Ok, so we have heard it all - market now going down etc etc. So we have had our two-bedroom house on the market now for like 8 weeks, 3 viewings and no offer. We bought in 2006 and it's priced very reasonably, we are hardly making any money out of it. It was initially priced higher (bright idea of the estate agent! But realistically, we knew even when we bought that it was going to be difficult to get over the stamp duty mark) but we dropped to a more realistic price very quickly when we realised which way the market was going. We are in SE London btw.
Looking to buy in another part of SE London, mainly because we now have 2 DSs and primarily we are looking at primary schools and a shorter commute for DH and more bedrooms. We have been viewing houses but nothing special so far. Today we saw a house that we had initially discounted because of the price. It was on for £625k 
. The agents called us (though they knew our budget was £500k) and said the sale fell through on the week it was due to exchange. The vendors are packed up and ready to go. We saw the house today and it's lovely - ticks all the boxes, near train station, near a lovely park, a 20-second walk to an excellent primary school, which is notoriously hard to get into, the catchment is literally 2 roads), lovely period features, lovely garden. Can see a few issues with the house - namely it's only got 3 double bedrooms. The loft room has not been converted properly so it's not a 4th bedroom, up a very steep flights of stairs. Too small for an ensuite. But we don't need the 4th bedroom, just that it would have been nice... And there's only 1 bathroom in the whole house, and it's on the first floor... Could be an issue with two little boys!
Agent won't say how much the accepted offer that fell through was but it was in £500k+ but market has changed since. When he first called me about the property, he tried to make sure we could 'stretch' our budget before offering us a viewing and I told him I am not discussing money till we see the place! And today, he told me basically to put in an offer for what I think it is worth. There's been no offers since the sale fell through a few weeks ago.
DH and I were talking about it and financially we could rent our house out (it's going on with a different agent next week as I think our current agent is s**t but that's another story altogether!) and get a loan from my parents equal to the equity we would have gotten from it. In that sense, we could be cash buyer (to make us attractive to the vendor as they are obviously desperate to move!) and make an offer of just under £500k. However, we did a bit more research tonight and the most expensive house ever sold on the road in the last year for £599,995. Another one sold in the same period for £485k and the rest that sold in the same time was in the low £400k! Houses on other nearby roads (it's a conservation area) have gone for just under £600k but that's rare. It looks like it's hard to break the £500k barrier there.
The big thing for us is obviously the school. We have been looking at private schools for the boys but of course the idea is if we pay out more for a house with an excellent school nearby, we save on that in the long term. My head is spinning, I don't even know what to think anymore? We saw another house nearby that was very similar (but properly converted loft) with a slightly smaller garden that was on the market for £489,950 but the price has been dropped to £475K since. But the boys will be going to another primary school, which is not as good as this particular one. And I think the vendor will accept an offer of around £450k for this property.
Is £499,995 a good/bad offer for this house? The vendor bought it in 2002 for £316k. I think I am slowly going mad... Thanks for all your opinions.