Sellers being unrealistic about pricing

Davy_Jones_II

jimmyjammy001 wrote: »

Just let someone else buy it overpriced and then come back here in a few years and laugh when they then create a thread that they can't sell it for what they brought it for because they overpaid, no doubt they wil try and blame it on something else for prices going down

Maybe I overpaid for my place, maybe I didn’t. The whole concept of overpaying doesn’t really mean that much though.

It’s a flat on the waterfront in a London, in a building that I had wanted to be able to live in since I saw it being converted in the 90s, but which had been out of reach. The best flat came up for sale, the seller had a price that he was insistent on, I had the money to pay for it, and so I bought it.

I lived in it for ten years, up until a year ago, and absolutely loved it. In one of the best parts of London, perfect for a young couple, all that I wanted really.

Now, let’s say I overpaid by a fair amount, perhaps £250,000. The alternative to buying is to rent it, so that’s ket’s Say £4,000 per month, or £48,000 per year, or £480,000 over ten years.

Even if I’d massively overpaid (and I hadn’t) I’d still be very far ahead.

Sadly there are people who are so convinced that houses are overvalued that they do exactly this, rent for years and years. They get more and more desperate for the crash to come, and they think that they would be proven right, but they never can be now. Houses can’t drop enough to ever make back the rent paid, and if they’ve lived in somewhere cheaper that’s all of those years not in your first choice of home.

phillw

chucknorris wrote: »

It isn't actually useless to consider when the correction will come, because I am now 61 and I have to sell at some point, and early enough to spend the equity before death,

Right, but selling up now because a correction might happen in 5 years when you aren't ready to spend the money now is not necessarily the best way to maximize your assets.

I don't know about your health, but you may only be 2/3rds of the way through your life.

chucknorris

phillw wrote: »

Right, but selling up now because a correction might happen in 5 years when you aren't ready to spend the money now is not necessarily the best way to maximize your assets.

I don't know about your health, but you may only be 2/3rds of the way through your life.

My health and fitness is very good, I do park runs most Saturdays, with at least one training run during the week, I also cycle, hike and weight train. But I always planned to start to sell up around my 60th birthday, which is more than 28 years of being a landlord, so that would make my best time to sell, being around 60 and also avoiding selling during a correction. But planning your life isn't just about managing assets, managing property is a hassle, or a cost (if you pay others to do it for you), and even then it still comes with some hassle.

Additionally dividend income is more tax efficient than rental income, the tax rate is less, and it is much easier to mitigate CGT with equities by using your annual CGT allowance each tax year to switch equities.

It is doubtful that I will be able to actually spend what I currently have in the next 30 years, so there is no point in me retaining all my property (which is more hassle) for what might (it might not) result in additional profit if you can't spend that additional profit. There are REIT's out there that have a higher yield than my properties have or did have (some have already been sold).

There is also an incentive to sell this tax year, because letting relief for landlords is being abolished at the end of this tax year, and also the last 18 months of private residence relief is going to be reduced to 9 months too. But I will be retaining one flat and a half share in a house to help with portfolio diversity.

chucknorris

Davy_Jones_II wrote: »

Sadly there are people who are so convinced that houses are overvalued that they do exactly this, rent for years and years. They get more and more desperate for the crash to come, and they think that they would be proven right, but they never can be now. Houses can’t drop enough to ever make back the rent paid, and if they’ve lived in somewhere cheaper that’s all of those years not in your first choice of home.

I do not think that there are many people like that, but they probably end up on the HPC website. I liken those types of people to compulsive gamblers who are on tilt and chasing losses, they have tunnel vision and can't think about their situation with unbiased logic.

warby68

House prices are more art than science.

Residential property is heavily influenced by emotions compared to commercial.

That's why there is no magic formula or ability to make a vendor sell something for a price you like.

Market forces then come into play on the micro level so if its a good house at a good price loads of people will want it so demand pushes the price back up.

Human nature makes you look at stuff at the top or over your budget then you convince yourself it isn't you that's punching about your weight but the unrealistic vendor.

If you remember you're looking first and foremost for a home and the right home can carry a premium for that 'rightness'. It doesn't mean hugely overpaying but it does mean not being hung up on getting the cheapest deal when those few grand will mean little over 20 years in a lovely home but would mean a lot if you ended up stuck somewhere you hated.

If those homes with the unrealistic vendors are really annoying you it must be because you really want them. It may well be that you aren't the only ones and so the vendor hopes for more and on it goes.

No point getting all het up about greedy sellers - you just have to find something in your ballpark and go to bat.

vacheron

bartelbe wrote: »

..... Sellers seem to think they can dictate the price to the market. So if they demand offers which are above what buyers will offer, they will magically get that price.
.............
Surely sellers need to face reality, you can only sell a house for what it is worth, not what you think it should be worth.

