Advice on offer for flat in London

LdnBuyer2019

Hi folks. Wondering if people can give advice on an offer we've made for a flat. It's a 2 bed flat in a modern building in East London (built 2009), listed for £595K. The last similar property in the area sold in Aug 2019 for £590K.

It's been on the market for 2 months now, no offers. Everything checks out, the only issue we have with it is that the service charge is £3200 per year approx. This is almost double what we've seen in other modern buildings in the area.

We viewed the property in October and liked it, but didn't make an offer. After looking for a while, we got in touch this past Monday, sort of out of the blue, to see if it was still on the market. The estate agent mentioned it was still available but also that, coincidentally, another buyer was interested and had their second viewing scheduled that very afternoon, and that they were going to submit an offer in the region of £560K-£570K.

We submitted our opening offer of £540K on Monday. It was rejected the same day. The estate agent told us the seller wasn't going to make a counter offer until the second potential buyer had made their offer. The next morning, on Tuesday, we got an email from the estate agent saying that the second buyer's initial offer was also rejected, and that the seller now had made a counter offer of £570K.

We're a bit sceptical that there's even a second buyer at all (is this a common practice?), and we'd like to avoid getting caught in a bidding war, so we're currently considering our next move. Any advice?

Cheers!

arciere

I live in London, I bought a flat in London but... £595K for a two bedroom flat? :shocked::shocked::shocked:

Where about in East London if you can tell?

[Deleted User]

Does the building have any cladding?

LdnBuyer2019

It's in Dalston

LdnBuyer2019

Yeah, it has glazed tile cladding

AdrianC

LdnBuyer2019 wrote: »

It's a 2 bed flat in a modern building in East London (built 2009), listed for £595K. The last similar property in the area sold in Aug 2019 for £590K.

So the price isn't miles out.

It's been on the market for 2 months now, no offers.

Well, none accepted.

the service charge is £3200 per year approx. This is almost double what we've seen in other modern buildings in the area.

Do you get more for that?
What's going into the sinking fund?
What's the SC for the sold-for-£590k flat?

We submitted our opening offer of £540K on Monday. It was rejected the same day.
...
the seller now had made a counter offer of £570K.

OK. And are you willing to pay £570k for it?

We're a bit sceptical that there's even a second buyer at all (is this a common practice?)

Does it matter?

You know the vendor won't accept £540k.
You know they want £570k.
You believe they won't accept £560k-ish, but don't know for sure

So how much would you be willing to pay? How hacked off will you be if you are willing to pay £570k, but somebody else gets it - or less - accepted while you're mucking about with inching up towards there?

If you're serious, go straight to £560k (if you're willing), and see what happens. If that's rejected, then you know £570k is the minimum.

SmashedAvacado

Sometime the service charge is higher because you get hot water, a gym, a concierge or similar - do you get any of these?

In terms of offers. I would ignore the other buyer. There are plenty of properties in london to buy - dont get sucked into a bidding war. We are about to have an election and brexit - its not a great time to be selling - so you will find other well priced properties if you dont get this for your target price.

LdnBuyer2019

Thanks for the comprehensive reply AdrianC.

We're currently deciding what our upper limit is. But you put it in really clear terms. We need to figure it out and just move on it.

About the SC, the other modern building has a gym and concierge. This one has neither. We don't know the details of the sinking fund, but the estate agent said that the sinking fund is the reason the SC is so high (but most buldings with SC have a sinking fund, right?). It's basically a higher SC and you don't get as many benefits from it (from what we know now).

Thanks!

LdnBuyer2019

Thanks Smashed. Yeah, the SC doesn't include things like a gym or concierge, whereas other modern properties in the area offer at least one of these. We feel it's a higher SC with no tangible benefit (other than a "sinking fund"). We've reflected that in our offer, given market rate is in the high £500k's at the moment.

AdrianC

LdnBuyer2019 wrote: »

We're currently deciding what our upper limit is. But you put it in really clear terms. We need to figure it out and just move on it.

Yup.

About the SC, the other modern building has a gym and concierge. This one has neither.

Ouch.

We don't know the details of the sinking fund, but the estate agent said that the sinking fund is the reason the SC is so high

A sinking fund is not spending money, it's saving it for future repairs. With an inadequate SF, you spend when the work is needed. With a healthy SF, the managers have a pot available, and you "take over" the vendor's share of that SF - they paid in, so you don't have to pay out.

(but most buldings with SC have a sinking fund, right?)

Not necessarily.

peterbaker

Is this your first leasehold purchase? Leasehold is largely unregulated and can be a minefield and a very regrettable experience for some. £560,000 is a lot of dosh to sink into one unless you are very fluent with the workings of the lease you are buying and typical pitfalls that other unfortunates have had to endure.

Is the service charge based on the plan area of each flat?

Is the service charge payable to a leaseholder controlled management company or direct to a freeholder appointed management company?

Is the freeholder still the company who built the block, else who is it?

Any management company names provided yet?

What are the ground rent terms?

Who sets the service charge budget? What was it in previous years?

There has to be a well justified sinking charge or what used to be more often called reserve charge else you should immediately walk away. There should be a regularly updated long term plan for it. My guess is that there isn't, and there won't ever be unless leaseholders work together to control it.

What do you know about the flammability of glazed tile cladding and what it is mounted on or insulated with?

I say again, £560,000 is a lot of dosh to put on one number on the roulette wheel. And that's what it is unless you have totally researched the hell out of the purchase ... it's not about the right price. It's always about instant resaleability to as large a possible prospective purchaser market, and that will always be driven by what else is on offer closeish to the City and whether a block of flats has an established and respected management, or not, and f course whether lenders will continue to lend easily on the particular type of property or building and location. What floor is the flat on?

Is now a good time to buy such? Is the seller just testing the market at a typical top of the market price of the sort paid when the South East Asian buyer market was active. It ain't very active right now. The estate agent is of course the sellers agent. Did the seller buy the flat off-plan? Did they buy it to let? Are you? Are any flats already rented out or for rent elsewhere in the building? How much per month? Rents have been depressed in East London over the past year by as much as 20% on smaller flats. How many square feet is this? You have been told here that the price isn't miles out, but miles out of what? You realise that the entire East London market is built on hot air? My flat is a small one and easily saleable but the price has gone up and down like a yoyo according to the fortunes and crazy bonuses of City employees and of course at the top end, the drifting sentiments of overseas buyers.

Dalston used to be the pits with regular armed hold ups in major supermarkets and the like. Is it really so much improved? Hoxton maybe, but Dalston? I still keep my doors locked when driving through it.

Is it safe for women to walk alone in the street? I'd take a lot of persuading to be happy to condone women in my family doing so.