Have you ever got rip-off road rage? Here's a list of the worst property rip-offs ever -- and how to avoid them!
It was the keys that saved me. The keys, and the parking tickets. Without them, I think I probably would have gone insane.
Let me explain. I was a first-time buyer, struggling to get a foot on the property ladder – although it felt more like an escalator, prices were racing up so quickly – and I didn’t have a very large budget. So I wasn’t exactly the most important person on the estate agents’ lists.
You see, at that time in London, first-time buyers like me were a dime a dozen, and we were all desperately vying to make bids on over-priced cardboard boxes. So the estate agents weren’t really all that interested in showing up on time or even, on one memorable occasion, showing up at all. They knew they would make a hefty commission no matter how atrociously they treated us buyers. They didn’t care. If you didn’t buy, someone else would.
The keys, however, were their nemesis. They’d get to the door and pull out a huge ring of clanging silver and gold. The expression on their faces was determined, but decidedly tense. They would mumble to themselves slightly – words of courage, or maybe it was just the door number. And, then, the fun began.
Oh, how they would struggle, and struggle, and struggle to open the door. They couldn’t find the right key. They couldn’t find the right key, because they hadn’t brought the right key. They had brought the right key, but it wouldn’t fit. They had brought the right key and it would fit but the lock wouldn’t turn. The lock would turn, but there was more than one lock. And for that lock, they couldn’t find the right key....
And then usually, if they eventually managed to open the door -- often following humiliating phone-calls to their boss back at the office -- they would turn around and discover they had been given a parking ticket.
Rip-Off Road Rage
Am I an evil, nasty person for taking pleasure in their misery? Without a doubt. But I see it as ‘rip-off road rage’.
The fact is, as everyone who has ever bought or rented a property will know, you’re at the mercy of a whole load of ‘property professionals’ – estate agents, conveyancers, surveyors, mortgage lenders and letting agents – who are all, in various ways, trying to rip you off.
Here’s how they do it:
1. Estate Agency Fees. While the average wage has only risen by only 54% over the last decade, estate agents have seen their commissions increase at the rate of property price rises: around 190%, on average. This is because they take a cut of the property price, usually at least 1.5% (if they are your sole agent) to 3% (if you advertise your property with more than one agent).
So, to sell the average £185,000 property using more than one agent, you are expected to hand over more than £5,000. That’s a fifth of the average UK annual wage, on just one sale. And to sell a property at twice that price, you may have to pay more than £10,000. Do they do twice as much work? I don’t think so...
Avoid this rip-off: Sell your home privately, via the internet. Sites such as Home.co.uk, Houseweb.co.uk and Housenetwork.co.uk allow you to list your property for a small upfront fee, usually less than £500. I particularly like Housenetwork, because it will advertise your property on major property search engines like rightmove and FindaProperty.com, and if you prefer you can take a no sale/no fee deal - the commission will be just 0.75%.
2. Stamp Duty. Like estate agents, the Treasury has benefited hugely from the record rise in property prices. Here at The Fool, we would like to see a reform of Stamp Duty. At the moment, you pay nothing if the property is worth £125,000, but 1% of the entire property price if the property is worth £125,001. The same goes for £250,001 (3% of the FULL price) and £500,001 (4% of the FULL price). These thresholds have not risen with property price inflation, enabling the Treasury to make a killing while most of us have struggled to find affordable homes.
At the Motley Fool HQ, we think the tax should be incremental, like income tax. So if you pay nothing on the first £125,000, then 1% on the next £125,000, then 3% on the next £250,000, and 4% on the rest above that figure. This would be a fairer reflection of the relative value of the property, we think.
Avoid this rip-off: And go to jail. The fact is, there is no way to avoid this tax – and attempts to do so could land you a large fine or worse. The Fool is hoping to launch a campaign soon to bring about reform of this tax, but until then, the only action I can suggest is to write to your MP!
3. Valuation Fees. Your mortgage lender will require an independent valuation of your property from a surveyor before they will agree to lend you any money. This usually costs hundreds of pounds. But nowadays, if your home is basically the same as another down the road, the vast majority of lenders will accept automated valuations from firms like Hometrack, using data about, for example, recent sales in your postcode and the current local housing market.
This means a surveyor does not even need to visit the property and the cost of the valuation is literally pennies. But you will still get charged as if a surveyor had visited the property. What a rip-off!
Avoid this rip-off: Look for a mortgage deal that offers free valuations and legal work. Remember, this perk can be worth hundreds of pounds, but the information is unlikely to be advertised in the best buy tables, which usually just go off the rate. A mortgage broker, however, will be able to help.
4. Letting Agent Fees. You pay them to credit-check you. You pay them to draw up a bog-standard tenancy agreement. You pay them a miscellaneous ‘admin’ fee. And you have to do it all over again when you move. All of it over-priced. And yet when the boiler breaks down, it’s often someone else’s problem.
Avoid this rip-off: Go private. Sites such as gumtree are great, and you can pick up a tenancy agreement for a fiver from the Resident Landlords Association. Offer your landlord bank statements and your credit report, which you can buy for £3 or download from Fool Partner CreditExpert for free during a 30-day membership trial. If you’re a landlord, consider taking out landlords’ emergency insurance.
Those are my top four – but what about you? Do you have any tales of property rip-off road rage to share with other Fools? If so, the comment box awaits!