Right, Im being boring again, but last time

hethmar

Some of you may remember son had offer accepted on a2 bed/2 bath flat in south east London by the Thames (not Thamesmead ) just a week before the world collapsed.

Now it was at its peak sold for £300k in Jan 2007. His offer of £162k accepted. Supposed to exchange in 28 days as its a repo but the vendors side fiddled around, didnt have paperwork etc. and there is still a question re the heating system they havent answered but they agents have text son to say the vendor wants exchange this Friday at the latest.

In the meantime, prices as we know have been dropping all round. Son has got a bit nervous and decided to offer £10k below his original price to give him some sort of buffer against NE. Agents have come back that the vendor (finance company) have refused and if he doesnt exchange on Friday they will "sell to another buyer"

SO - final answer please guys. Is he asking for too much off this place which was a new build in 2006? Not in the nicest area, albeit earmarked for regeneration and with a DLR arriving in 3 months?

He is in two minds - he is concerned about prices crashing even more yet he doesnt want to lose a bargain and wonders if he is being too cheeky or worrying too much.

domcastro

sounds good to me. about 40% discount. I'd be happy with that (but I know nothing)

mewbie_2

Hi Hethmar. It's a difficult question (who is really qualified to advise you) but I assume you are asking for points of view rather than the exact right answer for you and your son. I'll just throw some thoughts in.

It was 300k at the height of the boom / pyramid.
Flats are the biggest losers so far, and likely to remain so.
Conservative commentators reckon another 15% to go. So somewhere upwards (or downwards) of 15% further to fall.
160k - 15% = c. 140k. That's 20,000 pounds. Takes a while to save up that sort of money. I don't think there will be a shortage of flats for a while (couple of years at least).
The regeneration and DLR will already be in the price.
As a rough rule of thumb rent x 100 = purchase price - that's for professional investors. So for us less than professional punters perhaps rent x 150 would be a fairer indication. What is the average rental (achieveable not fairytale) for those flats?

hethmar

About £940 - £1040 per month has been the rental for the same size flat in that development.

The agents are saying he had already got it at a bargain price so there is no leverage to go lower. But I cant see that people would be queueing up at the moment. And if they put it to auction, they are unlikely to achieve £152k surely?

fc123

hethmar wrote: »

He is in two minds - he is concerned about prices crashing even more yet he doesnt want to lose a bargain and wonders if he is being too cheeky or worrying too much.

Hi HM, the above indicates concerns that seem to imply (to me) that he is still unsure.

Best advice I can give is that we have bought twice.

1st time at similar age (I was 27) and in a falling market. We didn't have any doubts about the 'value' to US of the house (home) we were buying. By value, I mean, not only the ticket price, but all the other things too...affordability, location right for our needs, amount of living space etc



2nd time; again NO doubts at all despite it being a significant (to us) trade up at the time. We were comfortable with the price paid and the house ticked all the boxes at the time.
The house we bought had been on the market for a year (a bad sign?) but we were accepting of the valuation as we were very familiar with the location. We didn't push the price down further....we made the decision based on the asking price (tho' we got 7% off due to survey) and what we could afford balanced against what we needed from a home.


If he is unsure about the location; rent in the area for 6 months.

If he is unsure whether it is a 'bargain', wait and see what happens to the market over the next 6 months.

2 possible outcomes;
1, he loves the place and no flat ever sells that low ever again.

2, he doesn't like the area afterall and another flat comes up 10% less 6 months later.

Life is just a series of decisions based on what one knows at the time...it is all one can ever do.

TBH....one can make decisions that, with hindsight, seem to have been the wrong one but one muddles through in the end.

He needs to do pros and cons list...may help;)

penguine

I'd say if he's feeling nervous, the best thing to do is walk away. But then, that's coming from personal experience. We walked away from a house at the end of June which we had offered on in April thinking we were getting a very good price, due to the changing market plus some things coming up in the survey that we hadn't expected. We haven't regretted our decision -- and especially not since we discovered last week that the house sold for £40k less than we'd offered!

Given your son's buying a flat and it's a new build then I think that's all the more reason to be cautious ... exactly the kind of property that's going to be hardest hit in this crash.

hethmar

Well, its nearly 2 years old now, but I get what you mean. Im expecting that so many in the development will be btl that there will be an influx of them on the market soon.

fc123

I just had a thought...base the decision solely on the sums.

Job security over the next 5 years.
How much the mortage would be (old fashioned repayment) on a variety of interest rates...so, how stretched he will be each month (or not).

and cost and time of commute

It's a gritty area but there's good and bad features and the river is great to look at.

sabretoothtigger

If hasnt had his queries on the property answered fully, I guess they arent that bothered about selling.
Its not like they'll be rushed off their feet at the moment surely

He could take that as a sign they do have other sale options or that its not his ideal property, they are covering a fault and in a (cash) buyers market why settle for second best

hethmar

The mortgage offer he has was £999 arrangment fee :eek: for a two year fix at 6.19%, before the rates dropped. He has already got an old school friend desperate to have the second bedroom and move out from the place she is currently sharing.

Commute is 42 minutes he reckons - he has done a trial run by overland train - the DLR not available til Feb which should cut a bit of time off.


Re the delays on their side/lack of info. One point was that all owners would have to fork out £500 towards modifications to the lift system. Now, apart from the fact he is in a block just 2 storeys high - the centre block is about 11 storeys - even if the cost were spread over all the owners, why would the lifts need so much expense in 2 years since build? His solcitor followed that up and has now been told that that part of the document was "an error" and does not apply. !! He has asked for confirmation of this in writing. The second point unanswered is that no one seems to know the heating system! He was told it was electric then gas, then it was communal and then individual. His solicitor advises he goes to the flat again and checks what exactly is there. He asked the agent for this to happen but they replied the vendor cannot see how that would be of any use???

I cant help thinking of the smaller, tattier place he was gazumped on last July (thank God!). It was on for £182k, he offered that price and then they rang to say theyd had £5k more offered and he dropped out. Hed be in NE already by now.

fc123

That mortgage doesn't sound great BUT I am out of touch with these things...ours has dropped to 3.49%......changes how we are viewing things IYKWIM.

Perhaps someone on the mortgage board coukld advise?