How much to offer for a place needing much modernisation work?(42 Posts)
We are considering buying a 2 bedroom Victorian semi-detached place with an asking price of 220K. This place needs central heating (at least 5K), rewiring (about 3.5K). It would also require a new kitchen, new flooring (only floorboards at the moment). We estimate that it would need in total about 15K of work done. We have a tight budget, this is only just be doable. There are other works that would need doing (eg. roofing, windows) but we thought we would live with that until we built up the finances for them.
The equivalent houses in the immediate vicinity sold for about 240-250K, during the past few years. I do not know the state of these houses when they were bought, and they do not come up very often in this area.
Is 180K an unrealistic offer for this place? Neither my husband nor I have any experience in "doing up" houses. We will be arranging a second viewing with a builder, are there any questions I should be asking/not asking?
Any anecdotes of similar experiences would be gratefully received!
I've got nothing interesting or useful to add, but we're about to do the exact same thing, so I'm going to lurk on your thread in a parasitical manner
Have a while we wait.
I am hoping the poster who was talking about being a developer and being able to do up a house for less because she had the right contacts will stop by and give us the benefit of her experience. I can't find her post!
I would start a bit higher. More towards £200k (19?). But it depends how much bargaining room there is for you,
I would expect the vendors to respond that 220k already reflects the need for refurbishment and that if they fixed it up they's be selling it for 240/250k.
It's always worth a punt but I would expect anyone putting a house on at 220k would be looking for a minimum of 200k plus.
All depends on how desperate the seller is, how long it's been on the market and how many other people are interested.
If equivalent houses have sold for 240 - 250k it sounds like the asking price well takes into account the need for modernisation so I would be surpised if you could knock them down too much. However it is always worth an offer (although that has to be balanced against looking like a chancer who they wont given a second chance to if they have a series of offers).
Depends on loaction/need for sale etc but I think most people are reluctant to take much less than a 5-7% drop, especially if not long on the market.
FWIW I recently bought a victorian semi which was in need of total refurb. It was priced not disimilarly to other refurbished houses in the area and we got into a bidding war. The EA said it always happened with the properties that needed lots of work: something to do with people wanting to put their own stamp on a home but feeling guilty about gutting a liveable house even if it wasn't to their taste.
I bought a house in January requiring all the same work you describe. The asking price was £380k and we went in at £320k. We haggled until we reached £345k, which is what we paid.
Much depends on other factors - local market, vendor's position etc. Ours was a deceased estate so the vendor was keen to sell. Having said that, she was VERY unhappy with the price she let it go for. It had been on the market for 5 months with lots of viewings and no offers. She was very difficult with us throughout the whole process because the neighbours told her she was sellign it for less than it was worth. They don't come up often on this rooad but there's one up at the moment on a much, much smaller plot and it's on at £400k.
If the equivalent houses in the immediate vicinity have sold for £240 to £250k then the £220 asking price already takes into account the modernisation work required. So, yes, I think £180,000 is a very unrealistic offer.
In effect you are saying - I want to buy a house for £180,000, spend £20,000 on it and for it to be worth £240,000 to £250,000 immediately. Which is wholly unrealistic.
what's the market doing in your area? That would have a big impact on how much I offered.
tbh I would not be buying a doer-upper at the very margins of what I can afford because my experience of old houses is that there is always more to do than you realise, and sometimes things come up that need urgent work so you need a financial cushion. (And don't forget interest rates are probably going to go up at some point.)
For instance, last week one end of our front guttering fell off; it turned out the wood to which it was attached was rotten.
This needed dealing with IMMEDIATELY in case it fell off and killed someone, and while the builders were on the roof they noticed some cracked rendering which was letting the water in. We hadn't yet had any signs of dampness from it but we wanted to get that dealt with immediately too.
So this was a couple of thousand pounds of work (probably) which we hadn't budgeted for.
DH and I are looking to move and I would be happy with a house that needs work, but only if we have a big safety margin. DH keeps finding massive houses and saying 'Look! We can afford that!' and my reaction is , 'yes we could buy it but how much would we have left over to redo the guttering/replace the windows/carpet the whole house?'
Also, when you're planning the order in which you do things, the most important thing is making sure it is all watertight and preventing further deterioration, so are you sure you would leave the roof until later? I would probably prioritise it. So actually that is what I would do with the builder - ask what jobs are urgent from the point of view of halting any damage to the fabric, so you can give yourself an 'urgent' list and a 'phase 2' list.
In terms of the vendor taking the cost of works into account, they probably think they have but may well have underestimated the cost of it all - that often happens. You would think that houses that need a lot of work should be bargainaceous but in fact because the market has been strong for so long it doesn't seem to work that way.
I think the main thing is to be as well-informed as you can about the market in the area and the cost of the works needed, so you will really know at what price you can afford to do it.
Thanks for the replies!
HarrietJones Yes, my initial thought for a starting offer was 198K too. I am not sure we can afford it if we have to put more of our deposit money towards all this modernisation work. We are going to get all the estimates in, and then start punching the calculator.
downtothesea The price is reasonable for the area, and it's got good space too. It's only been up for a week.
TheQueenOfDenial Thanks, I don't want to piss off the vendors! And I can well understand the attraction of being able to do it up exactly the way I want. We saw another similar place which had been done up, and I couldn't stop thinking about how I'd want to remove all their built-in wardrobes etc.
Thank you for all these replies!
sixtiesqueen I tried to get more information about the vendor but the agent would only say that he's got another property now. I think the vendor might be a downsizer.
bibbitybobbityhat Yes, it does sound very unrealistic. I was thinking that the 245/250K prices were from the peak of the market, but then if houses don't come up here very often, it means nothing. The other thing which made me hopeful was that I noticed that this particular agent had always (in my opinion) over valued their properties. I was hoping it applied to this one too.
