HELP! Due to exchange tomorrow. Buyers want to drop a further 25k. Is there anything we can do?

[MamaChris]

We accepted an offer 50k below asking price on our flat 3 months ago. Buyers have been awkward all the way, and now want to drop a further 25k, the day before we are due to exchange. We can't afford this, unless the next property in the chain takes the hit too, and we really don't think he will.

About to speak to agents, but does anyone have any advice? Is this likely to be a negotiating position or might they really pull out if we say no?

Scared.

so sorry you are going through this...
maybe it is a blessing in disguise?
You bought your flat a while ago so chances are you will not be in a negative equity situation should the prices fall more,
BUT if you sell and the prices fall once you have bought your new place you might be? (am I mistaken?)
I would also tell them to buggar off,, and if they dont come through then do renting - it is a great way to get to know a new area before making any long term commitments.

they bounced back because the government made credit artificially low and failed to regulate lending properly.

that is not as likely to happen again at the same level now that the taxpayer has had to foot the bill for this sort of tomfoolery.

Not in the 80s/early 90s they didn't - the interest rates were high, I remember them hitting 13% before we left the ERM, and they may have been higher, and credit was not easy to obtain then. Even with my dh in a very secure job, and me working too, getting a mortgage was very closely linked to multiples of 3 x joint max, and the building society preferred it to be 2.5 joint if we could manage it.

The house prices have risen since then and also rose in the late 80s after an earlier economic downturn.

Hope you do hold firm MamaChris, how you can afford to take such a bit loss? Agree with ScaryTeacher's reassuring assessment.

If the GOTS (gazundering opportunist tosspots) walk away and your seller won't move on price either, then as a positive decision you can instruct a better EA and/or also hand over instruction to a letting agent. There's plenty of time to rent for January, sell when a decent offer comes through/market picks up, as it will in London (supply/demand and all that) and buy a house you want at your leisure.

I was a recruitment manager for IT in 1998, that was the IT boom, now lots of programmers struggle to find work, crap ones were commanding £40 an hour in Birmingham in 1998.
Then there was property, that took over for 8 years.
It's a nothing industry. Of course they'll be another boom but it won't be property for a long time, houses will be homes people live in and provide shelter, instead of a bloody investment.

Scary teacher, you've just made my point. The average UK salary is £22k (and I find that hard to believe) and average house is £175k, the maths just doesn't add up.
3 times a salary is affordable.
When two teachers on £25k each cannot afford a 3 bed semi something is wrong in the world.
When mothers HAVE to go back to work to pay mortgages otherwise they can't own a 2 bed house, what is the social cost.
Interest rates hit 15% for one day, but people talk about it as if it went on for months, it didn't.

Good point SIFTW. We're not in negative equity. But not far off (bought in 2003), which is partly why we'd like to sell now before that happens.

And if we bought the new place, we would have expected it to be worth less than we paid pretty soon - our offer got pushed very close to the asking price because we failed to hold our nerve on those negotiations.

So selling and renting maybe makes sense thinking of it like that. And we need to try and hold our nerve over the next day or two and get max possible for current flat, and again when we do try and buy.

My homes have always been that Katie; the current one which is rented out as dh was posted abroad was bought for £94k in 1992 and when last valued in Dec 2006 was £300k, which is an average rise of £14200 per year for the 14.5 years we'd owned it to Dec 06. I have no idea what it is worth now and am not bothered, as I am not planning on selling it for at least another 10-15 years, by which time the mortgage will be paid.

However, the point is that despite there being a recession within that time, the price of the house has risen, as the price of the previous two did, despite the economic downturns.

Interest rates also went up to try to control inflation.

To the contrary Katie - it did go on for a while, but in the 80s. Being a sad woman I have the changes to my mortgage rate still in the filing cabinet and the rates in 1988-1990 went up to 14.5% in October 1989 and began to decrease slightly in 1990. By 1992 the rates were down to 10.99 and I remember being pleased to get a 5 year fix at 10.8% when we moved that year. After ERM the rates dropped to 7.0% approx, which was great.

As to teachers not being able to afford a house, I suppose it depends where you live; all the teachers I worked with apart from the Newly Qualified unmarried ones, owned their homes. You choose to live in an expensive city, you will pay more; choose a different area, you'll pay less.

By the way, I think the rates hit 18% on the day we left the ERM, and then tumbled fairly quickly thereafter; but they were high for a while before that, especially in the period I mentioned.

Expat katie and closed are the voices of reason

scary you imply (but don't say directly) that house prices climbed in the early 90s I think you'll find they bottomed out in about 1996 trickled up very slowly and have been stratospheric recently. Also as katie says interest rates hit 15% for one day only salary rises were also a lot higher too.

As katie says you made her point 3x is affordable 7x joint for grotty little flats/terraces isn't

half the people on here seem to live overseas the others in lalaland I'm at the people on here waiting for the market to change perhaps you'd like to start a thread telling us just how that's going to happen, as OPs buyers show so clearly once people get the scent of falling prices they just pay less and less.

rental market is flooded here rents are dropping
there will always be forced sellers who will drop prices in order to sell.

re the optomistic poster who suggested 150K for a 2 bed flat in London, I'm guessing the costs are 75k being 25% ie flat was on at 300K but you need to remember the asking price was never what the property was 'worth' just some ones estimate at what they thought would get them the instruction. EA on here have posted at how they are incentivised for every price reduction they achieve

yes think about it who can afford 300K for a flat in finsbury park?
OP are you under the 250K threshold? (not expecting an answer BTW just a thinking point)

OP only you know what is going on in your life and how much you 'need' to sell, also how much interest you had at each price /what is on in your area /what is selling, I agree the practice of gazundering is shitty it's been the other way for soo long now but you need to take what you know about your local area and make the decision that's best for you.
(maybe ring a few other agents tomorrow and see what they say when you say you have something to sell)

good luck whatever you decide

Not read all the thread, sorry but would just say that if buyer is getting mortgage funds to buy, then the price reduction will have to be reported to his mortgage lender (usually in writing) and a reissue of the the offer will have to be received before the transaction can proceed. This has to happen for everyone in the chain who buys for a different price than is listed in their mortgage offer.

