Offer 30% below asking

[CheekyFakers]

A number of valuations all arrived at the same marketing price.

Healthy number of viewings to begin with (though feedback notes didn’t quite match who came through the door, numbers wise) but no offers. To be fair, this was right in the mini-budget aftermath.

After pressing the agent, one chap came to view. Took a few days to come back with an offer 30% below asking on a £1.7m property.

Is this pure CFery? Is the market that bad? Or have agents been known to send associates round to view and make guaranteed ‘no, thanks’ offers?

If it’s pure CFery, I’ll be making a note to try this myself!

Try telling some sellers that though?

There are some CFs out there though. I’ve heard today of someone offering 20-30 pc under asking price on numerous properties without even actually viewing them, just looking at them on Rightmove. He just rang up the EA and made his offers, chancing his arm and presumably hoping that there’s someone out there desperate enough to take him up on it.

And yes, I know an asset is only worth what someone is willing to pay for it. The flip side to that is that if that asset is not available for purchase then it’s perceived value is largely irrelevant. Although there will always be a small percentage of forced sales, people will sit tight and not sell unless they absolutely have to. Stagnation all round. It’s happened before.

Because they are legally obliged to forward all offers to the vendor.

"The flip side to that is that if that asset is not available for purchase then it’s perceived value is largely irrelevant."

Then it is not part of the "market" but it still falls in value if a similar house nearby sells for less, which just goes to show that there really is SFA sellers can do about a falling market, there are ALWAYS people who need to sell, and more people "need" to sell when things get tight. It`s happened before. The cost of borrowing determines house prices, not sellers.

You can borrow what you like at whatever rate you can afford but if there’s nothing for you to buy then it’s irrelevant. The way it’s going, there won’t be a market for buyers to participate in; or at best, only a very limited one. As I said, yes, there will always be some distress sales which will be few and far between but the majority of owners will sit tight, certainly for the time being. Unless they absolutely have to sell due to forced circumstances, there is absolutely no obligation for property owners to sell at a price that suits potential buyers’ circumstances. The cost of borrowing is one factor that affects the notional value of a house which has no impact until it actually comes to be sold. It’s a negotiation: you can offer me a price, I can say no thanks.

Tough times ahead.

Houses like all other assets are priced by the sales taking place. Forced or not,
we don’t have to have many sales to set a price for the whole. When prices rise, it’s the same but for a higher volume. Still a small percentage of the whole though.

And people who don’t have to sell at that price simply won’t.

In a distressed market where we are heading repossessions and auctions will determine the market value and a few sales where folks really must sell and people must buy. Where I am Kent/London borders a long-term EA has just gone bust.

Why would you sell if you didn’t want to.?

He starts off with 30%, you say 10% is my final word, you agree on 15%. It always was thus (apart for the last 2 crazy years, but they were the annormality).

Maybe there's a reason why they offered 30% less, ask the agent. We once made an offer like that, with good reason (house needed a ton of work, seller and agent were delusional) - seller rejected our offer, but then over the next few months reduced their asking price a few times, down to what we had offered! It still didn't sell. A hell of a lot has happened since August OP. Take all these things into account. Reject the offer or negotiate.

People who need mortgages have effectively had the amount they can afford to borrow reduced by 30% due to the higher cost of interest.
There will be a lot of people who will be remortgaging and their repayment will have gone up by 50% ish. If you can't afford to pay your mortgage you have to sell up

Debt, divorce, death are the old ones. Nowadays you can add in employment as there’ll be a fair amount of people changing location due to the recession.

There's no way the August valuation is valid any more. We're about to enter a steep downturn as worldwide the impact of China's housing crisis hasn't hit yet & Russia's still at war.

I wonder if you live near me, people were asking piss-taking figures in the summer and several have dropped by 300k.

Yeah the last house I bid on went for sale at 235000, bid up to 275000. So would it be unreasonable to now bid 235000 on a house priced at 275000? I think the ea's were only just 'catching up' with how high some prices were reaching when everything happened. Some sellers are still anticipating high prices, whereas before they weren't and then getting pleasantly surprised. I've been outbid so many times this year even though I said each time I could move without selling first.

The Mail has an article today on what to do.

www.thisismoney.co.uk/money/mortgageshome/article-11435899/My-house-isnt-selling-reduce-asking-price.html?

Can you tell us about the last time this happened, that there was no market at all for housing? I think you are just making stuff up TBH.

Very helpful. Might as well use a chocolate fire guard.

20+ years ago we sold a 2 bed flat in South London for 50% more after owning it for just over 2 years. We had replaced carpets, painted and changed kitchen worktops & sink but that was all. I don't see how a sale price in 2003 is in anyway relevant. The same flat we sold is now worth between 3 and 4 times what we sold it for.

It is worth what someone will pay or can borrow for it, I very much doubt the 3 or 4 times value will be achievable now. 20 years ago was the start of the bubble, this is the end of it, no one will double their money with property now it is losses all the way from here for recent buyers.

As a chapter in Freakonomics handily explains it's really not true that an agent benefits from a higher price and has an interest in pumping them up for their own financial benefit.

Agents fees are approx 2%.
2% of 1.7 mill is 34k commission.
2%of 1.6 mill is 32k commission.
2% of 1.5 mill is 30k commission.

A reduction of 200k in asking price gives them a massive 4k cut in their selling bonus. What you actually want to do is make sure they're not railroading you into selling at a lower price in order to get their commission done and dusted.

I work in finance and can help with this.
Any market has bids and offers (people wanting to buy are bidders, people wanting to sell are offering).
If there is no one bidding (clamouring to buy) then price has to auction lower until the market aka buyers (in this case) decide that this is a price worth buying at.
Housing is an illiquid market anyway ( not loads of buyers underpinning prices) .

To prove it's a market then lower your price to 900k. I would wager Lots of buyers will come in. As price rises the demand will taper off and the market will tell you what your property is worth in current market conditions.

If you think a 30% drop in price is harsh then go to am online mortgage calculator.

Type in a 1 million pound loan at a 20/25 year repayment period. Type in a mortgage rate of 2% and see what the monthly payments are for an interest only as well as a repayment mortgage

Then Type in a 3.5% interest rate which is what many trackers are offering.

Then Type in 4% and see what damage of just a 0.5% increase does to a monthly rate.
Then type in a 5.5% interest rate (approximate fixed rate mortgage % at the moment). See how much that costs.

That's why a valuation in July/August when longterm mortgage rates were at about 2% doesn't mean much.

Err no. My house isn’t worth anywhere near that amount, or in London, but I’d decline and sit tight if they offered 30% less. Very thankfully I don’t have to sell. I would just like to.

It's a crazy market right now. A 30% drop on an inflated estate agent valuation from 6 months ago could well be realistic. Best thing to do is just keep it marketed and see what other offers you get. Sorry to say but if you were intending on moving quickly for an opportunity, It probably isn't going to happen.