Naive first-time buyer, please help!

antigherkin

Hi moneysavers! I'm hoping some older, wiser homeowners might be able to push a little advice my way. My partner and I are currently looking to buy our first home. We have a mortgage agreed in principle for £105k, largely arranged for us by my partner's dad who has loaned us a £20k deposit. We have seen a property we really like and want to make an offer but have no experience of this sort of thing and I really don't know what kind of ballpark figure we should be looking at when making an offer. We don't want to take the proverbial and offer some ridiculously low figure which might insult the vendor, but of course we don't want to pay over the odds either. The house has a guide price of £134,950. I've done my research and the property had previously been listed for sale for £139,950 with the offer of a £5k vendor-gifted deposit in July 2009, then moved to another agent with the price dropped by £5000 and no offer of a deposit contribution. According to Zoopla, the property's value is around £125k. So is it reasonable to offer £120,000, which is more than 10% less than the asking price? Will the fact we are first-time buyers with no downwards chain make the vendor more likely to consider a low offer? Any advice would be much appreciated - I don't want to be taken for a ride, or take anyone else for one, and this is all new ground to me! :huh:

Thankyou!

The_Drama_Llama

When it comes to negotiation, you need to be a bit brave and keep in mind that at the moment there aren't many buyers, so you're in a strong position. First of all think of two prices: your ideal price (what you'd like to pay) and your maximum price. So, if your ideal price is 120k and your max is 125, then your first offer needs to be lower than your ideal price, so you can negotiate up to it, say 105 or 110. Then go up in small increments: 110, 112, 114, 115, 116 etc etc. Think very hard about going over your ideal price...and even harder about going over your max price.

One good tactic (called 'the bogey') is to be clear about the max you can go to (even if it's a fib), eg: 'we can only get a mortgage for 115, so that's our limit.' (assumes you haven't told the EA what you've told us.

Also, sweeten the deal with things that make you more appealing: you're not selling, so there's no chain; you can be flexible on completion dates (either quick, or you're happy to wait etc).

Good luck!

antigherkin

Thanks Drama Llama, that's great advice! All I've told the agent is that the mortgage will be based on my partner's salary alone and not mine (as I work for myself), and since they don't know his salary we can get away with a little fib about the mortgage. I'm hoping that as the house has been on the market a couple of years the vendor will be happy with quite a low offer. But even though I know it's been for sale quite a while, I'm still paranoid about someone else nipping in and snapping it up.

lindos90

antigherkin wrote: »

Thanks Drama Llama, that's great advice! All I've told the agent is that the mortgage will be based on my partner's salary alone and not mine (as I work for myself), and since they don't know his salary we can get away with a little fib about the mortgage.

If you make an offer, dont be bullied into seeing the EAs mortgage advisor, they just want to sell you a product, in addition it could undermine your negotiations, as they will know your max borrowing capacity, and therefore could advise their vendor to not accept any lower offers you make.

If you make n offer, the EA have to forward the offer to the vendor, however they do tend to say 'we have to verify our offer first by you seeing the mortgage advisor' which is not the case...it really can be a conflict of interest.

We got an offer in principle, for what we wanted to borrow, (a lower amount than we could.) We offered that to the EA to prove it was a serious offer, when we declined to see their mortgage advisor.

zzzLazyDaisy

Do bear in mind that if the house has been on the market for two years and they've only come down £5k in that time, it might be because they are reluctant/unwilling to sell for a lower figure - have you checked when they bought it and the price they paid? It is possible that they may be in negative equity and are holding out for an unrealistic figure.

The reason you should bear these points in mind is because once people have seen 'the one' they tend to get emotionally involved with a house purchase. You have to be ready to walk away if they are not prepared to come down to a price that is acceptable to you - hence the advice to set your maximum now, before you make an offer.

Davesnave

antigherkin wrote: »

I'm hoping that as the house has been on the market a couple of years the vendor will be happy with quite a low offer.

I don't know where you are, but while this might be almost 'normal' in a few restricted areas, the fact that no one has wanted the property for a very long time ought to be ringing bells of caution, if not alarm.

There are two possibilities:

• the house is overpriced
• there is something wrong with the house

You also cannot rely on Zoopla or any other price estimation site for a valuation. The only sites that matter are those like nethouseprices, which will tell you what similar properties actually sold for. Their data, like the Land Registry, is always at least 3 months behind, however.

http://www.nethouseprices.com/

Good luck, and be careful. You will only be a FTB once. If I'd been genuinely trying to sell for two years, at a sensible market price, I'd be biting your hand off!

antigherkin

Thanks everyone, this is so useful. zzzLazyDaisy: yes, I did consider the vendor may be holding out for the asking price, we viewed a couple of others with vendors who seemed to have unrealistic ideas about what they would get for a property: some had been waiting nearly three years but were refusing to budge. I don't know what the vendor paid for this property, but found out from Zoopla that the house next door (which is a similar spec) went for £135k in 2006, the same as the asking price for this one now. The property's listing does specifically state this is a "guide price" though, unlike other houses listed by the agent, which makes me think the vendor might be willing to negotiate.

The house opposite, again similar spec, is selling for 15k less, and that has been on the market for over a year too.

antigherkin

Thanks Davesnave. Apparently the houses either side of the property sold for 135k in 2006 and 82k in 2002, respectively. However, these are both end-of-terraces while this is a mid-terrace (there are only three in the row), and the one which sold in 2002 also has a sizeable garden, so I would expect them to sell for more than the one I am looking at.

I checked carefully for damp when we viewed, as the property is about 200 years old, but it seemed to be in good condition as far as that was concerned. I wonder if it is the lack of desirable assets like a garden, garage and a modern fitted kitchen or bathroom which has kept the house from selling for so long. The new-build properties in the village tend to be snapped up, but these older mill cottages just linger on the market.

poppysarah

This 20k loan from someone's dad... When are you repaying that?

House near me finally sold after 3 years for 94k. Was on originally at 130k... they reduced it a couple of times ... the sale board rotted away in the end...

And the new people have already done a huge amount of work on it - so I think they still overpaid for it.

antigherkin

We've agreed to pay him back monthly. Even with that and the mortgage repayments, it won't cost us much more than we currently pay out in rent.

Soot2006

antigherkin wrote: »

We've agreed to pay him back monthly. Even with that and the mortgage repayments, it won't cost us much more than we currently pay out in rent.

... And your mortgage lender knows about this?
Is the £20k in your bank already?
If not, and if you're honest about where it came from, it's very likely the mortgage lender will want proof that you are NOT paying back any of the £20k, as they're unlikely to accept borrowed cash for a deposit, meaning it will officially need to be a gift.