What to offer?

Clearlier

Hoping some help/advice/suggestions can be provided as we made a complete hash of negotiating for our first house.

Short summary: house on for 280k, best house on bad road, ceiling price for road 265K, 25 - 30K work needed, thinking of offering 235K. What's the best way to negotiate?

Some more details are:

We're chain free with c. 50k in deposit plus renovation and costs of buying budget of 35k. We could obviously adjust the deposit amount by reducing the renovation budget but where we're looking doesn't get a house in good condition for <290K so we've been looking for something that needs work with the aim of getting in under the 250k stamp duty threshold. We also like the idea of doing things the way that we like them.

We've seen a few and offered on two which were rejected but we've recently seen one that we think ticks most of our boxes, we're doing a second viewing later this week to make sure. Now we're trying to work out from a financial perspective what a sensible offer would be. The asking is 280k having gone on at 300k and been down at 275k for a period. It was put on the market about 16 months ago, going sale agreed once and is a probate sale. Financially it suffers from being the second best house on the road. Inside it's not too bad structurally (will obviously get a survey done though). The kitchen needs to be replaced and a mess has been made design wise of a mini-extension which in itself would cost 3k to make good. We guesstimate that it'll cost 25 - 30k to bring up to date (fix extension, create kitchen diner, install kitchen, rewire, skim most places, redecorate [ourselves], some windows, carpets and curtains).

There are three houses which have sold on the street that it can be compared to. They're all of a similar size. Zoopla hasn't unfortunately got an estate agent history for any of them. The numbers in brackets is the price adjusted for the average change in property values in the postcode, a bit rough and ready but hopefully useful.

House no. 1 sold for 265K (255k) last year (ceiling price for the road), marginally smaller garden, no attached garage
House no. 2 sold for 258K (250K) in 2008, smaller garden, no garage
House no. 3 sold for 234K (231K) in 2006, no garage and the house is notably smaller from the outside, probably 2 dbl beds + 1 single compared to 3 proper dbls in the one that we're looking at, very slightly smaller garden, can see that it has a loft conversion but don't know when it was done.

We were thinking of going in with an initial offer of 235K and see how they respond.

Anybody any insights or thoughts on what the best way of negotiating on this might be?

The_JinJ

I would be offering less than £235k - sounds like a fair bit of work needing done. The seller needs to be realistic in their pricing. Start off low but you may have to play the waiting game for them to realise they won't get offered what they want.
How about £210k to start (which is about 20% off ceiling price), stating the repairs needed and falling market. Expect it to be declined but sit tight.

firsttimetom

Agree with The_JinJ, £235k almost sounds too much.

Do you have Property Bee? Can you see if there have been any reductions in price over the past 16 months? The property would have been overpriced when it came on the market, so by now it will definately be overpriced.

Due to the stamp duty threshold, they will be expecting offers below £250k, and if it needs £40k of work, then that gets you to £210k.

I would put a offer in writing (letter or e-mail) to the EA as you can get better get across your reasoning without having the EA interrupting.

Clearlier

firsttimetom wrote: »

Agree with The_JinJ, £235k almost sounds too much.

Do you have Property Bee? Can you see if there have been any reductions in price over the past 16 months? The property would have been overpriced when it came on the market, so by now it will definately be overpriced.

Due to the stamp duty threshold, they will be expecting offers below £250k, and if it needs £40k of work, then that gets you to £210k.

I would put a offer in writing (letter or e-mail) to the EA as you can get better get across your reasoning without having the EA interrupting.

Thanks for the thoughts.

Property Bee has it going on at 300K, reducing in a couple of increments to 275K and going back up to 280K.

I think that 210K might be going a step too far. This is a detached house and I haven't compared it to the semis. Several have gone for >240K in the past few years though.

The_JinJ

Clearlier wrote: »

Thanks for the thoughts.

Property Bee has it going on at 300K, reducing in a couple of increments to 275K and going back up to 280K.

