Buying a half-finished renovation project with extension potential

Emmajhowe90

Hello,
Need some advice from someone who knows a bit more about renovations than we do!
Our house is currently on the market, and we said we didn't want a project but we wanted to move somewhere more rural. We went to view this property and it's in the perfect location, huge garden and lots of potential to extend. https://www.rightmove.co.uk/property-for-sale/property-93059315.html

It's marketed as a 4 bed, but in reality it's 3 double beds (no ensuite) and the 4th bedroom is really the study/snug downstairs. So we'd want to extend above the lounge (where you see the chimney on the pictures) and create a master bedroom, ensuite and walk in wardrobe ideally.
We'd then probably also extend out the back and build on a larger conservatory/orangery to open out the kitchen/diner space more. And eventually do some work on the outside of the house and garden to give it a bit of TLC, and convert half of the double garage into an office space (but these things could come later down the line).

Currently the property is in probate and with covid the renovation by current owners is taking a while. The kitchen and its floor is basically done, just oven and cooker etc need putting in place, the bathroom has a bath bought but not in place and tiles are bought but nothing tiled. Floors need carpet laying, but all walls and internal doors are done.

The property is up for £649,999 which is the completed cost if they carry on with the work in the current footprint of the house (bear in mind this has reduced recently from £674,999). But they are also accepting offers 'sold as seen' too. 
My first question is how much would you say is a sensible offer? (the estate agent won't tell us what price the owners have in mind for purchasing 'as is'). This house is the worst house on the road - according to Zoopla the average price in that road is about £700-800k, and some of them are valued £1mil. But all the houses are wildly different and most have been extended etc.

Our house budget based on what mortgage we'd be accepted for is £620k. So we were thinking if we could offer £500-520k we'd have enough money left in our budget to do the renovations for £100k? Does that sound reasonable... also bearing in mind my husband works in the glass trade and can get conservatories, bathrooms, windows etc. at cost price.

How would you suggest it works? We make an offer to secure the house, then as it's going through we apply for planning permission, get builders/architects to give their opinion of the cost of the work and feasibility etc. and then once we complete do we remortgage to £600-620k for example to cover the cost of the renovation work? What costs do we need to pay upfront?
Is there anything else I've forgotten to consider or questions I should be asking. Totally out of my depth but seems like we could make a good investment here and the normal cost of purchasing a house in that area with such a big plot would be way out of our budget.

Many thanks in advance for any advice
Emma.

[Deleted User]

No because you are adding in a lot of fairly extensive reservations you want to do.  Why should the owners pay for what you want to do?  I would have thought the tiling/putting bath in and carpets could be done for £10-£12k.  I'd take more off because of the inconvenience of waiting for probate but certainly not expect as huge a reduction as you are (maybe 40k reduction but I wouldn't expect it to be accepted).  If you want the offer accepted (and its already been reduced by quite a bit), you will need to offer nearer the asked for price.

You are actually taking £149k of the asking price and 30K has already been taken off (almost a half price house). Way way too much.  No idea why you'd think that was reasonable.  You've already said the house is well below the average in the area.  If I was the executor, I'd say forget it and not entertain any further offers.

Doozergirl

I think the 'discount' In terms of present value has to be based on the cost of required work to the present house, not the addition of extensions. 

But even then, it's also ultimately about what is acceptable to the vendors.  

DCFC79

That's a very cheeky offer, as mentioned you run the risk of the owners not entertaining any further offers from you.

Why don't you ask the owners if it would be ok to have a builder walk round to give you a price based on what work you will want doing.

Mickey666

There are no rules about how to price a house, even if it's a building site.  All the OP can do is make whatever offer they want and see if it's accepted.  Only the seller can decide if an offer is reasonable - they are the only person who matters.

There's a chance, since it's a probate sale, that the beneficiaries have told the executor (who could be the same person) to sell it as quickly as possible even if it's a low offer.  After all, ANY price is a bonus to the beneficiaries.  BUT, there's also a chance of the opposite and that the beneficiaries want as high a price as possible and are prepared to wait, in which case a very low offer might be received as wasting their time and they might say forget it and don't come back again.  Who knows?

