Help, gazundered!

[RachQ86]

We put our flat up for sale last year and just into the new year we accepted an offer from a young couple for £5k below our asking price which was £450k. Everything was progressing and we were due to exchange just before lockdown happened and everything went on hold until this week.

We have now heard from our agent that our buyers have now sent a revised offer for £390k as they claim they need to add more to their deposit from the mortgage. I don’t understand, how does bringing the price down increase their deposit?

We bought the property for £410 a few years back so there’s not a chance they are getting it for less that that, how should we approach this as we don’t want to lose them as a buyer as it took long enough to get the offer in the first place, but we’re furious they would offer a price and then change it!

This is such flawed logic! "please buy at the top end of the market that is about to drop precipitously because, in the future, you will definitely make a profit"

This ^

If you weren't needing to sell your house in the early 90s of course the drop didn't matter to you then and you were fortunate enough to later benefit from a huge rise in house prices. If someone is planning to buy now when the outlook is terrible, the situation is an entirely different one!

OrangeDutch We didn't wait 25 years for the market to turn, and I think people were spooked about negative equity too easily. If you buy a large enough house, you are future proofing to a certain extent. Our second house we had for 4 years. We bought at £58k iirc, and sold at about £83k. The mortgage rates were 12% at one point.

Yes, life can change, but you don't have to sell. I somehow ended up just outside Brussels for the best part of 13 years, but we kept the house and rented it out. We didn't need the rent to pay the mortgage, have made losses on paper, but making a profit wasn't the aim; that was to keep the house ticking over til we moved home, which we did last year, and a bonus of being finally mortgage free.

Having rented in Belgium for that time, paying a mortgage is far preferable to paying rent, especially at the levels charged there, and the annual increase...but no point in us buying there as the costs are huge, and you need really to keep a house for a decade just to make back the costs, which are greater than here, and we knew we were coming home.

Knowing The media says the outlook is terrible, but is it really? A couple of articles I've read reckoned that as interest rates are so low and the banks are being closely watched and expected to be reasonable, that there will probably be a period of stagnation in the market, and perhaps a drop of 4%. That's a bit different to the gloom and doom scenarios others are positing.

We sold and bought in 92, and looking back at what my parents paid for their houses and what they are worth now, house growth seems to keep on happening for every generation, not just mine. I must admit, I'd have given my eye teeth for the current interest rates though. We bought this with a fix of 10.7% and thought we'd done well, especially when rates shot up to 18% on Black Wednesday.

A drop of £55k? Fuck that for a game of soldiers.

Someone tried that on me years ago when I was selling my little house to move to another part of the country for my job.
I told them no and took it off the market and left it empty whilst I rented in the south. In 6 months the prices had increased and I sold it very quickly for £60k more than I was originally selling it for.

I know that the young woman originally wanting to buy (my perfect newly decorated house) was already at her limit finance wise so I think she was chancing her arm. I’d already thrown in all the white goods, carpets and curtains but I wasn’t going to suddenly drop the price and I resented her for trying it on. Luckily, I wasn’t banking on the sale to be able to move at that point, as I was already living elsewhere.

The bottom line is, can you afford to lose the sale? Unless you are really desperate, I’d tell them to get to fuck.

@orangeDutch

A shorter term buyer today would look to weight the costs of rent over 5-7 years and keeping deposit invested v. mortgage + stamp duty + home improvements + maybe appreciation in the home value.

Deposit invested in what exactly? My stamp duty was next to nothing.

I fit the description of the person you've described, and having rented (in London) for the best part of the last decade, I can safely tell you I feel utterly relieved to have bought my own flat this year. Yes, I've spent money on renovations, but I got my flat 35k under asking, so felt I could justify it. My mortgage is £200 lower than the rent I paid, and the bills will work out to slightly more. However, the utter relief I feel to be able to live in my own home, vs house sharing with a minimum of 3-4 people is priceless.

I don't see it as losing money before you've completed; I see it as securing the property you want to be in. People don't mind losing money when they buy a new car and it depreciates the minute it is driven off the forecourt, and will never regain the value, but a house will make the money back, and then some.

Agree with this 100%. I wasn't thinking about how much money I'd make/lose. For me, at the forefront of my mind was knowing I'd have my own place, that my deposit was no longer sat in a low interest account, and not having to rent with others again (I couldn't afford to rent a 1 bed in London).

Imagine if you were dress shopping and you agreed to pay £100 for a dress. When you got to the till, several other women were standing there paying £85 for the same dress. Would you still hand over your credit card and pay £100? Of course not

But if £100 is the price then no one would be buying the dress apart from those willing to pay and if it doesn’t sell then the store will rent it out till it does sell

People can offer it doesn’t mean you are going to accept.

If I can’t afford a £10 million house or even a £500,000 house. If I only have £400,000 does it mean the £10million house or the £500,000 house is not worth £10million or £500,000 and prices have hit the floor or does it mean I should look in my price range at houses I can afford.