But that is exactly what the seller is doing. They can (and are) dictating the price to the market that they are willing to sell their property for.

As most potential buyers are quite motivated, so the mistake they make is beleiving that EVERY seller will therefore be equially motivated.

I know of a house near where I used to live. This house was on the market for 20% over the market rate and was listed for over 6 years. It turns out that the sellers were happy where they were but had made the decision to list the property at the price that "they" would be willing to pack up and move out for. They had done this one two previous occasions, and on each occasion, when the right buyer (or sucker as many on this thread would consider them) eventually came along, they used that financial opportunity to upgrade to a larger house.

When the house didn't sell they didn't care less, however many posters on here imagine that they will eventually "come to their senses" and run around in a blind panic with their head in their hands saying "What a deluded fool I have been! That first time buyer that offered me £80K under my asking price was right all along!!!!".... one or two possibly might, but the majority probably won't.

I see the same mentality regularly with eBay, I currently have 30 or 40 items listed at the price "I" am happy to sell them for some have been listed for over a year, but it costs me nothing to have them up for sale. One is a computer graphics card for sale for £280, the other day someone offered me £140 with the justification "The price reflects the fact that I can collect within the hour and pay with cash".

Thanks, but I'm selling this item becuse I don't need it, not becuase I need to buy food for my hungry baby. So for me the appeal of having pound notes in my hand within the hour does not warrant a £140 discount!

Eventually when (and only when) someone gives me the price I want, I am THEN motivated to get off my posterior and pack it up and post it.

vacheron

Davy_Jones_II wrote: »

Maybe I overpaid for my place, maybe I didn’t. The whole concept of overpaying doesn’t really mean that much though.

It’s a flat on the waterfront in a London, in a building that I had wanted to be able to live in since I saw it being converted in the 90s, but which had been out of reach. The best flat came up for sale, the seller had a price that he was insistent on, I had the money to pay for it, and so I bought it.

I lived in it for ten years, up until a year ago, and absolutely loved it. In one of the best parts of London, perfect for a young couple, all that I wanted really.

Now, let’s say I overpaid by a fair amount, perhaps £250,000. The alternative to buying is to rent it, so that’s ket’s Say £4,000 per month, or £48,000 per year, or £480,000 over ten years.

Even if I’d massively overpaid (and I hadn’t) I’d still be very far ahead.

I posted some calculations yesterday on another thread using a far more modest example than yours of a £250K house with a 20% deposit.

The figures I used showed that, over a 10 year period, and assuming no house or rent inflation whatsoever, a buyer would be £105K better off after 10 years than someone rening a similar property.

This resulted in the need for the house to fall in price by 42% from the price it was 10 years earlier just to break even!

Davy_Jones_II wrote: »

Sadly there are people who are so convinced that houses are overvalued that they do exactly this, rent for years and years. They get more and more desperate for the crash to come, and they think that they would be proven right, but they never can be now. Houses can’t drop enough to ever make back the rent paid, and if they’ve lived in somewhere cheaper that’s all of those years not in your first choice of home.

As I posted on HPC many years ago, the only thing which is guaranteed to fall towards zero with each passing year is your life expectancy.
Many waiting for the crash do not seem to factor into their detailed calculations when they post about waiting "just another 10 years" for the "inevitable" crash, having waited for 20 years already!

AdrianC

vacheron wrote: »

But that is exactly what the seller is doing. They can (and are) dictating the price to the market that they are willing to sell their property for.

But no more than buyers are, by dictating what they are willing to pay.

That's how values are set. One buyer willing to pay that amount for that item, one seller willing to accept that amount for that item.
No agreement? No sale.
No other seller willing to accept? No sale.
No other buyer willing to accept? No sale.

Davesnave

warby68 wrote: »

If you remember you're looking first and foremost for a home and the right home can carry a premium for that 'rightness'.

This concept of 'rightness' is what passes many by; all they see are the obvious physical aspects of the house itself. They miss or don't value the unique features that make certain houses special.

There are dozens of extra attributes a property of a given type might have. Some may be bought and others are completely unattainable if the situation's wrong. When they're all properly considered , particular houses stand out as having many more desirable attributes, especially the sort which can't be bought and bolted-on.

Over time, owning a house with fewer drawbacks makes a huge difference to the daily quality of life. You might pay an extra 10-20% and still consider the place worth the cost, especially if it's a long-term home you'll live in without wanting to move again.

phillw

chucknorris wrote: »

It is doubtful that I will be able to actually spend what I currently have in the next 30 years,

While the rest of your post is very thoughtfully laid out, this in particular strikes me as a rather odd statement.

I bet I could spend what you have in the next 30 days. I have a feeling you could too.