Chain-free cash buyer. Thinking of offering 20% lower than asking price - Too low? Or reasonable?

brasso

Deleted_User said:

I feel even more confused now than before I started. I know now at least that places do go for 20% less. It is a thing that happens. But moreover, I think I really should just go with my own instincts depending on each individual property, the state of repair it's in, against what similar properties in my area have actually gone for. In which case, 20% less may be totally reasonable, or totally unreasonable. This seems wisest rather than "20% less than asking price of every property I see". 

It’s obviously possible for a property to sell for 20% below but there’ll be reasons for that — it’s a long way from the norm. Your final sentence is correct. It’s a case by case thing. Where we’ve been looking, in a particular town in the SE, there are a couple of houses that have been on the market for nearly a year. If we were interested, I'd have no qualms about offering 5-10% below. But the houses we’ve been looking at that we’d actually like to live in have all sold for over asking price. We’ve put failed offers in for 4 properties at 2%, 5%, 8% and 15% over asking price respectively. All have been exceeded by other offers. You might be lucky with a dilapidated property, especially if it’s a probate sale where relatives are keen to offload the place. We’re cash buyers too, and there can be an advantage there I.e. proceedability. But being chain-free is a bigger plus point as the seller can feel safer that you’re not going to get bogged down in delays below you in the chain. A final thought is that you shouldn’t feel it’s a god-given right to get discounts. An EA will generally price a house at the level they think it should fetch in the current market. In the big majority of cases they turn out to be right. If you’re buying a place to live in rather than to sell on, there’ll also be times when you find a place you really like, and will be happy to offer the asking price to block someone else from getting in there before you. Good luck!

lookstraightahead

Yes I think it's perfectly possible. I've bought this year for 10% below asking  (in a desirable area, etc etc). We were in a really good position with a low LTV and no chain.

the problem is anyone who has recently paid a 'high' amount for a property really doesn't want to think they could have bought it for less. That won't rest easy with them. I remember going on a cruise once and we met up with about four couples and everyone had paid different amounts and we had paid the most. I tried to justify it to myself by saying it was probably the last cabin / cabin was better. I had been told "all cabins with balconies sell out quickly" and I hadn't even questioned it. 

We're fed information mainly by estate agents and get sucked into the hype when buying property. We're emotionally invested and feel good about our houses being worth more rather than less. You only have to see how much we are willing to pay for certain brands of food, clothing etc purely because it's marketed in that way. Estate agents are brilliant at building up momentum - they're sales people after all). 

20% is a lot but a good starting point. If it doesn't work out it's best to have the strength to move on (rather than using words like "dream" or "forever" home).

I believe the market will correct soon. Once sellers realise they're not selling so quickly. Even as a homeowner I can't wait for this, as it's really taking the proverbial. 

It's also worth considering however that once a figure is put in a vendor's head, they've often spent it as though it was their cash. They feel wealthier than they thought they were. So that hyped up price becomes psychologically the norm and a 20% 'discount' is a 'loss' (you can see this in the term 'undervalued' as though the value has come down)

Off to buy 285 toilet rolls ....

jimbog

lookstraightahead said:

It's also worth considering however that once a figure is put in a vendor's head, they've often spent it as though it was their cash. They feel wealthier than they thought they were. So that hyped up price becomes psychologically the norm and a 20% 'discount' is a 'loss' 

A buyer can turn this to their advantage. Seller asks £10,000 for a car. Buyer's friend goes to see it and makes out they're interested, but scoffs and says to the seller that it's worth only £7,000 max. Buyer goes along and offers a 'take it or leave it'  £8,000. Buyer far more likely to get the car at that price

'Loss aversion' is an interesting phenomena 
https://thedecisionlab.com/biases/loss-aversion/

lookstraightahead

jimbog said:

lookstraightahead said:

It's also worth considering however that once a figure is put in a vendor's head, they've often spent it as though it was their cash. They feel wealthier than they thought they were. So that hyped up price becomes psychologically the norm and a 20% 'discount' is a 'loss' 

A buyer can turn this to their advantage. Seller asks £10,000 for a car. Buyer's friend goes to see it and makes out they're interested, but scoffs and says to the seller that it's worth only £7,000 max. Buyer goes along and offers a 'take it or leave it'  £8,000. Buyer far more likely to get the car at that price

'Loss aversion' is an interesting phenomena 
https://thedecisionlab.com/biases/loss-aversion/

Interesting article 👍

HotPantsCruiser

peterhjohnson said:

Deleted_User said:

First time buying, so I'm completely new to this.
Is 20% less a common kind of offer?

It's not usually successful. Let's assume for a moment the unlikely case where your 20% under is actually a fair market price. The (deluded) seller will almost certainly reject it and the property will stay on the market, perhaps being reduced a bit as the months go by.  I did once leave such an offer on the table and after a long wait, got my offer accepted.

It is much more likely in much of the UK market now that someone will offer over asking price. It's almost certain that someone will offer more than your -20% figure

How likely is it though that their lender will agree, especially now that interest rates are rising?

eidand

I am interested to see how this turns out. OP, let us know what you offered and what the answer was.

theoretica

HotPantsCruiser said:

peterhjohnson said:

Deleted_User said:

First time buying, so I'm completely new to this.
Is 20% less a common kind of offer?

It's not usually successful. Let's assume for a moment the unlikely case where your 20% under is actually a fair market price. The (deluded) seller will almost certainly reject it and the property will stay on the market, perhaps being reduced a bit as the months go by.  I did once leave such an offer on the table and after a long wait, got my offer accepted.

It is much more likely in much of the UK market now that someone will offer over asking price. It's almost certain that someone will offer more than your -20% figure

How likely is it though that their lender will agree, especially now that interest rates are rising?

