Offering under doesn't work

[Peachyroll]

A lot of advice on here strongly recommends always offering under asking price by 5-10%. And lots of people here say they get these kinds of offers accepted all the time.

Am I missing something? Currently looking for our first house and none of the owners will remotely entertain accepting anything less than (sometimes hugely inflated) asking prices. Even a house we recently saw that had been on the market for 4 months, with hardly any viewings and no offers. Needs some work and modernisation. We offered 6.5% less than asking price. The owners rejected and said they're still holding out for asking price.

For context, we're looking for a house in Surrey/Sussex commuter belt so appreciate it's a more desirable area.

@rainingsnoring ,

Fair point.

If you have time and patience and are in a good position, you won’t have to pay up.

Property isn’t like stock or bonds, it is a really inefficient market.

I've actually found this alot, like the fixer uppers don't seem to be discounted enough compared to the ones that are "done" the house we're buying is a fixer upper, the "done" one that sold last year was £35k more, this house would probably need £50k to get it to that same standard (and what I based my initial offers on) it feels a bit unfair but it is what it is. Xx For us it'll get a lick of paint but no major reno's for a good while.

But thay standard will be exactly to your taste. The done up house is a compromise because it's somebody else's.

Two simple phrases:

Seller "this is my house and I determine the sale price and to whom I sell it to".

Buyer "I am prepared to pay x for the following reasons. That's my final offer". It's on the table until noon on x".

It's as simple as that.

I agree - in particular prices round here often don't seem to take into account the hassle factor, because on top of the costs of renovation, you have to have the capacity to actually plan and organise it and probably live In it for at least 12-18 months as is while you get all the permissions and tradesmen lined up.

But, at the same time, if MN reflects real life (which I can neither prove nor disprove), a lot of comments on the RM link threads like "overpriced - it needs a new kitchen and bathroom" actually mean "the current kitchen/bathroom isn't to my taste", rather than it's unusable and therefore needs to be priced in vs comparable properties. There's a difference between a house being overpriced and it not being the house for a particular buyer IYSWIM.

As PP said, it's hard to generalise as every house and buyer/vendor are individual.

We are buying at the moment and I point blank refused to increase our offer on property A but did so on property B- but if I put the two side by side on here and said "which one is more expensive" I'm pretty sure it would be a split decision.

Yes it’s very subjective what a house is “worth.”

MN comments need to be taken with a pinch of salt because some people seem to think what happens in their area is reflective of all areas, which isn’t true of course. So they will cry “it’s overpriced!” at pretty much any property in an expensive area but especially London. The house hunter asking the question would be much better doing their own research using the sale of comparable properties in that particular postcode to ascertain whether it is overpriced or not. And even then … some just do seem worth paying more for than others, as you note with your property B and the reasons why are nuanced.

I think it's also proportionate and depends where you are in the chain. A 10% under offer is likely going to impact the first house (lowest value) at the bottom of the chain even though the total cut is less than 10% at the top end of the chain. People nearer the top tend to be able^ to afford a lower offer.^

@crew2022 yea- that’s a really good point. When I bought my first flat getting even a few G off meant I could afford to buy furniture rather than sitting on the floor until I’d saved up from a. Few more pay cheques. Imagine my joy when the vendors said they were leaving their furniture ( emigrated). I’ve actually still got the bed frame they left and that was 23 years ago!

Yeah this is what's really thrown us. Houses in a poor condition are listed for as much as 'decent' houses. Makes no sense. We saw a house this weekend that was slightly over our budget because it's been on the market for months. It looked OK in the photos, but was in a bit of a state inside (really old, mouldy bathroom and a tiny, busted kitchen) and stunk of damp and dog piss.

It was just 2 streets over from a beautiful, bigger house we lost out on a few months ago, which sold for less. Wish we'd just upped our bid now, but we had only just started our search, were trying to be sensible, and didn't know what we know now!

I've seen a lot of these houses that need lots of work and are listed far too high. The owners are v unrealistic. Buyers aren't buying them now as the prices are far too high relative to the cost of work. I see so many languishing on the market.
I think these types of houses, usually belonging to older people, have fallen in value much more compared to turn key type houses and the sellers just haven't cottoned on.

@rainingsnoring Exactly, they're chancing a high listing price, but they're not selling. Eg. the owners of the fixer upper house we saw at the weekend did the viewing. They seemed quite aggressive and frantic the whole time, we got a strong impression they're fed up of months of having to do viewings that go nowhere. And the guy kept brushing off all work that needs doing the whole time, trying to justify the asking price he must know is ludicrous.

