House Price Crash Didn't Happen

trytobuy

I'm new to this forum so I hope I'll be forgiven for any lack of knowledge or obvious mistakes and for this very long post.

I've been trying to buy a (first) home for a few months now in the North East and my experience so far is that the asking prices, and bottom lines of many of the sellers seems to suggest most of them feel like the house price crash that started around 2008 didn't actually happen to their property.

I've put in a number of offers on properties between 160k and 200k, all on detached houses (3 beds) and coincidentally, thus far all of the properties in question were last purchased between 2007 and 2008 and are now being sold. In every instance whilst my offer was lower than the asking price there seem to have been to major issues.

(1) The original asking price of all the properties was at least 10% more than what was paid at the last purchase.

(2) The bottom line of the vendor never dropped below a 5% increase vs. the price paid at purchase.

(3) The average price drop suggested by various sources, including land registry in the post code area of the houses in question, between 2008 and now is actually around 17%.

I've done as much home work as my amateur status will allow and I'm sure there is plenty I don't know but I have scoured the land registry site and looked extensively at properties for sale/recently sold in my area always narrowing the search the very similar properties (in terms of size and condition and location), that were purchased between the end of 2007 and 2008 and are have been sold in the last few months, and whilst the 20 or 30 properties I've looked at like this suggest that in nearly all cases the last sale price in 2011/2012 was around 5% - 10% below what was paid at the previous purchase in 2008 the properties I have put offers in on have always had the vendor insist on a minimum price that was actually at least 5% above what was paid when they purchased in 07/08.

I don't believe I've been unreasonable in my offers, the offer price has always been derived by factoring in a combination of the sale price of similar properties in the close surrounding area and the average drops presented on Land Registry, and also by carefully factoring in any work the vendor claims to have done to improve the property.

Despite valuing all of the vendors work at the full amount they told me they had paid for it I'm still finding that they are behaving as though the crash didn't actually happen to their property and asking for around 10% more than they paid shortly before the crash.

To give an example of a recent property I made an offer on:

(1) Asking price : 170k
(2) Price paid in June 2010: 157k
(3) Work done by vendor (as quoted by vendor): £23k
(4) Average drop in sale price drop (vs 2007) for similar properties bought around the same time and sold in the last 6 months: 5% - 10%

Now in the property above my offer was for £160k but the vendor is refusing to budge from their asking price, and this would be the 3rd time I have experienced similar behaviour from a vendor.

By my admittedly simple calculation if the property prices in the are have dropped by 17% since the vendor purchased, then the property is effectively worth around £130k, if you factor in the vendors work at full value (£23k) then this effectively puts the value at around £153k, so why on earth does the vendor think that £160k is too little and £170k is actually the right price?

Has anyone experienced anything similar? am I being stupid/using bad logic to make my valuation? Am I being unreasonable or is it the vendor?

Please help guide a new entrant to this crazy world.

PS. I am a first time buyer, with no chain involved.

pinkshoes

A property is worth what you're willing to pay and what they're willing to sell at. No more or no less.

Have you made an offer, had it rejected, and the property has gone on to sell? In which case, it would say the property was priced to sell.

Which area are you looking at? If you give a more specific area, people will be able to offer more advice, as "north east" is quite general!

sirmosh

A property is worth what someone will pay for it, they must think someone will actually pay for it. If no buyer emerges who will meet the asking price they will, over time, have to accept that they need to lower their expectations.

A lot of people also seem to think that when you do £20k or work to a house it adds £20k of value, when in reality unless the work was structural it rarely adds much value at all, only desirability.

Unfortunately the vendors will be happy to leave the property on the market for 18 months rather than accept a realistic offer in many cases. Like any sale it's all down to the vendor and buyer reaching a happy medium, and that medium depends on the expectations and stubbornness of both parties.

trytobuy

Thanks for the response. The area is Darlington.

I appreciate what you're saying about a property being worth what ever someone is willing to pay, but i guess what I'd like to know is if I've missed something in my valuation or if in your opinion the price is fair.

I mean what can explain the vendor thinking the house has risen so much in price when the entire market around it has dropped so drastically.

sirmosh

trytobuy wrote: »

I mean what can explain the vendor thinking the house has risen so much in price when the entire market around it has dropped so drastically.

One possible answer is that they felt they got a really good deal when they bought and that it was worth more in the first place. Or perhaps it was marketed at a much higher price and they negotiated £20k or maybe even more off of that asking price so they felt it was really worth more than they paid.

AdmiralX

trytobuy wrote: »

I'm still finding that they are behaving as though the crash didn't actually happen to their property and asking for around 10% more than they paid shortly before the crash.

Now in the property above my offer was for £160k but the vendor is refusing to budge from their asking price, and this would be the 3rd time I have experienced similar behaviour from a vendor.

Has anyone experienced anything similar? am I being stupid/using bad logic to make my valuation? Am I being unreasonable or is it the vendor?

Of course prices went down and in some places more.
It does not matter if you are 1st time, buying and selling a property is a skill. I am selling my property and buying one as well, and have to say the following:

Vendors overprice always... but they argue they price OK for quick sale - don't take that always, might be true for some cases.
Vendors believe they will achieve what the EAs tell them even if massively overpriced.

Keep making offers because you do not want a negative equity in 2 years.

Check always with zoopla, the "sold prices" over 5 years and do not be oversold.
Do you want to buy a leasehold or house? I recomend you to also look for a Commonhold I had owned those before.
Every offer is a different experience
You want to buy the property but the vendor claims to have spent to improve the property So what? Do you really think these improvements are what you need? you might have wanted a different sort of improvement, tell him .. which you could have done free, DIY.

Do look at Land Regisrty and argue with vendor, dont buy dear.

Catblue

Your analysis and logic is spot on.

However, a lot of people who bought at the height of the market did so by stretching themselves as much as they could. So, if someone bought a house in 2007 for 200K then they may have only had around 10K or so as a deposit on that, therefore they maybe got a mortgage for 190K.

4 or 5 years later, they have not paid off much of their mortgage (and obviously if they got an interest only mortgage then they will have paid off nothing).

So if prices have gone down by 20% then their house is now only worth 160K, they still owe 190K or near enough and their deposit is gone. So they cannot sell for 160K when they owe 190K because the banks won't let them. And they can't afford to sell at a loss anyway.

They now want a bigger/more expensive house because they've been on the ladder for 5 years and they "deserve" to move up.

Therefore they pitch the house at 215K hoping to clear the mortgage, get their deposit back and have 15K "profit" that they truly deserve for being on the ladder for 5 years and for putting a new carpet in the dining room.

That is all delusional thinking of course but you can't tell some people.

trytobuy

Thanks so much for the responses everyone. They're all very helpful and interesting.

My gut feel is the property is over valued (even at the price I have offered, which includes a £23k bump up for the work they have done). I still can't get my head around what exactly it is that is driving them to think it is worth that much more in this market.

What the previous poster said may be true though, if they over stretched at purchased their own circumstances may have something to do with it but this still doesn't mean what they want constitutes a "fair" price in today's market and I can't help but feel what I have offered is in fact more than fair, and still only 5% below their asking price.

GAH

The property market is just that, a market. Sellers can ask whatever they want for there home, doesn't mean they will get it.

trytobuy

GAH wrote: »

The property market is just that, a market. Sellers can ask whatever they want for there home, doesn't mean they will get it.

I appreciate that, but I guess what I'm asking for is your/everyones personal opinion on my method for calculating what it's worth and how you would value it (based on what I know is not all the information you may want yourself).

Uk_Lover

Make the best offer you think the house is worth and if rejected walk away.