was a very different place with the value of homes having doubled or even quadrupled in the 14 years prior. Buyers prepared to pay asking prices without argument.
He believes that at present, people expect to pay substantially less – and if a seller won’t accept an offer, then a buyer will often simply shrug and walk away. Apparently a typical buyer will presume that there is another property around the corner, and that those sellers will “play ball”.
Lucian Cook, Director of Savills Residential Research, says: “There is evidence that high house prices [and] divorces are linked”. This is understandable when you think about it: both parties want to extract as much value as they can from what may be their only significant capital asset. In other words, they want to get the highest price possible.
But where does this leave you if you are separating or divorcing and need to maximise the value of your asset? What are the implications in the current market if you are trying to sell for the best price, but are desperate to move on with your life?
Demand in Cheshire
Savills has recently forecast a further slump in residential property sales this year. It predicts that prices won’t reach their 2007 high again until 2014.
Back in Cheshire, Mark Holden says: “the best way to maximise the property value is to price it realistically in the first place. Then there is every chance of the selling price increasing through competition.
“In the main the only premiums in the last two years have been achieved through competition rather than asking high in the first place.”
He believes that part of the problem is unrealistic expectations cultivated by the boom years, noting that two years ago people in Cheshire expected to pay £3m for a house with a swimming pool – but that now, purchasers expect a swimming pool if they are paying £2 million. Quite a drop!
He also confirms that although market conditions have changed, sellers are struggling to adapt. He notes that it is not only the national economic climate affecting prices, but also local factors.
In Cheshire for example, Holden points out that many speculative developers who had seen no end to the rising market were surprised to find there were few buyers for the 30 – 40 high-end, new build properties in various stages of completion. Many of these have been sold considerably discounted and the remainder have been let. The ready availability of these new homes swamped the market and buyers have been ignoring older homes which, ironically, developers were previously buying at a premium to re-develop. Mark Holden says that the market for properties costing more than £2 million has not been very active over the past 18 months, unless tempted by discounts or property that “ticked all the boxes”.
London bucks the national trend
In London the market has been buoyed somewhat by overseas investment capitalising on the weak pound.
Yolande Barnes, Director of Research at Savills says: “Their buying power has already extended to the lower tiers of “prime” London, particularly new developments which are once again being bought for investment.”
However this is viewed by many as an artificial resurrection of the market, with Richard Donnell, head of research at the Hometrack housing consultancy, commenting in the Daily Telegraph that the bounce “has been distinctly one-dimensional. It’s being driven by a high proportion of sales from cash buyers and overseas investors.”
But what about the rest of the country? Barnes goes on to say: “Turnover is likely to remain very low and, set against the current increase in available stock, will suppress any price growth and will result in small price falls in some markets.”
Mark Holden of Savills advises sellers to be realistic, suggesting that they follow guide prices from estate agents and don’t hold on to dreams of the unrealistic prices of 2007 and 2008. He also debunks the myth that renovations and planning permission add value to a property, saying that most people simply can’t be bothered with the additional cost and work involved in extending a home, especially when the market is already saturated with properties that have everything a buyer is looking for.
He also notes that contrary to popular perception, kitchens and bathroom suites are often not worth upgrading as they are usually the first thing to be removed when new owners move in.
The options for divorcing couples
So where does all this leave you? After all, you don’t want to be left with a house you can’t sell and both parties in the divorce unable to move on.
Typically the wife can’t afford to settle for less capital and the husband doesn’t want to sell for a lower price if it means he will also see less money. In some cases where there is limited equity and the first lump sum available goes to the wife as part of the settlement, the husband has no incentive to agree to a reduction in asking price that will leave him without a penny.
Lucian Cook, of Savills Residential Research, says: “With so much conflict it is not surprising that logic does not always feature strongly amongst divorcing sellers. In the current market, the split of proceeds seems to be even more difficult. The spouse with children resents the diminishing proceeds as they feel obliged to buy back into the market, whereas husbands are able to stay out of the market in rented apartments, waiting for prices to fall further.”
If one party stubbornly refuses to sell, couples may have no alternative but to go back to court for a review of the agreement, or an order for sale. That alternative, of course, is to bite the bullet and start again with the entire settlement. It may not be a bad option.
Advice for divorcing sellers in the current market
- Be realistic in your selling price. You aren’t going to get as much as two years ago and the market is a much tougher place for sellers.
- Don’t spend a fortune doing up the property or obtaining planning permission. It won’t increase the price of the property. People are savvier to home improvements and you are not going to be able to offer anything new that isn’t already on the market.
- However, it is important to keep your house looking uncluttered, neat and attractive. It is possible to do this without spending a fortune. Don’t waste time and money arguing with your former partner about the cost of keeping the garden done or adding a lick of paint where it is needed. It may just make the difference to a buyer.
- Don’t delay. Professionals recommend avoiding delay as they believe the market will get worse before it gets better, with an increased number of sellers flooding the market.
- Go local. Helen Silver of The Property Styling Company says, “Don’t just go for the biggest estate agency or the one offering the highest price. See who’s actively advertising, has a good internet presence and has evidence of recent local sales.”
Above all, remember that the whole market is depressed. Even though the value of your share in a property may have decreased, remember that if you buy now you could grab yourself a bargain – especially if, despite the divorce, you can afford one of those new builds in Cheshire!
Note: we would like to thank Lucian Cook and Mark Holden of Savills for their assistance with this post.
Stowe Family Law is the UK’s largest specialist family law firm, with offices and divorce solicitors in London, Yorkshire and Cheshire.
With an outstanding national and international reputation, the firm provides a full range of private client family law services. Our divorce solicitors are praised by clients, the media and legal guides for their knowledge and expertise.
Marilyn Stowe and members of the Stowe Family Law team