Buying advice

[likeamother]

Sorry if this has been covered recently. Have searched and read some interesting theories about the property market but I haven't found anything covering buying at the moment.

Really interested in some thoughts, particularly from anyone in the know on property buying, especially at the moment.

I'm separating from my H and was house hunting when lockdown happened. I still need to buy (obviously once I'm able to view again), a mortgage will be loads cheaper than renting and I want a permanent home for me and the kids.

My worry is I was only just doing it by the skin of my teeth anyway, and as I'll essentially be a first time buyer now, I don't want to pay over the odds if the arse falls out of the housing market in the next year.

Do you think people looking to sell are mindful of this too in terms of being realistic about what to sell for? Would I be foolish to pay near asking price at the moment?

There's a house online with O.I.R.O £200k, around 13k over my budget anyway, but was considering as it was asking for offers and it seemed about 10/15k over what people have been selling for in the area anyway. Now I'm wondering if I'd be silly to pay my maximum if prices are likely to drop? OTOH, if someone markets their house for around 200K is it ridiculous to think they might sell for 180k? (Which would be reflective of a 10% house price drop this year.)

Does anyone have any experience/thoughts? The buyers aren't buying on, and they purchased it 10 years ago for 110K, should that be a factor.

Thank you, am chronically stressed about the future right now!

None of the sellers I've ever come across have thought 'I've made a massive profit on this so I can be more flexible on price', so I wouldn't factor that into your thinking.

In my experience OIRO usually means offers over/very close to this price. Don't let this put you off offering under but might be worth being aware.

Will this house be a long-term purchase? When you say skin of your teeth is that low deposit/decent salary or high deposit/low salary, or another situation? That makes a difference to what your position would be if the market falls

Thanks for replying honfleuri. I’m high deposit, low salary. Too frazzled this week to work out if that’s the less favourable set up?!

I do plan for it to be long term though, and also for my salary to rise as kids get older as I’m only pt.

That’s interesting about OIRO. I always assumed they knew they were overpricing on the off chance but have no actually experience of buying one listed this way!

In the lower prices rangegs there's normally less movement on price (and 200 is certainly lower than average for the UK), mostly because the sellers need to buy - but if they don't in your case, definitely not insulting to offer 180 and then move up a bit. If I were the seller, and not dependant on every penny for the next purchase, I@d def consider 185-190.

likeamother when the economy is on a downward trend house prices usually drop in line. Also not so many people buy when market is down so you will be in a strong position. Some economists are suggesting that houses will be down between 6% and 10% after lock down ends. At the same time their will be less mortgages on offer whilst rates are so low. A tracker or long term fix would be better than a variable or short term discounted rate. You could start by offering £180k and see what response you get.

The house I completed on in February was asking offer over £200k, I waited a few weeks and I ended up getting it for £186k. You never know, just try your luck!

I seller might drop if the house they are buying also drops. As you can't do anything about it now I wouldn't speculate - there will be others, like you, looking to buy so there will be pent up demand which may keep prices up. But even so, offering as you suggest is not outrageous. Ypu don't know the circumstances of the seller. Look to what the most recent sales are in that area as your guide.

Thank you everyone, this is really helpful.

@Pipandmum - locally, similar houses have been selling for less, some not in good condition but also some with small extensions and still then for maybe 185-190k average in the last year. It's also on a busy-ish road so I guess I need to factor that in too.

It's so difficult because if I wasn't needing to buy right this minute I'd probably hold tight for a couple of months and see, have also read on here about the possibility of a stamp duty holiday, which would have helped.

I suppose I just need to feel at peace with buying it (or any other house) at a price I'm comfortable with, taking into account all the market uncertainty. Fingers crossed there won't be too much interest, although I take on board if others need to move urgently as well and there's less housing stock the sellers will be in a better position.

This latest twist is like a sick joke when in the middle of separating. Although I know it's not all about me!

@icanbreathagain that's a great deal! Do you think it was overpriced at offers over 200k?

@likeamother your situation is better in terms of security than the low deposit option which, if you bought something that then sunk in value, would run a risk of negative equity. Whereas with a decent deposit while your equity might be eroded it's unlikely you'll end up in negative equity. Things will go back up.

Good luck!

@honfleuri - I see, thank you v much for explaining. That makes sense, and so long as I'm not planning to sell up within a few years I wouldn't be at high risk of losing out then. That makes me feel better!

In this market I'd be putting in offers about 10% below asking. We got our "offers over £750k" for £620k because I'm a cheeky sod and the owners had had enough of being on the market and we could move straight in.

You just never know! So I'd be inclined to offer low right now.

