premium for private sale?(26 Posts)
we have mentioned to a few people that we might be moving next year and have had some casual expressions of interest in our house. dh is adamant that we would be better going with an agent to be sure of getting a good/fair price. but i think that a private sale could work out well/flexible for us.
where we are going we are considering using a property finder who can access off market properties. the catch is that we pay the agency fees and probably a premium to avoid the house going on the open market.
anywhere i have seen things about private sales buyers seem to think that the property should be sd cheaper as there are no fees to pay. there seems to be no thought that there is no competiton and what that might be worth.
anyway what are your thoughts?
i dont fancy having to sell our house "cheap" privaty or pay agency sales fees and an off market place for a premium. it would be quite a financial hit.
is dh right? or should we see whether a premium over agent's valuation might be acceptable?
I think the question is whether an Estate Agent can increase the sale price more than the amount of money you would save by selling private.
I'm on the other side of the fence. Amongst other property services, we do relocations for corporate clients, and often this will include finding them a house to rent or buy.
We'll be told of off-market or newly launched houses by local EAs or property developers. Our clients are naturally very motivated (they've paid us a search fee and have all their ducks in row legally and financially by the time they come to us) so they inevitably get first dibs. EAs claim to "act for the vendor", but their income depends on brokering deals, which means getting the deal done quickly, with both parties happy. The practical result is that we usually get a better price than if we'd approached the vendor directly.
Private sales can result in unrealistic price expectations on both sides. The buyer thinks there should be 1% discount at least (at seven figures this is the price of a new car) because the vendor has no EA fees; the vendor thinks theirs is a particularly sought-after property and they can name their price.
In practice, both are wrong. Now that cash buyers are disappearing, the mortgage valuation decides the price, and in this market, even for prime clients, I don't bat an eyelid at downvaluations of 10% or more.
1605 - I dont understand what you just said at all.
In effect what you are saying is that an EA will tell their 'vendor' to sell at a lower price when another EA has a relocating client on the line than when just an ordinary private buyer comes through the door. What gives?
Sounds frankly like there is a conflict of interest.
MoreBeta - that's exactly what I'm saying. EAs want the deal done fast to get their commission, and they will lean heavily on the vendor to sell at a price the buyer (or their agent) is ready to pay.
Whether the "ordinary private buyer" is disadvantaged depends on how well-organised they are.
Tricot If you really want a private sale, get your own surveyor to do a valuation on your house, and then get as many EA valuations as you can stomach.
Ask local agents to supply floorplans for everything they have sold in the last 18 months, and then work out a price per square foot paid based on Land Registry records.
You'll then have a very fair idea of what yours will sell for. Even the most unusual properties in the most bullish of markets only command 10% premium or so over price per square foot. Though in real terms that 10% can be a huge amount of money.
We sold our last flat (this was in 2007) to a private buyer represented by Phil Spencer's company (the one that went bust) Garrington Homefinders.
We actually approached Garrington first, as we knew the location of our flat was fantastic, and we didn't want to pay or even deal with estate agents if we could help it. They told us to get EA valuations and set our own price based on those. Their buyer offered 100% cash at asking less £5000, which was Garrington's fee.
We were all happy with that, and the deal was done in a month. We could have fannied around for six months for a few more thousand, but we were getting married and wanted to get on with the next stage of our lives.
I think a lot of house sellers are dreaming. If you've read the Governor of the Bank of England's report today you'll know that we are all stuffed.
He warns about us going back to the 1930's. Yep.
There is a scary LonRes report out today as well, Miss Perception
I'm addicted to a website called Nethouseprices which shows sold prices and in my postcode (where people priced out of Notting Hill and Holland Park relocate) there were fewer than 60 sales in the whole of the last quarter. Several of those sold well short of the asking price.
I'm not too bothered about selling low as I'm just rolling my flat's mortgage forward into a house, but the gap between flats and houses seems to have widened, at least as far as asking prices are concerned
Yes Mervyn King was very interesting. The most important bit was where he said banks are going to have to start taking losses on loans they made in the past.
