House Price Crash Discussion Thread

gem82_2

Hi there,

I'm a FTB who has just found a property that I am really interested in buying.

The property is currently on the market for 132,000.00, we have currently made our 2nd offer of 121,000.00 for it, which has just been rejected.

We have been advised that the vendor would be willing to accept 125,000.00. Although we can afford this amount, I know for a fact that this is was the vendor paid for it themselves 2 years ago.

I understand that the owner has put a lot of work into the property but am a bit wary of paying the same price as they did due to the way the market seems to be going at the moment.

Has anyone got any tips for me at all?

Shall I walk away from the property?
Leave the offer on the table as see what happens?
Or just offer the 125k.?

Any advise would be welcomed.

This is my first time at all this so I want as much info as possible before going into this.

dfarry

Are you stretching yourself in buying this property? I think most people accept that the property prices will drop further so might you be risking negative equity?

If you really like the place then I'd be tempted to say that you know how much they paid 2 years ago and that prices have dropped by X% in the area since then. Also similar properties in the street are currently on the market at £XXXXX and therefore your lower offer is reasonable in the current economic climate...

If they don't accept, walk away but remind them how the property market increasing looks depressed.

Bally101

We have seen a house we very interested in on a local Persimmon site, which has a price of £239,995. They have offered us £150,000 for ours in a part exchange although ours has been valued at between £165k and £179k.
The part ex. appeals so not to be paying agents fees, and worried about the chain of other people having to sell etc.
We put an offer in for £190k which may be a bit of an insult as just over 20% less than asking price.
I have read Persimmon profits are right down, and with only a handful of properties left on this site that they have been on for 8 years, thought they may be keen to get sold asap and get the site off the books.
They have told us they could accept 5% off the asking price ! Any thoughts or experiences with Persimmon or similar ?
Realistically we could go to a 60K delta between the two properties.

Paps_2

Hi, we're currently in discussions with Persimmon about a property near to us and I can tell you that offering them 20% less than what they want is fine, don't worry about offending them. Put it this way, they advertsied houses on this new estate in April & now they have dropped them by £40k on the big ones, we've bumped into other people buying on the site and discussed prices and we were surprised at the things they were telling us, stamp duty paid, 15 - 20% discounts and £5k worth of fittings etc. Persimmons year end is Dec so they would prefer the money in this year so the ball I would say is in your court in terms of offering and striking a dea;) l

codger

This developer is no different to any other developer and so will want to capitalise ASAP on unsold stock. And Paps is absolutely correct: offering 20% below the developer's asking price is not an insult.

Unfortunately though the situation is anything but straightforward because the transaction centres upon an unsold property valued by the developer at £240k.

That figure is meaningless without knowing when that asking price was set: last week? Last month? Three months ago? Six months?

The developer concerned here is well established (and very experienced) so if the price was set within the last six months (rather than last week) up to 10% headroom will have been factored in to legislate for probable offers in a declining market. The "real" figure, if such there be at a time when today's valuation is tomorrow's fish 'n chip paper, is therefore more like £220k -- at most.

Offering a further 10% off that is sensible. Not unreasonable.

But it's complicated by the nature of the deal: no PX transaction, whether it's for a car or a house or anything else, is ever constructed in the buyer's favour: the value of the product on offer is maximised, the value of the product being bought-in is minimised.

As ever, cash rules supreme: the developer here would likely snap a buyer's hand off who didn't have a property to PX and offered 20% below the asking price.

Best thing is to decide just how valuable -- in terms of convenience -- a PX deal truly is at this particular time.

If it's the best way of acquiring a particular property that's only available now, then such a deal has attractions.

If it's a way of acquiring a property that is likely to be available for some time, then the deal isn't so attractive, because whatever percentage drop affects the buyer's PX property this month, next m,onth, and the month after that will also affect the vendor's, and as the latter has a higher ballpark price than the former, then the actual cash reduction will be greater.

As ever, research is the key, and in this instance, establishing just when the current asking price was set.

As things stand though, it's already obvious that the vendor regards its own price as "soft", hence the 5% reduction plus PX. At minimum, a 10% reduction wouldn't seem to be out of the question, so sticking to a 15% reduction isn't unrealistic. If it works, then fine; if it doesn't, then as a negotiating point it's a good way of upping the level of counter-offer.