I don't think they necessarily do know that the asking price is ludicrous. I see the comment from sellers on here that 'my home needs work but the price has taken account of this' and they get cross when the potential buyers try to negotiate. They don't seem to understand that their price is purely subjective.

Using the example you have given, which sounds grim, this is the way they live so they see it as entirely normal and acceptable. Historically, the market has risen in the main since mid 90s (barring GFC crash) and people have been able to market at high prices and the market has risen to meet their desired price. Secondly, there have been masses of 'property developers' during the same period who have been able to do property up and turn a profit so were keen buyers of this kind of property. This is much harder to do now with the cost of materials and labour having doubled and the market falling. Unfortunately, the sellers of properties that clearly need significant work have just not grasped this still.

I linked to this already. It shows LR prices (approx 6 months out of date because of LR delays). Prices have definitely fallen from peak in most areas, for most types of homes especially in the SE and SW.
https://otta.property/trends
My advice would be to take your time and not overpay just because there is a small degree of pressure. You will likely regret it later. Have a look at movinghomewithCharlie on YouTube. Despite him winding one poster on here up, he has been v useful to many, especially FTBs.

As well as some vendors not realising just how much work needs doing to their properties, a lot of them don’t seem to appreciate how much more expensive renovations have become. What was £25-30k pre Covid is easily double.

The fixer upper I viewed a couple of months back it’s coming up for a year on the market now, it was originally priced higher than “done” properties on the same street and has dropped in price by £100k. I don’t think it’ll shift without having another £50k + knocked off.

I am finding in South London now that if a property has been up for about a month, sellers are reducing the asking price themselves. In that first month, most buyers bothering to make an offer are going to make very low offers (probably rejected). But it gets sellers realising by the month mark that their property is overprice for the current market and it will now get worse because The "busiest" time in the market is Spring and it hasn't even been that busy this Spring 2024. I think it will be a quiet summer too.

I think most sellers know it is a falling market.

TiredCatLady · Today 09:26
As well as some vendors not realising just how much work needs doing to their properties, a lot of them don’t seem to appreciate how much more expensive renovations have become. What was £25-30k pre Covid is easily double”

Agents price based on the condition of the property.
The cost of renovations isn’t the vendor’s concern.

I kept getting told that too.

Soon realised it's because they bought their houses years ago when you could do that. The market is not the same any more.

It is if buyers won't buy your property knowing that the cost of reno is high. Fixer upper properties are sitting on the market for months and months for a reason.

Well it is if no one will buy it because it is priced far too high once buyers have taken the cost of renovations into account.
As I have pointed out above, agents and sellers are pricing these sort of properties too high in the current market and they aren't moving in the main.

I said earlier that I have seen much faster reductions this Spring, sometimes within a month or two which is very different to the previous 18 months where reduction a 2-3% reduction might happen after 6-9 months. Some sellers are catching on, just not all!

My late relatives house was a huge do-upper BUT it was in a fab location in West London. That is what sold it. The area had very very few houses that people could do up to their own specfications and the area was such that people who were buying there had the money to spend £££ on making the house to their specification. Also once in this area people tended not to move EVER! Lots of older people in the street with huge houses yet they clung on for grim death.

I also think that some people on both sides are clueless. You see them on property porn programmes or just spouting off that they know far far more than the EA, the market and will just wait until things change. Often they are still waiting years later....

FWIW, the observations on the area I watch, are that well maintained properties are priced higher than the fixer uppers, but only by about 30-40k, initially. They go SSTC within a couple or threee weeks. The fixer uppers are not shifting for months, and not before 25-40k reductions ( off @ 450/500k initial asking).
The fixer uppers are bad value for money from what I can tell.

It certainly wouldn't work round here. Each sale has about 5 offers and buyers told that all houses are going over the price. Some by £30k!

Are you just offering without backing up your reasoning as to why you're going below?

When we put in an offer below ask, in a very desirable area, we pointed out the difference between the property and the rest of them, the work required to bring it up to times and potential pitfalls. We made it sound like we were doing a favour taking it off their hands to fix.

Obviously, don't over do it but pick something wrong that would cost a lot to fix and use that as the reason, you'll find people will more accommodating to at least review the offer rather than return no and stick to ask.

Depends what the demand/supply is in your area as to whether you can get a discount I suppose

I often think doer uppers are bad value for money compared to ones in good condition.

That’s why I’ve always bought properties in good condition because I can’t be arsed to go through all the stress of renovations when the price doesn’t make it worth while 🤷🏼‍♀️