Will make offer on London flat - need strategy!

unbeareableLightness

Hi all,

I'm a FTB looking to buy in London. I've resigned myself to the right balance of compromises rather than that misty feeling of finding my dream home. I've lowered my expectations and given up on my preferred area, any outdoor space or decent-sized second bedroom. And so, I've found something I want to make an offer on.

It's a £275k two bed flat and, in a sane world, I would be in a pretty good position. I have a large deposit of 100k, no chain or anything else slowing me down and local solicitor all lined-up.

But this is London! So, I'm not sure what strategy to take. I feel like in such a frenzied market I'd better offer more than the asking price straight off the bat. My friend who is a 100% cash buyer and also FTB with no chain is planning to do exactly that - what hope do I have against competition like this?

At the same time, I like a good bargain and kind of feel the flat is overpriced - in absolute terms, though research suggests not relative to the crazy market. Either way, need to act fast (i.e. Monday).

Any thoughts or advice?

System

What area is it? Are you sure the local area to the flat is moving fast? If so, how much are others going for?

benjus

Best thing is to talk to the agent. If there has been a lot of interest, an open house with lots of viewers etc, the agent may go straight to best and final offers, in which case you will probably need to go over the asking price if you want a chance of getting it.

Otherwise, just put an offer in for what you think it's worth, and the vendor can come back with a counter-offer if they feel it's too low.

Vendors aren't always motivated by economics alone. For example, given 2 offers at the same price, one from a BTL investor paying cash, the other from a FTB with a mortgage, the obvious choice would be the former - but some vendors might prefer to give someone the chance of getting their own place rather than lining the pockets of another landlord. My parents are selling their house at the moment - my father has years of experience with commercial property negotiations (and has bought and sold several houses) - yet they still feel quite strongly that they would prefer someone with young children or planning a family to be the next owners.

benjus

Also, while the London market is going a bit crazy at the moment, not everything is selling within days of going on the market so don't get needlessly carried away.

We viewed a flat a few weeks ago in Zone 4, SE London - decent enough flat, quite big for a 2 bed (about 95 sq m), nice period building, decor looks a bit tired but is serviceable, on the market at £285k. Main drawback was that the lease only had about 71 years left and the vendor doesn't have the cash to renew.

So we had a look at our finances and decided to offer £250k for it. This was turned down but the vendor indicated they would accept £260k as they are keen to sell quickly. So we set up another viewing to make a decision on our next move.

At that point the agent dropped a bombshell - the garden, which she had told us was communal and made a real selling point out of, actually belongs to one of the other flats. At that point we decided we weren't interested.

unbeareableLightness

I'm looking in SE London, zone 3. I find it hard to work out prices for the area to be honest, each flat is different in so many ways. I looked at the sold price of other flats in the same block, but again not easy. They were all sold at different times, so you've got to factor in the growth.

The nearest comparison I found was another 2 bed in the same block that sold for £180k in Feb 2009. So in five years it's risen by roughly 10 % per year, which is about right for house price inflation in the area. I'm not sure if this is a good method to gauge prices though, if anyone has a better method please let me know!

But I think this flat is overpriced because the kitchen is really old, it's electric not central heating, there are tenants there at the moment so everything is grotty and bathroom needs retiling. I'll have to do a bit of work and it will cost about 5k. I'm going to make an offer tomorrow 5k under the asking price and see what happens.