I think that 210K might be going a step too far. This is a detached house and I haven't compared it to the semis. Several have gone for >240K in the past few years though.

Think of £210k as a starting point. I'm assuming it'll be the only offer on the table at the moment anyway.

hazyjo

Out of interest, why the best house on the worst street? Wouldn't it be better to look at the worst house on the best street (as generally advised)? Sounds like the vendors are totally deluded anyway and are trying to claw back what they've probably spent on a house which has dropped in value.

When did they buy it and what did they pay? Zoopla goes back a pretty long way so advisable to check that out.

Personally, I'd probably wait until it had been dropped a bit more. They obviously tried £275k and realised they'd have to take £250k or less. The £280k is probably so someone might feel justified in paying over the SD threshold.

Keep us informed... good luck.

Jx

GAH

It really depends on who the beneificaries are. I have tended to find from past experience, that people either want to sell really quickly to get their hands on the cash or they will wait a long time as they are in no rush and will try and get the best price.

Make an offer of what you feel the place is worth to you, and have a final walk away price in mind.

Also just as a tip, it is never a great idea to buy the best house on the worst road, it should be the other way around, worst house on best road, that will always add value in the longer term.

Clearlier

I completely agree on buying the worst house in the best street. It's our preference and the previous two we offered on were far from the best on the street. We're relatively constrained in the area that we're looking as we want it to be within walking distance of our sons school and this house fits all of those criteria. I suspect in the end we won't get it because we won't be prepared to pay best house in the street price.

To be honest I think that 210K would be taking the proverbial. It's a detached house and I've compared it to other detached houses but there are also semi's on the road and several of them have gone for >240K over the past few years. One in bad shape went for 220K.

AlanW1980

but i think everyone is making the point that you wont be expecting this to be accepted. If you start at £235k then you an only go up from there. Going in at £210k might get laughed off but at least you are possibly curbing the seller's expectations and it also gives you loads of room to go up from.

I would let them tell you that you're taking the proverbial rather than second guessing yourself

firsttimetom

Yes, I wasn't expecting £210k to get accepted, but it gives you a place to start.

Better to start low than too high

Clearlier

Thanks again for all the comments. As I said in my first post we made a bit of a hash of negotiating for our first house so I'm taking notes!

We have done the second viewing - discovered a few more cosmetic things of no importance but also that the kitchen has a false ceiling which leaves us wondering what's up there. Still unless there's a problem with the joists it shouldn't add much to our refurb budget to remove it and redo the one above - wonder if it's an Artex ceiling above....

Also, we got an explanation as to why it was on so long - they put it on, a sale fell through, the roof needed work so they took it off the market, did the roof and put it back on 3 weeks ago - plausible as the roof is definitely new but important to us only in terms of how sick of the process of selling the vendors are getting which may not be as much as we'd like at this stage.

More to the point we did a little dance with the EA about the price. We talked about ceiling price on the road minus the cost of work and also about how you didn't want to go over the 250K threshold (now that I understand everybodys suggestions this maybe wasn't the greatest idea). He made it clear that the vendor was expecting greater than 250K. So I apologised for wasting his time at which point he started backtracking furiously and was doing his best to encourage us to put in an offer of 250K which given our strong position might be interesting to the vendor.

There's an outside chance that the EA is genuine. They're by a distance the most professional of the 7 or 8 EA's we've dealt with over the past few months. This doesn't matter though. We don't value the house even at 250K.

I'm thinking that we'll phone them up in a day or two, thank them for the viewing, tell them that after doing our numbers again (which we have) that the asking price is too high for us to open negotiations without being silly and that we're not interested in being silly (because we're not and this EA seems to pick up a large portion of the local renovation projects so it's likely that we'll run into them again). If he were to push for a silly offer I'll mention 205 or 210. I'll also say that if they do get any more renovation projects in at around our budget to let us know because we are eager to buy at the right price.