WWYD re: house purchase

[ftb30]

Posted for traffic as I really need to make a decision today and my heart is ruling my head.

Property was advertised at £352k, offered £340k and this was accepted. Property is a 3 bed end of terrace in Essex and this seems a fair price looking at other properties on the market. It is ex-LA but has been privately owned for over 30 years and improved/extended. The next door property is privately owned but there are still some LA owned properties in the road.

Mortgage valuation has just come back at £315k. Reason for lower valuation was the mixed social housing and fact the property is ex-LA. Our mortgage provider not willing to re-evaluate and estate agent has told us that there are few mortgage providers that will lend on ex-council (I had mo idea about this!).

We can just afford the extra £25k but it will move our mortgage into the 90% LTV bracket and eat into funds we'd hoped to use for improvements. We also benefit from stamp duty freeze at the moment which I think will be withdrawn if we start again. We've paid for survey and incurred legal fees already.

We would stay in house at least 6/7 years. We are TTC and getting married (hopefully - postponed!) and the house is large enough to grow our family by two kids before we'd need to consider a move!

Seller will not lower price according to Estate Agent.

AIBU to ask WWYD?

1. Reduce offer to closer to £315k and pull out if seller won't accept
2. Reduce offer to closer to £315k but continue with higher LTV if seller won't accept
3. Continue with higher LTV
4. Just walk away now

TIA. 

Many houses have over inflated prices at the moment and when it comes to mortgage valuation are being down valued

Considering some of the mistakes made in the past that's probably no bad thing, especially with a financial mess on the way
I'd say there have been enough artificial "bubbles", without creating yet another one over the stamp duty holiday

I wouldn't pay more than a mortgage valuation.

They are being unrealistic and they will lose out on their wanted home too. Their problem, not yours.

Sorry @Sethy38, I stand by my original vendor being a knob for several reasons. His house was nice but not top notch nice, tbh, and WAS overpriced by all accounts.

When I say he wouldn’t negotiate he refused to even discuss options and put it back on the market in the same phone call with the agent, so we had no chance to even lay out the position.

A couple of days later he sent an email casting aspersions on my mortgage broker (who is absolutely a legend).

If he’d entered a discussion he might be in a new house by now 🤷‍♀️

Worked out for us, luckily, but even though he’s a knob I feel frustrated for him.

If you want help looking for homes, give us some details if you like. I'm bored and love house hunting.

The issue here is if price do drop as expected.

Your house which you paid £320k for and was valued at £315 is now worth £300k.
You have blown an extra £6k paying over the odds. You then find you've lost £20k on the house. You are £26k down. And you you are stuffed because you don't have 90% equity in the house.

You are then trapped in negative equity and have the potential for ongoing financial issues from that (which include losing your house). You also can't easily remortage your property after you are out of the fixed arrangements for your mortgage. PLUS you've been paying the penalty for being over 90% on your mortgage

If you stick to no more than the valuation of £315k and hold on to your wiggle room, and the price drops to £300k you've lost money, but you still afford to sort the problem out after you've written off your loss.
You can at least sell up if you needed to either for relocation due to unforseen circumstances or if you needed to expectedly downsize to keep a roof over your head. Its considerably easier to remortage. AND you aren't paying the additional fees associated with a 90% LTV mortgage.

And thats why the risk of paying over the odds, isn't something you should be doing for a 1st time buyer. Its a huge risk.

Paying over the odds is something for people who can afford it. You can't afford it on a 90% LTV mortgage.

This is why they say that the value of your house can go down as well as up. You should definitely be considering this as a possibility given the current uncertainity and no one really knowing how much of a dent this will put into the economy in the next 6 to 12 months.

Plan to afford as much as you can, but also have a plan b in case things go tits up.

This is not the house for you if the vendor expects that much more than its worth.

A house is only worth what someone will pay for it. Having worked in an EA, I have seen some Vendors with very unrealistic views of what their house is worth and they are usually determined to stick to it.

