Reducing house offer after months of waiting for completion

Sunsaru

TXC said:

I assume that if the situation were reversed and house prices were rocketing in real time like we saw last year that you'd be more than willing to increase your offer price?

Fairs fair after all

I bought when the lockdown business was ramping up. From the moment I put my offer in to getting the keys, my house had gone up roughly £10k.

I kept my mouth shut.

MeteredOut

TXC said:

I assume that if the situation were reversed and house prices were rocketing in real time like we saw last year that you'd be more than willing to increase your offer price?

Fairs fair after all

I don't think anyone would really expect a buyer to offer to increase their offer, but its not unknown for a seller to request/accept a larger offer (sometimes from another party). In fact, it happened so often, a word was invented for it.

Perhaps what the OP is considering should be coined dezumping.

The market has changed (and despite many people saying the market is only sold prices, public perception of price trajectory is also part of the market) and the OP was told the seller was chain free. Both of those give the OP ammunition to lower their offer, should they wish to take the risk.

On the flip side, with the seller seemingly not having found their own future home, there is a good chance that the OP reducing their offer would make them think about their own circumstances, perhaps pause their own search until its clear where the market is headed, and just withdraw their property from the market.

That's the risk the OP has to weigh up. How much do they really want the house.

GDB2222

Leaving aside the 'moral issues', I think the OP is asking whether house prices are about to drop. My answer is yes. And, not just 1 or 2%. I wouldn't recommend dropping out of an agreed purchase over 1 or 2%. 

Mortgage interest rates have risen (on a 2yr deal) from around 1% to 5%. For a couple with a mortgage of say 6 times joint earnings, that's going to cause some serious re-thinking, with 30% of pre-tax earnings going on mortgage interest alone. That's probably sustainable, but it's going to be hairy if rates go up any further. It also completely changes the balance between renting and buying.

Sarah1Mitty2

CSI_Yorkshire said:

Would people here that are saying the OP is due a discount have the same view in the opposite situation - if a seller turned around and said "mortgage rates are getting cheaper so you can afford to borrow more, I'm putting the price up"?  Would that also be expected?

Well yes, that is the reason we have reached the mess that the economy is in basically, with millions trapped on unaffordable mortgage debt.

Sarah1Mitty2

GDB2222 said:

Leaving aside the 'moral issues', I think the OP is asking whether house prices are about to drop. My answer is yes. And, not just 1 or 2%. I wouldn't recommend dropping out of an agreed purchase over 1 or 2%. 

Mortgage interest rates have risen (on a 2yr deal) from around 1% to 5%. For a couple with a mortgage of say 6 times joint earnings, that's going to cause some serious re-thinking, with 30% of pre-tax earnings going on mortgage interest alone. That's probably sustainable, but it's going to be hairy if rates go up any further. It also completely changes the balance between renting and buying.

Yes, this describes the reality, yet there is still post after post of "I would tell the buyer where to go"! As I said the OP should just drop out of the buying process until rates find their top in my opinion.

jonnydeppiwish!

LLM000 said:

fiish said:

Does the valuation on your mortgage offer support the agreed price? (ie no big downvaluation)

I take it you haven't instructed any survey on the property yet? If your survey includes a valuation and it indicates a significant fall in the house's value since the deal was agreed, you might have something (but not very strong) to back a renegotiation. 

A useful thought exercise to help might be: if you were in the seller's position, and decided to re-list the property, would you be able to get a better price than the reduced offer? And how would restarting the process with another buyer affect your onward purchase? Need to add the annoyance factor of a buyer dropping the price after an accepted offer, of course

Thank you for thoughtful advice. We are now in the process of instructing a surveyor. I have been told by people I know that the survey carried out on houses no longer include valuations - do you think this is untrue? Or just some surveyors won't value any more. 

I think if I was in the sellers position, I would be cautious of putting back on the market. They originally listed it at a very unrealistic price and we were able to negotiate down, but even now I think the offer is too high. It is hard to judge as similar properties in the area are not on the market and have not been for some years so there is no true comparison. Other than saying when the sellers brought it, they paid much more than a like-for-like property that sold only a couple years previously.

Similar properties just out of area (1-2 miles down the road) are going for much less (£100k+) than what we are agreed on at the moment. 

My house, 30 meters east from its current location, would sell for £150k more.

jonnydeppiwish!

GDB2222 said:

Leaving aside the 'moral issues', I think the OP is asking whether house prices are about to drop. My answer is yes. And, not just 1 or 2%. I wouldn't recommend dropping out of an agreed purchase over 1 or 2%. 

Mortgage interest rates have risen (on a 2yr deal) from around 1% to 5%. For a couple with a mortgage of say 6 times joint earnings, that's going to cause some serious re-thinking, with 30% of pre-tax earnings going on mortgage interest alone. That's probably sustainable, but it's going to be hairy if rates go up any further. It also completely changes the balance between renting and buying.

I’m not sure they’ll be a big drop. Maybe 10% unless there is sustained higher rates. Stagnation for 6-7 years like the 90s is my bet. But then again, who am I to know anything 😆 

Sarah1Mitty2

jonnydeppiwish! said:

GDB2222 said:

Leaving aside the 'moral issues', I think the OP is asking whether house prices are about to drop. My answer is yes. And, not just 1 or 2%. I wouldn't recommend dropping out of an agreed purchase over 1 or 2%. 

Mortgage interest rates have risen (on a 2yr deal) from around 1% to 5%. For a couple with a mortgage of say 6 times joint earnings, that's going to cause some serious re-thinking, with 30% of pre-tax earnings going on mortgage interest alone. That's probably sustainable, but it's going to be hairy if rates go up any further. It also completely changes the balance between renting and buying.

I’m not sure they’ll be a big drop. Maybe 10% unless there is sustained higher rates. Stagnation for 6-7 years like the 90s is my bet. But then again, who am I to know anything 😆 

Yes, maybe, but remember the "stagnation" came after 30% price drops!

Scotbot

I expected prices to fall once rates rose. Based on May land registry sales data the annual increase is 21% where I live. So they have to fall 20% before I lose a  single penny. They are still selling as well, almost every for sale sign has sold on it. It is not sustainable and I expect prices will fall but seems the stress testing is working round here for now(West Mids)

GDB2222

Scotbot said:

I expected prices to fall once rates rose. Based on May land registry sales data the annual increase is 21% where I live. So they have to fall 20% before I lose a  single penny. They are still selling as well, almost every for sale sign has sold on it. It is not sustainable and I expect prices will fall but seems the stress testing is working round here for now(West Mids)

Yes, the stress testing has worked pretty well so far. 

Does anyone know how the stress testing works now, given that interest rates are 5-6% on a two year mortgage? Do the banks add a few % on to that rate?  That could make it difficult for new borrowers to get much of a loan?