It is well known that banks are sitting on a lot of repossessed residential and commercial property they dont want to sell at a loss but my feeling is that they will be leaned on heavily to start disgorging it soon.
I was listening to a well informed person this morning who said that in reality this entire crisis comes down to property and the losses on loans made against it and the scale of those is yet to be truely revealed.
In my town there is already a lot of empty commercial property but there has been a sudden spate of banks calling in receivers on small retailers. A real rush of them in the last few months. Every small business that goes bust causes several job losses, an empty commercial property and a repossesed residentail property as business loans are often secured against them.
London and South East are unaffected yet but in the North anmd Midlands the recession is accelerating at the level of the high street and individual.
Yep; to those of us who are not quite so naive, it's obvious what will happen. When it will happen is another matter. (should have happened 5 years ago but the Government have been doing all they can to keep house prices at ridiculous levels)
It would be nice to think that our children, one day, will be able to afford to buy a home at a reasonable price.
Just catching up with the thread this morning and realise I forgot to mention the other problem with price expectations, which is that cash buyers often think they deserve a discount just for being able to proceed very quickly.
In my experience, a chain with more money on the table will succeed because most people are not in a hurry to sell, they actually want and need to take their time to bid farewell to the house.
And most people can't afford to kiss goodbye to 5% of their house just for the sake of saving time.
MissPerception I always tell my clients to work with their own circumstances and not the market's. Eg. one of my clients has just been made Partner at his law firm and got a massive pay rise. The 4x multiplier for that pay rise will cancel out the £80k price increase that's occurred in the last 12 months in the area where we're looking for him, so he can afford to chill his boots. Another of my clients has had to put her sale on hold because she's unexpectedly pregnant, and is terrified she's going to miss the boat. No, love, you'll have a baby, if you lose £40k on your sale it'll be more than compensated by the blessing of a new baby .
Kensington If you can afford to even contemplate buying a London house, you need a household income in the region of at least £200k and an equity pot of at least £300k.
There are only around 300,000 households in the whole of the UK with that kind of money.
The gap between asking prices for flats and houses in London is increasing, yes, but in reality the pool of people able to afford that kind of money is already small, and getting smaller because the likelihood of bringing substantial equity forward is decreasing. London is going to slide, no doubt about it, but I can't call it and anyone else who claims they can is a fool. As I said, work with your circumstances, not the market.
1605 - 200k income presumably only applies to certain parts of london!! it certainly doesnt apply around my neighbourhood!
Although the idea of a gentle-womanly private sale agreement sounds good, there seems to be no particular advantage for us. we would have to do lots of homework and pay.for a valuation. i suppose we would save on agent's fees but that means we have to do checks on the chain etc. we also limit ourself to one buyer who may expect a discount of 1% anyway due to our apparent saving. it doesn't seem to be worth the hassle.
at the other end tho we may well need a property finder as very little seems to be ccomn
coming on the market so we will need all the help we can get. we will just have to grin and bear the thought that we will pay 2 sets of agency fees and possibly a premium on a private purchase. you guys have somehow convinced me that i will not get that on my sale, but sadly our finder person thinks it will be likely on our purchase.
1605 - I agree with what you say about cash buyers.
In my experience as a cash buyer, it makes no difference if you are trying to buy a house from a family or a downsizer that have no need to move today. The only thing that matters is how much you offer and that has to be all the money the seller above you in the chain wants to fulfill their needs/dreams. It takes time for them to modify those needs/dreams and accept less money.
The only place it might make a difference is buying final sales, repossessions or at auction where it is cash on the hammer where there are no needs and dreams on the table.
I also agree with what you say about the gap between flats and houses getting bigger certainly true in my provincial city - the pool is also getting smaller of people that can actually afford to buy a house. In fact, it's got so bad in our city that there are almost no houses selling at all. Houses at the top of the market here take 2 - 4 years to sell and the local (very good) removal firm that has been in business for 3 generations has just shut down.
what are these 'off market' properties exactly??