@whynotchangemore Wow that's amazing!

With a high deposit you will have access to the best mortgage rates available. If you want to budget for a long period then I would go for the best five year rate available, if every penny is important now then go for a two year fix, then you will get a better rate but will have to pay (arrangement fee/advisor), organise and risk the rates being higher at the end of your fixed rate. The rates for borrowing have never been better.

This is just standard house buying and you're over thinking it. Find somewhere, make a cheeky offer and see what happens. Might get lucky, might not, but unless you start things off you will simply not know.

The sellers wanted out fast as they had split so I feel I was lucky!

@StarintheMorning thanks, I'll have to do some serious sums around this! Was planning a 2y fixed as I need the mortgage over 28 years to get the figure up and planned to reduce to 20 in a couple of years when my income is higher. But I'll weigh reducing the term against a potentially better interest rate.

@Loofah01 I know what you're saying (and I am an overthinker ) but it does feel different than how buying did a few months ago because there's now so much uncertainty. It's definitely been helpful seeking insight and guidance on such a massive and completely solo purchase.

Have a look at the Lloyds projections. They’ve got their ‘most likely’ as 5% decline this year and slow recovery for two years, leading to effectively static house prices for a few years. But their worst case is a 30% decline in house prices. There’s a lot of risk in between those two outcomes!

Process is still the same. All players are experiencing the same uncertainty so nothing has actually changed. Go make an offer!

We bought our house for 165k last May, it was on the market for almost a year at 175k. It had an offer of 175k accepted shortly after coming onto the market, but the buyer (an investor) kept trying to reduce the price, so the seller pulled out. The house wasn’t overpriced, just needed a complete renovation (which was reflected in the price) and with that and Brexit looming (plus the sellers said absolutely no investors again) people were put off. I would definitely put in an offer of 180k, you might be able to get it for 185-190k if they are desperate to sell.

But their worst case is a 30% decline in house prices.

Blimey that is interesting/scary! Just had a look, v useful, thanks.

Thanks very much everyone. Sounds like there's always a chance of getting a house a chunk lower. But I appreciate there are a lot of influencing factors, even without throwing a pandemic into the mix.

@ikeamother

I recently remortgaged and was deciding between a 5 and 10 year fix. There was a fair jump in rates between them so I decided to go for 5 year but overpay.

Felt like best balance for me.

I would definitely wait to buy. I can't see how house prices WOULD NOT go down when we are being told to expect a downturn worse than the Great Depression. There may be huge discounts in the next 2 years and you would kick yourself for buying too early. Especially if you are stretching to buy - waiting could mean a much more comfortable purchase price and more choice of properties. With such a strong buying position buyers will be eager to sell to you. In your position I would wait to see how everything pans out. The ONLY downside I see for you if you wait is that you won't be in home or your own yet. Everything else is in your favor. This will very likely be a buyers market very soon.

If you're planning on staying in the house for a good few years, and you have a decent LTV rate then it doesn't really matter if prices go down, if you're not selling or remortgaging it's just a figure on a piece of paper, they'll go back up again eventually.

@likeamother as a side note, regarding a 28 year as opposed to a 20 year term on your mortgage have you considered taking out a 28 year mortgage with a longer fixed period (say 5 or 10 years) and then overpaying your mortgage when you can afford to, rather than forking out the fees for remortgaging in two years time? Interest rates are historically low at the moment and a lot of mortgage companies will let you overpay by 10% of the outstanding balance every year. If you did this regularly it would knock years off your mortgage. As an added bonus by overpaying your mortgage rather than remortgaging with a shorter 20 year term you would have a little bit of flexibility should you have a lean year- you just don't make the overpayments that year. There's a calculator here that will allow you to play around with figures and work out how many years you could knock off your mortgage by overpaying, its quite an eye opener: www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/
You'd just need to check when you took out the mortgage that the bank allows overpayments, although I've never yet taken out a fixed rate mortgage that hasn't allowed me to do this (and I've had a few!). Good luck!

@likeamother I was, we had been in rented for 13 years and had a ton of cash saved and first time buyers, the house is big with land and needed so much updating, so to be fair the price they were asking wasn't even close to a real market value.

Just a right time right place situation, we also got on well with the owner, who was lovely and wanted a family to buy her home.

@Womanlywiles thanks for the advice and this does concern me. The problem is I'm currently living with my H, soon to be separated and it's obviously been hard. Rent would be x 3 my mortgage payments and not worth saving a few thousands on a house price as would cost more than that to move twice and pay the rent for 6 months. I do worry there's be a big drop though after I've bought. I guess I just need to approach with caution and not consider paying the 'pre-pandemic' market value.