Advice needed on house negotiation

surferstar

I have put in an offer for a new build house in London which has a guide price of £725k, I’ve offered £700k. The developer has come back with a counter asking for £750k but they’ll pay my stamp duty (£22.5k) plus some additional costs of c. £5k. This makes the effective cost just over £722k. 

This is a decent counter but I don’t want a mortgage for £50k more as it pushes my monthly costs up and over the course of 10 years for example I’ll be paying about £11.5k more in interest vs the mortgage needed if the price was £700k. I think that’s a fair comparison but need it sense checked. 

I’m not entirely sure why it’s more attractive to sell it above the guide price and then offer all these incentives but I imagine it looks good when securing funds for future developments and maybe they can write off some of these additional costs. 

I’d like to go back with a proposal that reduces the effective cost to £710k, about £12k less than their current offer with the focus being to reduce the house price rather than reducing the amount of incentives. Or I could just increase to £710k and no incentives but clearly the developer is very keen to maximise the price paid on paper for the property and wants to include incentives to get there. 

Any advice and suggestions on what I should do here? If they’re offering incentives it would also help if they funded £5k for example against furniture but I don’t want to overly muddy the waters. 

If I just go back to ask to reduce the cash price to £735k or so and keep all the offered incentives that just won’t cut it so I’ll probably need to say they can reduce the stamp duty contribution. 

With all these incentives when would they normally be paid, the day of completion to my bank account? Not sure how it would work. 

DullGreyGuy

What size deposit are you going with?

The mortgage company won't lend for the stamp or furniture and the LTV will be calculated based on the value less these things so in reality they just come out of your deposit. 

surferstar

About £200k deposit is planned. If they pay my stamp duty then I could actually increase the deposit by that amount technically so some of the argument about increased interest for the higher loan is lost. I also forgot the stamp duty would increase to £25k not £22.5k if the price paid is £750k rather than £700k. 

So actually the effective price they’re offering after the incentives is £720k (£750k minus £25k stamp duty minus £5k additional incentives in cash). My offer was £700k cash. 

BikingBud

Can't be seen to be reducing the prices, so by offering incentives at what is "full price" they try to sweeten the deal.

Think of car salesman and mats, mud-flaps and "special polish". They tell you it works out over £600 and will throw them in but in fact they will have been <£100.

Veteransaver

They do these incentives so as not to actually be seen to reduce the headline price because that tends to anger all the other people on the new build 
 development who have paid more than you.
It's a sign they are struggling to sell them, in the past I've seen developments chuck in a free £40k Jaguar rather than reduced the price.
But it's a bit off to give a guide price and then want £25k more, or even still want c£3k more net of the incentives
Note that the mortgage company will want to know about those incentives, and it would affect what they value the house at, and hence how much they are prepared to lend as an LTV %

Herzlos

If they drop the price, it'll be a matter of record and they'll have a harder time selling the rest of the houses (or on other developments) for full price.


I don't understand the point about the mortgage though, your outgoings are going to stay the same whether the sale price is £722 or £750 with incentives. Presumably you can put the 22k saved from stamp duty in as a further deposit so you're borrowing 22k less.

david29dpo

First thing that springs to mind is the over-complication.
Just offer what you want to pay!!!

Sapindus

I knew someone who bought a new build after being dazzled by all the "extras" the developer was throwing in (TV, upgraded kitchen etc).  Within a couple of years he was desperate to move because the house was just too cramped and awkward for a growing family.

Hermann

Decide what you want to pay & offer that, forget all this incentive nonsense it's not benefitting you but is benefitting the developer.

Be clear that you are walking away if you can't agree a simple cash price.

If you go down the incentives route you will find yourself effectively taking a significant depreciation the minute you complete. 

Consider what you would be able to sell for on day 1 of your ownership, you wouldn't be offering all those incentives and therefore would be selling for a lot less.

Do you really want to take that hit just to try and keep the developers sale prices artificially inflated? 

Albermarle

On the other hand, if they offer you a washing machine, dishwasher etc for free and you were going to have to buy them anyway, you have gained.

surferstar

Hermann said:

Decide what you want to pay & offer that, forget all this incentive nonsense it's not benefitting you but is benefitting the developer.

Be clear that you are walking away if you can't agree a simple cash price.

If you go down the incentives route you will find yourself effectively taking a significant depreciation the minute you complete. 

Consider what you would be able to sell for on day 1 of your ownership, you wouldn't be offering all those incentives and therefore would be selling for a lot less.

Do you really want to take that hit just to try and keep the developers sale prices artificially inflated? 

This does make sense but if I’m able to purchase at my ideal ‘net price’ then does it make much difference how we’ve got there? ie if I was happy to pay £725k for the house but the developer insists on £750k with £25k stamp duty contribution then I’ve not paid £750k for the house. 

I’m very conscious not to be confused by all the incentives. I’m just focusing on the net price after incentives, however if the incentives genuinely help me as I’d need to pay for these costs anyway (ie stamp duty) then they make sense. If they were trying to upgrade to a super flashy kitchen claiming that’s £20k value then I’m not interested as I don’t want that and don’t equate value to it.