HanSolo - in my experience they are people who have a large house that is not on the market but let it be known to a few of the more top end estate agents that if they get a desperate (ie stupid) buyer on the line that they might consider an offer way over the market. They don't want to be bothered with doing viewings and advertising and a sign outside but will only start looking for a house to buy once they have a desperate stupid buyer for their house lined up.
That is what happens in our town anyway but I supect 1605 will say something slightly more nuanced.
i think if an estate agent is selling it then it is "on market"
if a property finder has a list of clients looking to buy and prepared to pay 0.5-1% fees to that agent to.do so then some sellers with properties in desirable areas.will contact them to be put in touch with a buyer. that would be "off market".
obviously there are a few (50?) shades of grey between which i have no idea about, but that is the basics hansolo
basically i am selling in an area where the houses are not desirable enough to.have property finders with gangs of eager clients. unfortunately i am looking to move to a desirable scottish are where there is lots of competition and the dreaded offers over system. hence my hope to reduce costs on my sale! the purchase is going to be pricey.....
if you have a standard house, it is not hard to work out how much it is worth, with all the tools available; its now a pretty transparent process how much a house is worth.
we have recently sold a house without an agent, told interested party how much we wanted, they were willing to pay. did not discount price to take into account the saving of agents fees. Since had several people putting notes through door etc. In all honesty, if it had fallen through we would have sold via private bids using the local solicitor. In some situations its worth paying an agent but ours wasnt one of those situations
Bigbadbob had it earlier. Could an agent deliver you a premium that a private sale at survey value wouldn't?
If you're ready to sell at a sensible price (so a straightforward property that's not likely to outperform local ceiling prices), you're better off going private. Don't complicate life.
As I said, a surveyor would give a fairly accurate valuation and you could split the difference on fees with your buyer (or meet halfway between two survey valuations).
Where it gets interesting is if you have an exceptional property or you have an extraordinary situation - such as the current climate in London, where there are so few really well presented family houses offered for sale that many are exceeding asking price even in the midst of a recession. In such circumstances you need to be on the open market. Your private buyer could always match the highest offer.
Morebeta Yes, "off market" essentially means a house that could be sold if the price were right.
It's not just traditionally top-end houses that moneybags clients are interested in, though. Ex-council house owners who exercised their right to buy may be sitting on half a million quid's equity. My clients go wild for these houses as they tend to be more spacious and less drastically altered.
Tricot I was responding to Kensingtonkat's comments on widening asking prices and from her comments about Notting Hill assumed she's not a million miles away from my patch (Balham to West Hampstead).
You'd be surprised how much family houses command even in unfashionable areas of London though. Five years ago I didn't even know where Brockley was, and I'd never been through Acton except on the tube. No more, I'm recommending them!
I just bought a house in a nice bit of North London, and really studied the sold prices, cos I was quite jumpy. Asking prices and sold prices for houses have definitely been going up for the last few years a bit, and asking prices this autumn are higher than the spring - but what interested me in looking at the sold price data is how individualised the sold prices were - there were some surprisingly high prices right through 2009/2010 and some lower ones in 2012 for instance. It didn't look so much like house prices rising to a clear bubble as some houses 'getting lucky'.
Also 1605 on the equity/salary sum you mention - I do just wonder whether in some parts of the premium London market there aren't just a good chunk of young families who are sustained by very large equity sums transferred from their families in the same premium area?
I saw one property in a desirable part of Muswell Hill with a dozen well heeled couples offering full asking on the first day, largely driven by schools catchment. It was an unglamorous doer upper doer which was marketed for 800 and needed a lot more spent on it (way out of my league) - a lot of them were clearly locals and I just couldn't help but wonder if that was the case.
The more I have looked for a house in London, the harder I found the whole thing to call, because such diverse factors seem to play on the market, and so many younger people one knows with a nice house in Islington etc are there due to longstanding family money, not income.
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