Negotiating Price before exchange

Ja171

First of all, let me say I hate to do this. As a FTB we are getting closer to agreeing to a completion date. We offer £5k over the asking price in August to secure the home and were more than happy to pay this as we were not concerned at the time about being in a negative equity position.

The market has since had a downturn which is predicted to get worse. Pre COVID boom a similar home sold for £55k less than our offer.

I'm getting really stressed about being in a negative equity position from day 1. My job isn't super stable so my concern is that if anything were to happen and we lose the property in the next year or two we would end up paying the bank more, on top of losing the house. We can't really afford to do this.

To avoid a scenario where the mortgage is worth more than our house I am considering reducing the offer by £15k. Our deposit would mean that the mortgage balance roughly equals house value, in light of drop. I'm happy to take the risk of the market downturn, that is my risk not the sellers. What I can't afford though is potentially losing the home and owing more money on top due to being in a negative equity position.

Finding this all very stressful so would appreciate input. Am I concerned for no reason?

1616six

First question I’d ask is how long do you plan on being in the house?

Negative equity immediately is only really an issue if you plan on selling again straight away. 

Prices will always go up and down, how would you have felt if prices had gone up and the vendor approached you now saying actually houses are selling for more so they want another 15k on top?

We are in a similar position, buying a house that in July we offered top dollar on. I’m sure if it went on the market now it would be £10-£15k less but that doesn’t really mean anything to us. We plan on being there an absolute minimum of 7-10 years and no one can forecast what the market will be like then. 

In all honesty, if you’re planning on staying a while then just get on with it and don’t muddy the waters. It’s not worth the stress!

mattyprice4004

I wouldn't muddy the waters if you're planning to stay there - as per the post above. 
The buyers of my house started making noise about dropping their offer; as a result I chose to drop them and sell to someone else for the same price (I stuck with the first buyers as they offered first - but as soon as their courtesy went out the window so did mine). 

All worked out in the end, the people who ended up with the house were remarkably grateful and easy to deal with. 

Ja171

We expect to be there for around 4-5 years. If we have a family will need to move for catchment area otherwise could end up there for longer.

What would happen if the house say got repossessed would negative equity not matter? 

If it only matters when we sell them maybe I am stressing for no reason.

74jax

If your job isn't super stable, is now the right time regardless? 
You have no guarantees with any job but the fact you state it isn't super stable, must mean more so than a regular job.

mattyprice4004

Negative equity would matter if it was repossessed, but as long as you keep up payments (and a bit of a rainy day fund) I wouldn't worry about that. 
The value of your house only matters when you come to sell in normal circumstances, and the market will always bounce back (even if it takes some time) 

diystarter7

OP
You can offer what you want as it's turned into a buyer's market in some places.
You will feel bad but there is/was a chance that if markets had shot up, the seller could have upped the price

About your concerns re negative equity. You could be in positive terrority the year before you sell then financial markets crash the year you wanted to sell and everything goes belly up. So, if you really like the place, don't lose it for a few quid but no harm in trying
If I was the seller and you had offered me as FTB and more than other people, I'd be unhappy but I'd understand and if I did not, I would not sell to you.  Therefore, only you can decide and possibly pick the brains of the EA but don't forget they only make money once the sale is completed so I feel they may favour the seller

IMHO, it may not hurt to try paying a little less citing market falls, jump in rates etc.

Re another sold for xx less than the advertised rate - possibly that was overpriced/etc?  Even similar property on the same road may sell at diffent prices due to the views/has been done, size of gardens etc etc and a bit of luck

Let us know how you get on and good luck

movilogo

You can reduce offer until exchange. Seller may or may not accept it. Seller may counter offer to settle midway.
You won't know until you speak with vendor/estate agent.
Just make a back up plan in case vendor says no. Are you going to proceed in agreed price or simply going to pull out? 

Ksw3

I think it also depends on how much you are borrowing as a multiple of income or how much of your monthly income will be needed to cover housing costs. This will affect the likelihood of repossession I would imagine. 

Ja171

Borrowing slightly under 3x our joint income. Mostly my income so the risk. I don't think I would have too much difficulty finding a new job. The instability comes with sector and role.

Haven't really saved much in my earlier years, so have been aggressively trying to build a rainy day fund and currently at 4months.

I suppose you never know until you have the conversation. Will sleep on it and keep you guys posted.

Martico

Have you considered redundancy insurance as a back-up? I've never taken it out, have no idea of the cost or restrictions involved, so it's something for you to research and consider.