Is this offer too low?

Mover12

Hi,
I'm hoping to get some advice about what might be a reasonable offer to put in on a house I'm interested in.
The house is on the market for £159,000. It needs lots of updating. Though it is generally dry and sound it needs new windows, heating, bathroom, kitchen, Rewiring, asbestos collapsing garage replacing and generally decorating.
There is an identical house two doors down that is on the market for £175,000 which has had most of the above work done except it still needs a new bathroom.
Looking at zoopla, the last house that sold on that row in 2011 went for £175,000. (Though I don't know what state that one was in at sale.)
By my reckoning the necessary works probably come to somewhere between £40,000 and £50,000.

Rewiring 3000
Central heating and new boiler 5000
New windows 5000
New garage 10000
New kitchen 10000
New bathroom 5000
New gas fire 1000
Pave driveway 5000!

If we accept a done up house on this row is worth about £170,000 it seems this wreck of a house should really only be bought for about £120,000 or £130,000.

What does everyone think? Do you think it is reasonable to put an offer in of £120,000 even though it is 40k under the asking price?

We are in a strong position as buyers. Nothing to sell and deposit and mortgage ready.

Thanks for your time.

casperlarue

There's lots of unknowns you are working with here.... how desperate are they to sell, how long has the house been up for sale? If it's only a few weeks then your offer of £120k would come across as cheeky! They can only say no, but they may well come back with a counter offer which you can work from.

I understand where you are coming from by budgeting for works to be done to the property but I would say your guess-estimates are rather high....10k for a kitchen is a lot of expensive kitchen, try £4 to £5k and cut bathroom cost in half at least.

No idea where this property is but going by the price I'm guessing outside London. Don;t forget up to £125k there's no stamp duty to pay, but I would be surprised if you got it for that price.

go_cat

But out of what you have listed what are urgent improvements and what are nice to have?

As long as it has a kitchen and bathroom that are liveable with, then a new one is your decision however new wiring is more of an essential.

Mover12

Thanks. Good advice.
The house is in East Yorkshire. Prices have been pretty static here or have come down a little in the last 6 years.
The house is currently empty. The previous occupier is now in a nursing home so her son is selling the house. But don't know how long it has been for sale for, nor have I got much sense of how desperate he is to get rid of it. The estate agent that is selling it are known locally as generally over valuing properties. So this may be influencing me a little. I'll try and do a bit more research and find out time in the market, and if theyve had any other offers. I'm thinking a second viewing might be helpful to be able to chat to the vendor directly.
The son showed us around the first time and pointed out himself the need for rewiring, new heating, new kitchen/bathroom, new garage. So he has acknowledged the need for work to be done. (More necessary than just nice to have.)
But I appreciate you pointing out my guesstimates might be too
high. I'll revise before I put in an offer.
Many thanks for your sound advice.

julieb1987

Just because you spend £50K on a house, doesn't mean the value will go up by that much. £120K will probably be a bit low but you have to look at your affordability, and it's how much you think the house is currently worth and how much you're comfortable paying.

If there's a RM link you could post and one of us Property Bee-ers could see hoe long it's been listed for, if price has changed etc.

Gonzo33

I think you should take a good builder with you the second time to get more accurate estimates. At least then you will have a better idea, although you will have to bear in mind that it sounds like the property is marketed at the right price for a sale taking into consideration the work required (16k under last sold house price).

lessonlearned

50K sounds like an over-estimate for the works needed. You are not looking at London prices. Most of those figures could be substantially reduced. However you may also have missed some, ie sounds like a probate house, so there may be issues with damp etc.

Make sure your offer is "Subject to survey" just in case there is something nasty and you need to revise your offer. With a house like that get a full structural survey and don't just rely on a Homebuyers Report.

10% below asking price seems to be the going rate at the moment, but if you are in a strong position then you could try a cheeky offer.

Unless you are cash buyer (no mortgage needed) then your position may not be as strong as you think it is. Lenders are playing fast and loose at the moment, continually moving the goalposts and this is not a straightforward purchase.

They may well baulk at that to do list and will probably hold back a retention until some of the immediate remedial work is carried out, especially the electrics, if the boiler has to be condemned, damp course - that kind of thing.

I agree even if you have £50K to spend - don't. It's far too much to spend on a property valued at approx £150K - you won't recoup your investment. It's only an ordinary house. If it were something special like a dilapidated barn then that would be a different matter.

Good luck.

Fire_Fox

If the son has Power of Attorney he is required to manage the money responsibly, he may well not be able to sell at any old price. If the state is currently funding the mother's care they will want their money but will be prepared to wait for the property to sell. The value should be based on land registry SOLD prices for a number of properties in the street and area not the FOR SALE price of just one.

You don't need to spend £10K on kitchen nor £5K on a paved driveway and the garage only needs removing not replacing - you can't discount what you want to spend from the value you should be discounting what needs to be spent plus some leeway for profit or unexpected costs. Do you actually have £25K available in cash for all this work on top of your deposit, costs of buying and 'rainy day' funds of three months mortgage payments? You lender will probably make a retention for any essential repairs and maintenance.

Mover12

Wow, thanks everyone for your helpful responses. What is a RM link?

Fire_Fox

Rightmove.

Mover12

Of course. (Should have been able to work that one out!)
Sadly the site won't let new users post links. (To stop spammers.)