FTB in a bidding war with investor

cupofjava

Hello!

I'm after a bit of advice. I'm looking to buy my first home - an apartment just not far from a city centre. I was the first to view and offered at asking price the next morning. However it seems I'm in the unfortunate position of being up against an investor who has made the same offer, without even viewing the property. They are paying cash and I'm obviously mortgage.

The vendor has requested we both make a final offer on the property. My question is what is a reasonable % above to offer? Its at the low end of my budget but its in an area I really like. Is an investor really likely to come in at offer, say 5-10% above asking price (property is around the 120k mark) ?

anselld

Asking price is irrelevant.
FTB / Investor is irrelevant.
Cash vs mortgage is irrelevant; there are pros and cons of each.
There may or may not even be any other bidders; EAs sometimes invent them to wind up FTBs.

You need to look at how much you think the property is worth to you based on comparison with similar properties *sold* recently in that area.

Offer a price you will be comfortable with if you win and won't be wishing you had bid more if you lose.

Guest101

Even if you're unsuccessful, you can always raise it (though I wouldn't) and equally the investor could do the same.


Offer what you're happy to pay, no more.

csgohan4

Are you sure there really is an investor or something made up by the EA to squeeze more cash from you

Hoploz

Oh dear how rotten. I have been in sealed bids scenario 3 times, twice in 2007 and the one I'm in now, in 2014. I only won the third!

You have to think about how easily you will find an alternative. If there are lots of options it's not worth as much to you. If you're not going to find anything similar for months it may be worth paying a little more than you think today's 'logical' price is.

I would imagine an investor would be more interested in how the yield works out, so may not be prepared to go much over AP perhaps, it is impossible to know.

Did you meet the vendor? I wonder whether you may be able to appeal to their better nature if you meet them on another viewing and you show them what a nice person you are, how keen you are to make it your home ... etc. But this only works if the seller is emotionally attached to the house - no good if they are investors too!

Cakeguts

Go and have another look at this property you don't need to see inside but go and look at the surroundings very carefully. The fact that you say that an investor has offered the same amount without looking at the property makes me think that this is a good area for renting flats. Often what is a good area for renting flats is not so good if you are buying. Is 120K a low price for that area? If it is then there is some disadvantage with this flat. It could be the general area or it could be something that happens near the flat like a noisy pub or a bus garage or something that would put people off buying there. Tenancy agreements are only for a few months so people put up with problems knowing that they can move on. It is bit different if you are buying a property. If a property looks cheap then you can be sure that there is either something wrong with it or something wrong with the area it is in.

The other thing you need to consider is that if this is an area where there are a lot of rented flats you may have neighbours who are always moving no one staying for very long. You will have to think about whether you would be happy with this.

norm_

Sounds like BS made up by the EA, them emphasising the investors cash position makes you think you have to put in a good counter offer to outweigh their position.

I would hang fire for a week and see what the state of play is, whether they come back to you.

Mr.Generous

EA's don't tell the truth, but I doubt many make up another buyer. An investor (unless stupid, or ridiculously cash rich) won't pay over the going rate. Why would they? No emotional attachment to the property. They don't want to live in it, they want a return on investment. I don't know any investors who would pay asking price without viewing unless they believe its worth more. Investors make a lot of low offers until someone accepts unless your talking about a market where house prices are rising fast. If you do nothing EA will probably call you back in a few days and ask what you want to do. From a vendors point of view cash buying investors quite often pull out when they find something better value, whereas someone who sets their heart on a home see's it through. Hold your nerve.

upoiupou

I have some experience from the other side. I sold a property where there were 10 offers and then the EA asked each prospective buyer to make their final offer without knowing what the other offers were. Some people offered a very small amount above the asking price, and I believe there were investors in this group. Others offered more. My impression was that the highest offers were from people who wanted to live in the flat themselves.

As a seller, the sincerity of the offer and the likelihood of the sale going through at that level were as important as the amount of money. My EA knew that and she gave me the relevant information on each buyer.

If I was on the other side, as you are now:

I can't advise you on the amount you should offer, other than suggesting you first think in isolation about what you think its worth to you and staying within that. There's no way of accurating guessing what the other potential buyer is going to put forward so I think you need to almost disregard them and give a number that feels OK for you for this property.

Equally importantly, I would stress my sincerity, the reasons why I was a desirable buyer and the reasons why I was a safe bet for the seller.

ruelle

upoiupou wrote: »

I have some experience from the other side. I sold a property where there were 10 offers and then the EA asked each prospective buyer to make their final offer without knowing what the other offers were. Some people offered a very small amount above the asking price, and I believe there were investors in this group. Others offered more. My impression was that the highest offers were from people who wanted to live in the flat themselves.

As a seller, the sincerity of the offer and the likelihood of the sale going through at that level were as important as the amount of money. My EA knew that and she gave me the relevant information on each buyer.

If I was on the other side, as you are now:

I can't advise you on the amount you should offer, other than suggesting you first think in isolation about what you think its worth to you and staying within that. There's no way of accurating guessing what the other potential buyer is going to put forward so I think you need to almost disregard them and give a number that feels OK for you for this property.

Equally importantly, I would stress my sincerity, the reasons why I was a desirable buyer and the reasons why I was a safe bet for the seller.

that's interesting that you say the higher offers came from people who wanted to live in the house. i would've expected those to be from the investors.

op - i'd say tempting as it might be don't over bid/over stretch yourself too much as if you do end up getting it, you'll start to wonder if you over paid and will be setting yourself up for buyers remorse. only bid what you think it's worth.

AnotherJoe

ruelle wrote: »

that's interesting that you say the higher offers came from people who wanted to live in the house. i would've expected those to be from the investors.

op - i'd say tempting as it might be don't over bid/over stretch yourself too much as if you do end up getting it, you'll start to wonder if you over paid and will be setting yourself up for buyers remorse. only bid what you think it's worth.

Investors are in it to make money, so they dont want to pay over the odds, indeed its important they dont. An extra £5k from an investor might be an extra 1-2 years befire they get into profit (especially with the new SDLT on top)

For a home buyer, its an extra few pounds a month on a mortgage spread over 25 years. Home buyer should be in a better financial position unless stretched to the limit on mortgage (which an FTB often will be).