Consequently last minute price changes where mortgage funds are concerned are notorious for delaying procedure.

Sometimes it is a deliberate delaying tactic becuase the buyer has not yet gotten a mortgage in place and was never goig to exchange at this price.

I would tell them to get lost personally. But then, I do not like the feel of being bullied into a dark corner!

With the comment about lending multiples I was reponding to Expats post about lending not being regulated properly, and in the late 80s/early 90s, it was. I don't think I was implying that prices were going up in 1992, we had to drop a little on our sale then and our vendors dropped from £139k to the £94k we bought it for.

I also don't recall either my employer, or my dh's being generous with salary increases at that time.

I may be overseas, but I do read the papers and watch the doom merchants on the BBC, and I'm not in Lalaland either. I have been a property owner with dh since 1986, and each time there has been a recession, and some have been really bad, the price of property has recovered. Historically, they do this, so that is why I think it will happen again.

You also need perhaps to look at irresponsible borrowers - we've always kept to the 3x joint equation as we didn't want to end up in the shit. Just because the money is on offer doesn't mean you have to take it.

Bottom line is if you are going to sell you need to do it for enough to clear your mortgage, cover your legal costs and EAs bill, and have a deposit for the next place. If you can't do that, don't sell and look at alternatives like commuting, weekending, or renting out yours and renting in the new area.

I don't recall my employer ever being generous with salary increases

Well, you said that the salary rises were a lot higher - not in the public sector they weren't.

the OP has said the buyers are cash buyers, which means they are in a very strong position to negotiate or walk away.

Scary teacher, lol at your rather smug comments regarding those "irresponsible" people who have borrowed more than 3 times their salaries. If you had been a first time buyer in the last few years, what do you think you could have bought with 3 times a teacher's salary? The situation is very different to that of 1986 or 1992. Prices have become hugely overinflated and have a long way to fall yet.

Thanks Oranges! Sounds familiar! Still a problem if OP needs mortgage finance to buy her new property.

It is SO irritating when they do this,...for very small amounts it is one thing, but for such a whopping amount is a bit suspect in my view.

Would still tell them no way.... I think to take a hit for £25k is huge in this market.

I wasn't trying to sound smug - nor was I aiming it at first time buyers - but the housing market isn't just comprised of first time buyers is it? It's the people who have big salaries and are over mortgaged who are hit as well, and who treat their properties as cash cows,rather than a home. My houses have always been homes where we've stayed for a while and then moved if we could afford it.

On my salary point I could have bought a small two bed terrace for about £79/80 in the nearest market town in Devon, and for less than that in Cornwall. It depends where in the country you live. If I'd looked in Plymouth or the new developments in the surrounding areas, I expect I could have found something as well.

House prices may fall, but historically they move upwards, and they will again. The house we owned in 1988-1992 we bought for £58k and sold for £80k+ approx...it was last sold in 2005 for £245k. That's an upwards trend; as is my mums, and mine.

They are horrible people to have pulled this stunt. After thinking about it last night, I decided that if it were me and I could afford the hit, I would sell and move on to your new life. Getting on with your life is the more important thing here and having a rental property in London when you live elsewhere might not always be easy. Also there are too many properties for rent at the moment and rents are being driven ever downwards.

I hope you are OK whatever you have decided.

I'mwith Swedes - who's to say you will be able to rent it easily (ourpart of SW London is flooded with rentals) and if you try to sell again, who's to say next peoplewon't offer even lower? At least look into renting in your new area.

Good luck today MamaC. Come back and tell us what happened.

Swedes word of caution should be listened too, regards the rental market.

I have just been made aware that my tenant has paid 90% of her rent the last few months. Assumably because she has taken it upon herself to adjust her rent to the market. I have the choice between giving her notice and find a new tenant (which wont be easy and a hassle I wont take), or grin and bear it and deduct it off her deposit. It is better to have a tenant that pays some rent than having an empty property with a mortgage on it.

However, I would call their bluff regards the cut, and try to ride it out and see what happens.

thanks swedes. we are not ok, but think it's the least bad, iykwim. and "moving on with our lives" is the right phrase. that's just what we need to do.

waiting for estate agents/solicitors to get their arses into work so we can get this thing done.

our plan is to say no till lunchtime, then say 10k off, then 15k etc, but say we want to exchange today, and want 4 weeks till completion to find somewhere to rent (buyers want 2 weeks).

1dilemma your figures are spot on.

I've not had a chance to catch up on all the posts on this very long thread but want to wish you best of luck today with whatever you decide.

The prices that properties are selling for now reflect all that is known about the future direction of house prices. There is no sensible reason to expect them to reverse direction and start shooting back up in price over the next few years, so don't bank on that.

Also - we are viewing flats to rent today. Agents have called us to let us know about flats we were interested in dropping their rents by 20% or more to attract tenants. The last, very gloomy, agent I spoke to said that "with all this uncertainty, not even tenants are moving". He hinted that all rents advertised are now very negotiable for suitable tenants.