Buyer reduced bid by 9% before exchange

[Deleted User]

I'm selling my late mother's unoccupied property. The accepted bid in April was from a property developer who converts houses to HMO. They bid 7% over the asking price and above all other bids. They are using a bridge loan to finance the purchase.

They said the reduction is due to:

1. Article 4 being introduced in the area, meaning they will need planning permission to convert the property (higher risk)
2. Increased interest rates

Other potential reasons:

1. This is a tactic they always use when purchasing
   
2. They are capitalizing on the market switching from a seller's market to a buyer's market, and know I wouldn't get as much if I re-marketed the property
   
3. They think I want to get rid of the property ASAP and will accept the lower bid

Afterall, the buyer is purchasing the property to add to their BTL portfolio. This won't be their home. I am not surprised that they attempt to improve their position (I suppose I wouldn't be surprised if anyone did this actually).

The EA said it's unlikely we would get as many or as high offers as we did in April (rising mortgage rates, mortgage products being removed).

How would you handle this scenario?

lookstraightahead

I think a lot of people who created bidding wars will see this - did they pay over what you marketed it at?

I think 9% isn't too bad given the circumstances.

[Deleted User]

lookstraightahead said:

I think a lot of people who created bidding wars will see this - did they pay over what you marketed it at?

I think 9% isn't too bad given the circumstances.

Yeah all interested parties put in their offers, and I picked the highest. Their offer was 7% over the market price.

clearancer

Grab it and exchange ASAP. The market is in free fall, no one can get a good rate, and this sale is all profit for you 

anselld

All those reasons are probably true to some extent but they don't even need a reason.  Your choices are obviously to accept, reject or try to negotiate a middle ground.

Don't read too much into your EA comments, they are primarily interested in getting their commission.  Arguably if it is a property suitable for HMO conversion the current turmoil has minimal effect on developers and if one was interested there will be others.  Article 4 must be backed with specific planning criteria on what will be accepted so minimal risk if the developer does their homework.

Personally, I would reject and remarket on principle.  The current buyer still has the option to proceed at the agreed price unless someone else comes along first.

eddddy

I guess one option would be to negotiate - for example, say that you'll accept a 4% reduction (or whatever), otherwise you'll put it back on the market, and talk with the other people who offered in April.


Or I guess you could ask the Estate Agent to contact the other people who offered in April anyway. But I suspect that the Estate Agent might not be enthusiastic about doing that - so might not do a 'thorough' job.

The estate agent will much prefer a 9% reduction in their commission now, rather than doing lots more work  and only getting 'a few pounds' in extra commission in a few months time.


(Unfortunately, an extra £20k on the price for you probably only equates to an extra £200 for the estate agent. £20k might be important to you, but £200 probably isn't very important to the estate agent. So there's a bit of a conflict of interest.)

pjcox2005

Say that you appreciate the challenges, but expect they wouldn't expect to increase their offer if their profitability was looking more favorable due to changes in market conditions. Then state to get it done you'll reluctantly meet halfway and accept a 4.5% reduction and get on with it. I'm assuming they would expect a counter offer.

silvercar

Speak to a different estate agent. See what it is worth in today’s market and then make your decision.

lookstraightahead

A couple of years ago when we were selling my late MIL property we accepted a low offer because of all the stress and worry of selling a probate house and we didn't live in the area.

Maybe think about whether you need to sell at the original cost.

[Deleted User]

pjcox2005 said:

but expect they wouldn't expect to increase their offer if their profitability was looking more favorable due to changes in market conditions.

An interesting point. Is there a term for when the buyer asks for more money before exchange? Gazupping?

lookstraightahead

Personally, I would reject and remarket on principle.  The current buyer still has the option to proceed at the agreed price unless someone else comes along first.

I think lots of people who got into bidding wars will be wanting to reduce though, on principle and because they actually do think they're paying too much.