It means nobody is going to pay before CV prices if most people are saying prices will drop.

I am sure prices will drop for a little while and there will be bargains for those cash buyers who buy at auction but if you need a mortgage then you might be lucky to get a discount.

But unlike the early 90s when interest rates were sky high and for a lot of people if they had even an average mortgage the rent of their house wasn’t going to cover the costs of the mortgage
Today we have .1% base rate and people are more familiar with BTL.
I can see people staying where they are and not moving or if they can’t get the amount they want or think they will go into NE they will rent out their house and move on into rented themselves

Then because of lack of properties for sale the prices start up creep up again.

There's a difference between offering a lower amount because that's now what the buyers can afford (which appears to be the situation here) and offering less because the value of the house has reduced.

In the first scenario I'd say they're trying it on, and tell them to get stuffed. In the second I'd have to do my own rese6to see how they've come to the valuation they have and consider just how desperate I was to move.

*research

Funnily enough I've just read an article on Rightmove which says new estate agent enquiries are already pretty much back up to pre-lockdown levels which suggests the demand is still very much there. They say this also suggests there might not be as big a house price slump as predicted (although it could also be people thinking they can swoop in, take advantage of the situation and grab a bargain!).

@Winederlust Demand will always be there, particularly in London. A lot of what happens imo is also dependent on the govt's next move with HTB and whether this branches out to non-new builds too. The issues we've seen with rising house prices imo were a direct result of HTB. I wonder if the govt will be there to bail out thousands upon thousands who find themselves in negative equity having purchased an overpriced property with a 5% deposit, just because this was the only way they could get onto the property ladder. IMO new builds (particularly flats in London) will be hardest hit. Developers will have to cut off their noses and price properties realistically. I have friends who have wanted a new build, but didn't want to over pay on them by 50-75k. They are now rubbing their hands with glee, and waiting for the price drop.

It’s quite possible they are trying it on, so hold your ground. I wouldn’t sell it at that price.

I find if you look on Housepricecrash forum and then do the opposite. Things don’t go far wrong

Funnily enough I've just read an article on Rightmove which says new estate agent enquiries are already pretty much back up to pre-lockdown levels which suggests the demand is still very much there.

Funnily enough any article on Rightmove is not exactly going to be unbiased, sterling journalism (not that most newspapers do much better).

But Rightmove would say that wouldn’t they.
In my area lots of properties are coming onto the market since opening up again,and there are also new reductions since opening up.
But it does not mean prices will not drop.
No matter how much you try to convince first time buyers that it doesn’t matter if the value of your house drops,no one wants to have overpaid on such a large purchase,also known as the Greatest fool,getting in at top prices just as the market is turning.

@thegcatsmother- I'm no expert at all and even Economists never seem to agree but the chances seem very high that house prices will significantly decrease. Even the government is warning of a massive recession, after furlough ends there will be even more job losses, many people (particularly self employed) are struggling already and that's before we have even started on Brexit. Interest rates are likely to rise surely?

Not saying I agree with Rightmove...just saw the article right after I'd posted and thought I'd mention the other side to the fear mongering out there!

I wonder if the govt will be there to bail out thousands upon thousands who find themselves in negative equity having purchased an overpriced property with a 5% deposit, just because this was the only way they could get onto the property ladder.
But this is nothing new. Early-mid 2000s people were buying property with 105% mortgages and paying interest only. IIRC Govt didn't bail those people out in 2008/9 when everything crashed.

But this is nothing new. Early-mid 2000s people were buying property with 105% mortgages and paying interest only. IIRC Govt didn't bail those people out in 2008/9 when everything crashed.

Were these properties being purchased as part of a govt backed scheme like the HTB? I was still at school during this period so don't have any idea what was happening during early 2000s!

I think this will happen a lot. Unless you can reduce the purchase price of the house you are buying by the same percentage then I'd not sell unless you have to.

The problem is that house prices could reduce by up to 30% (if you believe the media) so you need to think that any house you buy, now could potentially go into negative equity depending on your finances etc. If you reduce yours and pay the same for the house you move into, could see you out of pocket if the housing market crashes in the next few months

But this is nothing new. Early-mid 2000s people were buying property with 105% mortgages and paying interest only. IIRC Govt didn't bail those people out in 2008/9 when everything crashed

I remember working with someone who was exactly in the position back in mid 2000's ish. Her and her bf had bought their first house a few years earlier and were then in negative equity by a fair amount. Took them years to dig themselves out of it.

I thought people who have used h2b in London were the middle classes. It was for the people with high incomes but who were struggling to raise deposits due to renting costs.

I was in negative equity for years and years in the late 90s - mid 2000s, for at least ten years. The prices did pick up again, and some, and I still made a good profit in the end, but it felt like they never would for a long time. I guess we were lucky then that prices were still reasonably low. I rented out my negative equity flat and bought another little house with my fiancé. The flat just about paid for itself until prices picked up again.

Hopefully buyers won`t be basing their economic futures on Rightmove articles.