Reduce asking price by 10% or offer 10% deposit paid?

Mathsguy

Hello,

I'm after a quick bit of advice, or rather just a few different opinions from people here I suppose.

Here is my question:

Which do you think would be more attractive to prospective buyers: To drop the asking price by 10% or to keep the asking price the same but offer to pay the buyers 10% deposit. Is this even possible / legal etc. Are there any other complications?


Here is the background to my question:

I have had my 2 bed property on the market for about 2½ months, and have had 3 viewings in that time. All have said it was very nice etc etc and well decorated and presented but have had one reason or another not to buy or to go for a different property. We reduced the price from 140k to 135k about a month ago but so far it has not drummed up any further interest. Looking at other similar local properties on the market, I think we are very well priced, with only poorly decorated or rather run down (‘in need of modernisation’ in agent speak) 2 bed houses being cheaper.

We are pretty keen to get it all done and dusted sooner rather than later due to job moves in August and, of course, because of the falling market so have been thinking of ways to get things moving again in these slow times. Considering I would happily accept an offer made today of 125k, I have considered dropping the asking price to 125k, but am conscious that even if this does get more people through the door, we might only then receive 120k or 115k in offers. The alternative is to keep the price the same but offer to pay the 10% deposit, in which case would hopefully spark interest from first time buyers keen to get onto the ladder but haven’t been able to because of the disappearance of 100% mortgages.

Thanks!

RHemmings

The "10% deposit paid" thing only works if the surveyors acting for the mortgage lender value the property at the sale price. Are they likely to do so? And are there legal consequences if you represent one price to the mortgage lender as the sale price, while in reality you gave a massive cashback?

Reducing the price by 10% is a lot simpler.

Personally, I'd be insulted if someone offered me "10% deposit paid".

AJ1982

Agree with Hemmings on this, also I have steered clear of such offers, including Stamp duty paid, as it gets complex to claim, I would rather have the property at the cheaper price, than worry about money comming after... when in reality its needed "before" completion. Most such offers ive seen only affect "after" completion. Eg, a cashback or similar once you moved in.

Mathsguy

I see what you mean about the surveyors agreeing on the value, but wouldn't see why not, as I'm not inflating the price first, to then be offering a discount later. Not sure about legal consequences, but you do see similar offers like this on new builds from the big construction companies like Barrats etc. so presumably it's fine... there wouldn't be any tax consequences anyway, infact, Hector would be better off this way!

The idea is to provide the deposit at point of sale, rather than as a cashback after completion. I.e. you get your 90% from a lender, and the other 10% comes from me, which then is just returned to me upon completion. This way, first time buyers who are otherwise stuck in a rut because although they have the income to aprove a mortgage, they don't have £12,000 savings for a deposit on a 120k house can infact now afford a 130k house.

I'm not sure why anyone would be insulted by this way of doing things, but interesting to know your thoughts, thank you.

terrierlady

How many building soc will accepted gifted deposits of 10 %

ruggedtoast

Why would you do this; what on earth would be the point? This fairly dubious practice has been used quite widely be developers and property clubs to over inflate the price of their buildings to make the local price higher on the LR stats and sell to people who need deposits but dont have them.

Just market your house at the price its actually worth and someone will buy it.

Mathsguy

terrierlady wrote: »

How many building soc will accepted gifted deposits of 10 %

I don't think you get it... the buyer would simply contact a bank / building soc and say "I want to buy a property at £x, I need to borrow 90% of x"... ?

ruggedtoast wrote:

Why would you do this; what on earth would be the point?
...
sell to people who need deposits but dont have them.

You answered your own question... to open up the market to people who don't have enough money for deposits.

Anyway, it seems that its a pretty unpopular idea so perhaps I will have a rethink.

Premier_2

Why not stick the property on at offers over £100k and see what you get offered???

You'll then find out what the true value is and if you don't want to sell at that price you can always decline.



Btw, the mortgage company will want to know what is actually being paid for the property inclusive of bungs. That is the value they will use for mortgage purposes (unless the surveyor says less)
This is because the mortgage company needs to protect it's investment.
If you can only get a buyer at 10% less than the asking price, however that 10% is arrived at, then the value of the property is 10% less than the asking price.
If the property was repossessed and had to be re-sold, assuming all things being equal, it would only sell again at 10% less than what you are currently asking.

If the buyer doesn't have the 10% in readies required at exchange, this can often be negotiated down to 5% with the sellers agreement. If the buyer doesn't have 5% available, they probably can't afford to buy anyway, so look for another buyer.

k9p9

I've been considering this for my property but now decided just to rent it out.

But there's been alot of negative things said about your idea, but i'd say do what you think will get people through the door. If but saying you'll give a 10% deposit gets things moving then why not. And just because you're advertising it as that doesn't mean you have to sell at that. You may get someone come in a make an offer and then you can sort out the terms as to the sale. Eg they may not want the deposit, they may only want to pay £125k so you agree they can have it at that price, or they may say the £10k deposit may come in useful so you agree £135k.

The object is to get people through the door, cause if you don't it'll never sell.

obsessed_saver

This has been discussed before:
http://forums.moneysavingexpert.com/showthread.html?t=956789
http://forums.moneysavingexpert.com/showthread.html?t=960635

I believe the FSA (or the CML) is investigating this practice as fraud, though I can't find the BBC News article, nor the post on here about it.

Mathsguy

Thanks, Premier. I do follow your reasoning behind the mortgage company's loan and the fact they need to protect their investment, but guess I'm hoping (perhaps naively) that their valuations aren't as sophisticated as that and they would just take the submitted sale price.

I know I can just stick it on the market for £100k or whatever and it will ofcourse sell, but it's all about getting the most you can, and if I can by introducing different marketing methods then they're worth a try.

Letting it may be the way to go rather than taking a big hit against the price I originally paid 2 years ago, but I know nothing about being a landlord and getting a property legally compliant for letting etc, and find the prospect a bit daunting.