SybilBeddows Sensible financial pointers, thank you! It helps seeing the financial aspect on screen, makes me put the head-hat on and take the heart-hat off! This feels it will be a logistics nightmare and we have a 9 month boy to contend with too!
We bought a similar property a year ago, didnt need as much done to it as you describe but we have done a fair bit to it.
i think if you offer £180 it would seem really cheeky, I would go in at around £198 as suggested, but you will probably be told they are looking for at least £200, we got ours for £202.5, but the market has picked up a bit so i wouldnt be surprised if you were looking at about £210. we decided to do the maximum deposit we could afford to get a better mortgage deal then took out a seperate loan to finance the work that needed doing. sainsburys and tescos are doing good rates on loans under 20k.
Definitely allow extra for additional work that will probably come up, and with regards to the floor we sanded and varnished it ourselves, much cheaper than carpet or laminate, takes a bit of effort but well worth it and for re-sale its an "original feature"
Hello boobiekat88. I didn't think of a separate loan for financing the works; I only thought of reducing my deposit. I'm bit worried about a loan but I can't place a finger on why!
I like the idea of maintaining the "original feature" though
I think 200 is the max you should pay because as well as the cost of the works the inconvenience is huge!
noddyholder Do you mean the cost of my time and labour (project managing etc)?
I think downsizers are the worst for not wanting to take a big hit on the asking price. It often isn't worth it for them to move if they do not take enough money out to make their retirement more comfortable (that is if there is no pressing need for them to move). Also, downsizers I have found can be the most unrealistic about the true value. It has only been on the market a week. By all means make a low offer, but be prepared to walk away from it too if you can't afford what the vendor wants.
I'm v bearish about where the market is going so if it was me I would be offering low (say 20% below asking) but not actually expecting them to accept, especially if it's only been on the market for a week.
Then if I got it, great, if not, well fine, there will be other houses along and hopefully they should be cheaper. And if the original one didn't sell (as 50% of houses on the market last year didn't....) I could come back a few months later and see if they were still interested.
You do risk pissing them off and annoying the agents if you do that, but it is a buyer's market; I would be less worried about annoying anyone with a low offer than I would have been a few years ago.
Alternatively I would hold back and not offer yet, just do so in a few months if it doesn't sell. DH and I have a list of houses that we are watching slowly come down in price; if they hit a certain level we will offer. (And if they never do we will compromise and buy a less nice house.)
You can't take the peak price as the natural value of the house; we are not in boom times any more.
and when I say 'offering low', I mean 20% below as an initial offer but being prepared to go up a bit.
Make an offer. The EA is obliged to pass it on. The sellers may be keen to sell quickly.
It isnt a criminal offence to make a low offer!
We've made an appointment to view the place with builders on Thursday. I am really excited
fapl Our last offer was rejected by downsizers, and we offered 7K less then what they wanted. Their house has been up for a year! It was a sensible house, in that it ticked all the right boxes but didn't make our hearts sing.
SybilBeddows We have a list of houses we check up on too, should they ever fall into our price range, we would pounce! I am telling myself to be patient and be prepared to walk away. Then I catch myself looking up threads on laminate vs wooden floors and best kitchen prices etc.
GnomeDePlume There will be some serious discussion in this household on the striking the low-but-not-ridiculous note on our first offer (if the estimates from builders come out on the right side of affordable.) The vendor has already moved out, so you may be right in that they would be keen to sell quickly.
You are much better to keep your deposit as it us and take a loan out for renovations... Otherwise you are going to be paying that £15k back for the next 20 years (or how ever long is left on your mortgage)
It's easier if you just balance the money about...get a 0% credit card, stick a chunk of renovations on that, pay it off over the 9 months or a year, take out a low interest loan, even if it's over 3 or 5 years at least you aren't paying for your carpets for 15 years after you have ripped them up. Most will allow for early settlement too, so if you had a windfall or managed to save a bit then you could pay your £10k off in a years time, whereas paying £10k off your mortgage would be a drop in the ocean, and you would be heavily charged most likely.
Geordieminx We're sitting down with the mortgage people to see how to best manage this. As you say, 10K off the mortgage is a drop of the overall, but also a big part of our deposit. It may be the loan option that you and boobiekat88 suggested would suit our finances best.
And as I am sure you know, the more deposit you can put down the better mortgage deal you may get!
WRT the house... Offer low... You can always go up! And tour hand will be strengthened if you can go back with a builders report saying XYZ needs doing at a cost of £X, as someone mentioned further down the thread, whilst the vendors have priced it to reflect the work that they believe needs doing... They may not be aware of everything. And from their point of view it's better to accept a lower offer from someone who knows what needs doing, rather than accept a higher offer then have to start reducing down the line when the structural surgery comes in.
I thought the (very very) general rule of thumb is that you should pay in the middle of what it would be worth done up and a price taking into account how much you are spending. So, if houses in the area are worth £240k, and it would cost you £20k to do it up (totally - including windows and roof), you'd pay £200k using that rule - i.e. make a £20k "profit" immediately, after spending £20k. But, that's a developer's rule of thumb which would depend very much on the local market. If people are buying a house to live in, they often pay a bit more than that - I think that's a lot to do with wanting to put their own stamp on it and not feeling extravagant by ripping out a perfectly good kitchen etc. just because they are not to the buyer's taste.
Agree about offering low though - just not too low to make you look silly or like you are really taking the p*ss. If you do that, the vendors won't trust you, even if you come up with a good offer eventually - they'll think you'll try to knock them down at the last minute (gazundering, I think!) or are flakey. I think just under £200k would be a good starting point. And how much you go up to totally depends on your finances (as well as what it could be worth when done up)!! Good luck!!
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