Happens a lot in Scotland.  Properties are advertised with a home report which includes a valuation, and that valuation is used by many mortgage lenders.  So when a buyer bids over the home report valuation they know they are bidding over the mortgage valuation - but still lots of properties at least in Edinburgh and Glasgow are going for over valuation.

comeandgo

HotPantsCruiser said:

peterhjohnson said:

Deleted_User said:

First time buying, so I'm completely new to this.
Is 20% less a common kind of offer?

It's not usually successful. Let's assume for a moment the unlikely case where your 20% under is actually a fair market price. The (deluded) seller will almost certainly reject it and the property will stay on the market, perhaps being reduced a bit as the months go by.  I did once leave such an offer on the table and after a long wait, got my offer accepted.

It is much more likely in much of the UK market now that someone will offer over asking price. It's almost certain that someone will offer more than your -20% figure

How likely is it though that their lender will agree, especially now that interest rates are rising?

Then you need back up money which FTB usually don’t have which is why they miss out on so many houses.

brasso

lookstraightahead said:

Yes I think it's perfectly possible. I've bought this year for 10% below asking  (in a desirable area, etc etc). We were in a really good position with a low LTV and no chain.

the problem is anyone who has recently paid a 'high' amount for a property really doesn't want to think they could have bought it for less. That won't rest easy with them. I remember going on a cruise once and we met up with about four couples and everyone had paid different amounts and we had paid the most. I tried to justify it to myself by saying it was probably the last cabin / cabin was better. I had been told "all cabins with balconies sell out quickly" and I hadn't even questioned it. 

We're fed information mainly by estate agents and get sucked into the hype when buying property. We're emotionally invested and feel good about our houses being worth more rather than less. You only have to see how much we are willing to pay for certain brands of food, clothing etc purely because it's marketed in that way. Estate agents are brilliant at building up momentum - they're sales people after all). 

20% is a lot but a good starting point. If it doesn't work out it's best to have the strength to move on (rather than using words like "dream" or "forever" home).

I believe the market will correct soon. Once sellers realise they're not selling so quickly. Even as a homeowner I can't wait for this, as it's really taking the proverbial. 

It's also worth considering however that once a figure is put in a vendor's head, they've often spent it as though it was their cash. They feel wealthier than they thought they were. So that hyped up price becomes psychologically the norm and a 20% 'discount' is a 'loss' (you can see this in the term 'undervalued' as though the value has come down)

Off to buy 285 toilet rolls ....

You don’t say what or where you bought, which makes it hard to make sense of this, but popular sales psychology aside, you aren’t buying a normal sort of property where I am, in the SE. If a seller and agent accept 10% below asking price in a good area then the property was simply wrongly priced to start with. Where we’re looking, there are more buyers than sellers, and nothing in the bracket we’re looking at (roughly 550-650k) is selling below asking price except for houses that have been on the market for several months. And the reason they’ve been on that long is nearly always that the seller (usually a builder or probate seller) is taking a punt. Eventually they get fed up and drop the price or accept a lower offer that matches realistic current market value.

newsgroupmonkey_

brasso said:

lookstraightahead said:

Yes I think it's perfectly possible. I've bought this year for 10% below asking  (in a desirable area, etc etc). We were in a really good position with a low LTV and no chain.

the problem is anyone who has recently paid a 'high' amount for a property really doesn't want to think they could have bought it for less. That won't rest easy with them. I remember going on a cruise once and we met up with about four couples and everyone had paid different amounts and we had paid the most. I tried to justify it to myself by saying it was probably the last cabin / cabin was better. I had been told "all cabins with balconies sell out quickly" and I hadn't even questioned it. 

We're fed information mainly by estate agents and get sucked into the hype when buying property. We're emotionally invested and feel good about our houses being worth more rather than less. You only have to see how much we are willing to pay for certain brands of food, clothing etc purely because it's marketed in that way. Estate agents are brilliant at building up momentum - they're sales people after all). 

20% is a lot but a good starting point. If it doesn't work out it's best to have the strength to move on (rather than using words like "dream" or "forever" home).

I believe the market will correct soon. Once sellers realise they're not selling so quickly. Even as a homeowner I can't wait for this, as it's really taking the proverbial. 

It's also worth considering however that once a figure is put in a vendor's head, they've often spent it as though it was their cash. They feel wealthier than they thought they were. So that hyped up price becomes psychologically the norm and a 20% 'discount' is a 'loss' (you can see this in the term 'undervalued' as though the value has come down)

Off to buy 285 toilet rolls ....

You don’t say what or where you bought, which makes it hard to make sense of this, but popular sales psychology aside, you aren’t buying a normal sort of property where I am, in the SE. If a seller and agent accept 10% below asking price in a good area then the property was simply wrongly priced to start with. Where we’re looking, there are more buyers than sellers, and nothing in the bracket we’re looking at (roughly 550-650k) is selling below asking price except for houses that have been on the market for several months. And the reason they’ve been on that long is nearly always that the seller (usually a builder or probate seller) is taking a punt. Eventually they get fed up and drop the price or accept a lower offer that matches realistic current market value.

Or as we're finding, there's something actually wrong with them!

Too much flat roof, non-standard construction and the like.

HotPantsCruiser said:

This one has three double bedrooms and has reduced it`s price by 50k so far, do you think there is something wrong with it?

https://www.rightmove.co.uk/properties/113117051#/?channel=RES_BUY

That was overpriced in the first place - it's clearly probate (see brasso's point above).

That would actually be right up our street if it actually had a garden!

It's the weirdest place ever. Is sat on a huge plot (we checked - the actual outside is all owned by the property) but has a teeny tiny courtyard garden. It's like "if you could pick the house up and move it to the middle of the plot", it would be grand!