Bally101

Thanks guys for the response.
Yes I believe the price was higher on this property when first built approx 10 months ago, and this price has come down in the last 3 months.
To be honest I think we have about a 60K delta to play with, so max I could go to would be £210k if we took £150k as p/ex.
We are in a position where we are not having to dive in, and also interesting with the comments of December year end, whether they will look to take a hit to get off the books ? I don't know ?
No doubt selling privately would get us the better price, but it is the climate of buyers situations and wondering how long it could take.
May be worth us sticking up on the market to get feedback, can always take it down again.

shelovestobuystuff

the_worried_one wrote: »

On ITV earlier there was a prediction of 50% drop from peak, how likely do you think?

Sorry I was only half listening, TV was on in the other room so I dont know who said it, but i believe it was on a tonight documentary?

Its all guess work.Personally I think that a 50% drop from peak would be good.It would get the prices back to a more realistic level and most homes would still be worth more than double what they were worth 10 years ago even after a 50% drop.

T4i

shelovestobuystuff wrote: »

Its all guess work.Personally I think that a 50% drop from peak would be good.It would get the prices back to a more realistic level and most homes would still be worth more than double what they were worth 10 years ago even after a 50% drop.

I hope so

As a FTB at 28 a 50% drop is a dream for me.

codger

Bally101 wrote: »

Thanks guys for the response.
Yes I believe the price was higher on this property when first built approx 10 months ago, and this price has come down in the last 3 months.
To be honest I think we have about a 60K delta to play with, so max I could go to would be £210k if we took £150k as p/ex.
We are in a position where we are not having to dive in, and also interesting with the comments of December year end, whether they will look to take a hit to get off the books ? I don't know ?
No doubt selling privately would get us the better price, but it is the climate of buyers situations and wondering how long it could take.
May be worth us sticking up on the market to get feedback, can always take it down again.

Bally: lots of luck with this one -- it's all a bit like trying to navigate a course that was once routine but now none of the compasses work and all the stars have gone out. It's pretty much reminiscent of that line the screenwriter William Goldman once used to describe Hollywood:

"Nobody knows anything."

Having a punt on the sale of your own house is not a bad idea (well, providing you're on a no sale / no fee arrangement) but as with everything else, prospective buyer "feedback" isn't what it was because from my conversations with an EA friend -- Gawd, I shouldn't be admitting here to such friendships, should I? -- he's saying that quote "wishful thinking" unquote is now rampant, viz: 90% of all current viewings, of which there are pretty damn view anyway, are by people who, it turns out, haven't actually sold their own home anyway.

He said: 'It's turning into a farce, which isn't good for genuine sellers. We're getting prospective buyers who assure us with a perfectly straight face that their own home is sold, who give feedback, who even make preposterous offers. . . and then it turns out, no, they haven't actually sold their own home at all.'

As to your point about the 60k margin, I'd honestly be inclined to play the percentage game with that, and knock six grand off: we've moved 13 times in our married life and it was only in the latter moves that the realisation belatedly occurred that I always, always under-estimated my costs and was always, always hit with expenditure I'd never factored in. (Though then again, I'm probably not the brightest penny in the purse!)

Aside from the collapse in the housing market, there's also the progressive collapse of the UK economy -- I know, I know, there's still some demented (and politically motivated) optimism about Britain not being in recession, but to many of us on these boards, entry into recession has already occurred as a reality, if not yet a statistically-validated technicality.

Which kind of suggests that not moving home at all for the time being, and hanging on to whatever cash reserves may be to hand, is perhaps the safest course!

Good luck. :beer:

codger

T4i wrote: »

I hope so

As a FTB at 28 a 50% drop is a dream for me.

We're all of us here on MSE stuck slap-bang in the middle of a moral dilemma, because on the one hand there are thousands of families who fought long and hard in recent years to get into the market (and now face the prospect of negative equity -- and worse) whilst on the other hand, there are thousands who couldn't get in no matter how hard they may have wished to try.

No sane person wants any family, anywhere, to have their home turn into a mill-stone (or even, lose it all together.) Yet equally, no sane person wants the obscenity of recent years to be perpetuated, where those much-needed homes for some were merely the casual trophies of fast-buck property speculators.

Ironically, what has happened now -- a collapse in the UK housing market because prices out-stripped affordability -- coupled with the banking crisis may well mean a return to affordability levels that once were posited on the simple, straightforward lending criteria of x3 to x3.5 income.

On which basis, a price drop of at least 33% seems inevitable, and though that's terrible news for those with high LTV mortgages, it's actually good news for people like you -- and for our own off-spring -- who I continue to believe are as entitled to a home of their own as my wife and I were, back when we were their age.

The tragedy in all this is that this situation could, and should, have been avoided, yet in the aftermath of that tragedy, economic sanity might just make a long-overdue return.

Fingers crossed for your own hopes!