Agreement in Principle question - FTB

kisaki757

Hi all,

Looking for some advice as I am a FTB and very new to the whole house buying process. I have a silly question about the negotiation phase.

Say I can borrow a maximum amount based on my income etc. Plus my deposit, it means I can afford to buy for an absolute maximum of X

I am currently looking at properties but I am not necessarily willing to pay the whole amount of X for all of them. For some, I would pay no more than 70% of x for example.

Recently I found a property I like and made an offer. I offered under the asking price which is also under my maximum affordability. Technically I could afford the asking price but I just don't feel it's worth it.

The EA rejected my first offer. I might offer a bit more but they are now asking me for my agreement in principle. But if I show them my AIP they would see my maximum affordability so wouldn't that ruin my negotiating position?

I am just curious if it's normal for estate agents to ask the buyers to provide the AIP before the offer is accepted?

Sorry, I really don't have the first clue how this works!

sheffield_soldier

That's fine, show them. Most will ask before they even allow you to view a property.

When they accept your offer they will then want to see bank statements for proof of deposit as well before they take it off the market.. 

Chandler85

Also just because you can afford X, doesn't mean you will pay that.  Stick to your guns as to what you think it is worth.

They are trying to ensure you are proceedable.

MsACam

Do NOT show them! Blank out the amount and leave the contact details of the mortgage broker and tell the broker under no circumstances are they to state your max when they are contacted by the EA and instead they are to confirm the amount you bid, or alternatively get your mortgage broker to issue an AIP for the exact amount you bid (that’s what I did and it took the mortgage broker one day). 

sheffield_soldier

Chandler85 said:

Also just because you can afford X, doesn't mean you will pay that.  Stick to your guns as to what you think it is worth.

They are trying to ensure you are proceedable.

Absolutely. I am just buying a house and the MIP says I can spend an extra 100k. I just simply told them I wouldn't be going crazy when bidding because there is only so much you can go over asking before issues with getting the mortgage because of the valuation. 

MaryNB

When I bought my house the EA could see I could afford more but I was firm with my final offer. Told them I wouldn't be willing to pay any more.

Only pay what you think it's worth, not the max you can afford. Your bank may downvalue it anyway if it's overpriced.

TheJP

Firstly the EA didn't reject your offer the seller did. The EA wont and cant show the seller what your max lending amount is, they want to see it to ensure you are proceedable and not wasting the sellers time. The whole point of an EA.

Find a number you are comfortable in paying, it may not be this house so manage expectations.

[Deleted User]

I've always wondered about this because I looked at about 40 flats when I was buying and I was never asked for my AIP! 
Anyway, as a FTB I'd suggest that you show them, but stick to your guns. 
At the end of the day, if you don't feel the asking price is reasonable, that's ok, they may reject it, but maybe it's not the home for you!
I put offers in on about 5 flats and got rejected on all but 1, but I will say, don't try and get a 'good deal' just think about what you're happy paying. I wasted so much time trying to get a bargain with potential, when realistically I needed a home, not a bargain. If that makes sense... 

canaldumidi

I would never show the agent my affordability.

Last place I bought, I got the agent to contact my solicitor (who in any case has to review my finance for money laundering checks) and he confirmed to the agent that yes, I could afford £X.

£X being the amount I have offered and/or agreed, not the amount in my bank account and/or MIP.

user1977

I wouldn't get overly concerned about it - at most it removes the negotiation argument of "I can't possibly afford that much". But how many people are ploughing every penny they have into the property?

I could afford to buy a shiny new BMW. But I don't want a car that expensive - or to pay the same amount for something which isn't worth it. Same principle.

TheJP

canaldumidi said:

I would never show the agent my affordability.

Last place I bought, I got the agent to contact my solicitor (who in any case has to review my finance for money laundering checks) and he confirmed to the agent that yes, I could afford £X.

£X being the amount I have offered and/or agreed, not the amount in my bank account and/or MIP.

Such a roundabout approach to something you control. You make an offer they reject, you make another offer, they reject. You walk away. The DIP will have no play because there is a degree of realism,  if i was selling and my EA said they refuse to show proceed ability then it would be a good bye from me.