Sometimes they get lucky and sell to somebody with more money than sense, but more often than not, they end up having to reduce the price several months down the line.

As somebody up thread said, or thereabouts - why should you pay more to fund their improvements and then not be able to afford your own improvements?

The EA job is to sell the house and they work for the Vendor not for you, so while they should encourage them to take a realistic offer, if they think they can get more, they will tell them that .

Do not pay over £320k max. £315 is good price for it if that is what it is been valued for.
I bought a flat that I had offerered £249k for and it was valued at £242. I really wanted the flat and let my heart rule. I paid out of my own money and totally was stretched. The flat didn't increase in value that much when I went to resell it. I kind of always regretted not going for the lower price.
All mortgage lenders will have access to that valuation of £315k by the way and so any future buyer will come up against problems too.

Can you look at different mortgage providers?

Same happened us - we put an offer in on an ex council property and lender refused - our broker told we couldn’t get a mortgage on it with anyone except one provider but we needed a 20% deposit - we didn’t have it - we had 10% so we had to walk away!!

Option 1

If you think it needs £25k of improvements on TOP of only being worth £315k to start with you're not going to end this in positive figures even if house prices don't drop.
Honestly I wouldn't even go for £321k at this point, I'd go £315 and walk away if seller says no.
Also you need to look into what will happen re: house insurance if you pay over the odds for the place.

It sounds like you are being sensible. We're about to hit a massive recession and now is not the time to be stretching yourself financially. I think your thoughts of 321k are very reasonable. People have been stupid about houses lately. We just lost out on our 4th house this year (first one offer accepted but vendors pulled out just before exchange due to shielding), 3 others in bidding wars, last one we offered 80K over the guide price (not talking on a footballers mansion sort of property) and still didn't get it. The stamp duty holiday means the market has been very hot. If this one hasn't sold, there is definitely a reason and I wouldn't be stretching yourselves to get into a house you will have to sell at a loss in a few years time. You don't have children yet, so it sounds like it's a good time to wait it out and find something else that suits you and your budget.

I think it's the wrong time to overpay for a house. Also I wouldn't be surprised if the stamp duty holiday is extended beyond March. You don't want to end up in negative equity. That's just my take on things.

I would reduce the offer is the lender has valued it as such. They will likely have similar with any buyer who needs a mortgage.

Sellers are going to struggle to sell now all the houses on rightmove are being reduced. The market is changing so tell them good luck and look for something else.

I absolutely wouldn’t pay more than the £321K you are prepared to do.

I would make my case to the estate agent that if they accept the £9,000 difference between £330K and £321K then both of you are showing willing in order to make the sale, but that it’s your final offer no further negotiation and you’ll recommence house hunting. That the offer remains on the table for as long as it takes you to find a new property...

Good call OP.

They have set their price at what they need for their next house, - but that's more than their current house is worth.

FYI, we bought an Ex- Council house. Not a typical one,as it was built in 1927, (rural) and had been adopted by the local authority. There were and (very likely still are) some lenders who will NOT lend. It is a question on the application forms. It goes back partly to RTB, and people taking out mortgages on their flats, and then getting hit with big building maintenance bills. They can't pay, want to hand them back - Mortgage company worried about selling them on etc.

We were turned down by Bristol and West, but had no problems with The Woolich. If you find another nice Council property, make sure you find a "Whole of Market" independent broker.

Option 1. You would be mad to overpay at the moment with the current economic situation. If you overpay with a 90% LTV mortgage you could really struggle and end up in negative equity.

Wouldn't buy a house right now if you paid me to! Wrong time!

You’ve got nothing to lose further by at least reducing the offer to start with. Do that then go from there.

Don't overpay. If you want to sell in 6/7 years any prospective buyers will have the same problem. Your house may not have increased in value.

Dropping to 90% LTV will also effect your mortgage rate and cost you ££££

Mass unemployment is looming and house prices will go down.

Hell's teeth no

Don't pay more than the valuation - not in the current climate

Good luck

1 for sure