So basically, the OP should just offer what they're prepared to pay . . . the same for all potential buyers.

cattie

Whatever you feel the renovations would cost, then doubling it will give you a much more accurate figure. People always tend to underestimate the cost of renovation & refurbishment works. The fact that you would need to remortgage to carry out the works shows that you just don't have a financial cushion to make this property a viable prospect.  Lenders have really tightened up their criteria & I doubt that there are any lenders around who'd be willing to grant you a mortgage in excess of what you hope to secure a property for, so you'd need cash in the bank.

I doubt anybody would be fool enough to accept a low offer such as you're suggesting. I would image they are thinking more along the lines of £625k+ bottom line for a sold as seen sale for a property in an excellent location. 

The blurb of the property actually does state that vendor requires potential buyers to be financially vetted prior to making an offer, so it's possible you'd fall at the first fence.

ProDave

One point in your favour is that it might be difficult to get a mortgage on the house in it's unfinished state.  If you don't need a mortgage that puts you in a good position.

AdrianC

Emmajhowe90 said:

Currently the property is in probate and with covid the renovation by current owners is taking a while. The kitchen and its floor is basically done, just oven and cooker etc need putting in place, the bathroom has a bath bought but not in place and tiles are bought but nothing tiled. Floors need carpet laying, but all walls and internal doors are done.

The property is up for £649,999 which is the completed cost if they carry on with the work in the current footprint of the house (bear in mind this has reduced recently from £674,999). But they are also accepting offers 'sold as seen' too. 

First question has to surely be whether it's even mortgageable in its current part-stripped condition.

My first question is how much would you say is a sensible offer? (the estate agent won't tell us what price the owners have in mind for purchasing 'as is'). This house is the worst house on the road - according to Zoopla the average price in that road is about £700-800k, and some of them are valued £1mil. But all the houses are wildly different and most have been extended etc.

Our house budget based on what mortgage we'd be accepted for is £620k. So we were thinking if we could offer £500-520k we'd have enough money left in our budget to do the renovations for £100k? Does that sound reasonable...

I think you're dreaming, to be brutally honest... 24% below the reduced asking. The work on the place is nearly completed, with a bit of labour, not much materials remaining. Call it £5-10k of work to go. And you want to offer a hundred and fifty grand less...?

and then once we complete do we remortgage to £600-620k for example to cover the cost of the renovation work?

Not a hope. Sorry, but I cannot see how this is going to work financially for you.

SameOldRoundabout

My jaw actually dropped when I got to the figure you want to offer. The current renovation needs minor work to finish, £10k at the most. To deduct £149k to try and cover extensions YOU want to do is stunning. If I were the vendor I’d laugh you out the door. 

It doesn’t honestly sound like you can afford to buy this property at all. You can’t buy then immediate remortgage, you need cash to start renovations or to live as is for a few years first. You could probably secure the house the top of your £620k budget but then you’d need to be able to have enough money left a month to save up the renovation fund. 

se2020

You can offer whatever you want.
If they have a minimum price then they might have told the agent not to pass on any offers below a certain amount. Its only 2 phone calls for the agent anyway so you are not really wasting anybodys time by making a low offer.
Be aware that If you are the first person to make an offer and that is £125k below asking price then if a second buyer comes along and offers them £50k below asking that will be an offer of £75k more than your offer and they then might see that as a good deal compared to your offer and jump at it pushing you out.

Also, I don't think you will be able to remortgage just after moving in. Firstly, most lenders seem to have a rule that the house has  not been sold for at least 6 months.
Secondly,  it will require a valuation for remortgaging and I would think the valuer would just value it at the price you have just paid for it. You would need to put up a lower deposit in the first place keeping money back for the work or secure additional borrowing for the work after purchase.

Scotbot

Based on the work to be done I would say 610 was a sensible offer with a view to paying 620. It will cost less than  30k to finish but adds in the hassle factor.  You could get a builder to advise on the cost of completing it if you are unsure of what needs to be done. As for the extensions they are irrelevant to the sale price as others have said.

I love the garden furniture.