First time buyer needs advice please

lisal0u

Hi,

My boyfriend and I are considering buying our first home. We are intending to live in it for 5-10 years maybe more. We have a 5% deposit and a mortgage approved in principal with Nationwide (£179K) and the Halifax (140K).

The property we are interested in is a 30's house that has never been updated; it is currently on the market for £104,950. I have estimated it will cost us around £20,000 to modernise it. The Halifax has told us that if we were to provide them with quotes for the work they would consider lending us the money to update the property, especially as we aren't mortgaging anywhere near what they would lend us.

We have been renting for around 8 years so are fully aware of the cost of living but have completely outgrown our flat. It has no garden or parking and is driving me crazy!

I would very much appreciate any advice on whether you think it’s wise for us to be buying a property now and also what offer you would put in. I was thinking of putting an offer of £80, 000 but is this too cheeky and unrealistic. The house has been on the market since before Christmas and it is being sold by the children of the owners as they have died.

I am only willing to put in a low offer to protect us from a falling market and negative equity.

I would be most grateful for your thoughts!
Kind regards
Lisa

janegal

Dear Lisa,

Only my personal opinion and I know people will disagree with me. I think if you find this is the right property for you, buy it at the best price you can. You have done your homework and you have a game plan for 10 years plus. I would go lower than £80k in the first offer - something like £75k or a price that would reflect how much that house was worth in 2004 - if the family has to sell due to the death of a parent they are desperate for an offer and you would do them a favour. State clearly why your offer is low and in what situation you are in.

However, if you get the property, I would never get more money from the bank to do it up - it would mean that you would be in negative equity straight away = you have borrowed more than what the property is worth.
Huge stress (potencially) if the property prices fall as much as we think they will.

Good luck with it all. Janegal

lisal0u

Hi Janegal,

Thank you for your advice!

I have had a look at house prices for that street and we have also looked around a house across the road that is the same age and style and size but has been modernised. It is on the market for £115, 000. It did sell in June last year for that price but the chain fell through. Prices in 2004 were around £71, 000 so I think I will definitely start with a lower offer.

The house is lovely and has a lot of potential, the garden is 30m long, but without a loan we would be unable to get the cash that we need to do the place up. I fully appreciate it is a difficult climate at the moment. Is there any other way around this?

Thanks again
Lisa

soupdragon52

Hope all goes well for you and you bag a bargain. As the place needs a lot of modernising you may find that the bank says they will give you the mortgage but with a retainer, dont let this worry you. Long as you've done your homework as to what needs to be done and how and when you will do it you can argue it out with them down to a minimum or even get rid of it altogether.

brummybloke

you only need be concerned about 'negative equity' if you sell it for less than you paid for it , or you try and secure loans on it, otherwise it means nothing and is merely scare mongering by the media.

if it is going to be your family home for 10 years then strangly, like pretty much most 'investments' the price can go up or down.

you could offer 80k, that is a low offer, however i doubt the family are desperate to sell, it is costing them nothing at the moment and losing 20k or 1/5th of the value to shift it is highly doubtful.

you may get lucky and get it very cheap but dont be shocked if a low offer is rejected, by the sounds of it, it may already be priced accordingly.

good luck either way, buying a house you really want is exciting and a new adventure.

sarah_elton

janegal wrote: »

However, if you get the property, I would never get more money from the bank to do it up - it would mean that you would be in negative equity straight away = you have borrowed more than what the property is worth.

That makes the assumption that the work done to the place adds no value, which of course it will.

The danger is that you don't borrow enough to properly do all the work, and are forced to sell it half done when the money runs out. If prices fall and it still needs a lot of work, you will definitely be in negative equity.

Make sure your budget is realistic, that all your sums for the next few years are watertight and you won't get into difficulty, and you'll be ok.

Of course borrowing the money to do the work from the bank does mean you'll pay interest on it. Financially it's more sensible to save it up first, then buy, when hopefully prices will be lower. But if this is a long term family home and it's the house of your dreams then sometimes emotional reasons for buying outweight financial ones for not buying.

Kez100

Make a cheeky offer on this one and see how it goes. However, if they will not negotiate, before rising too much take a look at the next level of property up (with prices you wouldn't entertain) and see if any are reposessions or have been on the market for ages. You may find them more willing to negotiate down to what you can afford and you may get a property on the next 'tier' of affordability for the same as the asking price on the present one.

I hope it makes sense. It's what we did in 1994. We could afford 75k and even with a dire market many wouldn't negotiate much. So, we found two at 120k (one reposession, one a 2nd home which had been on the market for two years). They both knocked spots of the others we had loked at, for obvious reasons. We offered on our favourite £75k and it was accepted.

lisal0u

Thank you so much for all your help. I was a little bit worried about posting in case people shouted at me for being silly! I am so glad I did now!

I have done my homework on costs as follows:

Remove 2 load bearing walls and build a stud wall = £4, 000
New kitchen = £4, 000 (Fitting ourselves, have a builder and electrician in the family)
New bathroom = £2, 000
Carpets throughout = £2, 000
Re-wiring = £4, 000
Double glaze 2 bay windows and 2 doors & install double glazed patio doors = £5, 000 (this is not so urgent and could be done at a later date after saving up).

Hopefully the prices can come down slightly as I have an Uncle who is a builder and my Dad is an electrician/plumber.

We are in no rush to buy so if we cannot get an offer that suites our financial situation and the current climate we can and will walk away. I will certainly look at houses that are slightly more expensive and have been on the market a long time. We have looked around 15 properties so far, 2 of which were reposessions and most were empty. I thought this was very odd, where do all the people go?

Thanks again for all your helpful advice!
Lisa

Kez100

Good luck!

You have to be very disciplined looking at more expensive properties - don't change your maximum at all (our maximum per bank was 90k but we decided 75k was our affordable maximum).

I hope the one you like plays ball and drops but finding a bargain,whatever the market, does tend to be like finding a needle in a haystack.

The other thing, I wouldn't personally worry about getting a perfect house to start with. Yes, things like re-wiring, heating system and structural stuff tomake the house safe, but let the rest follow (like we did in the olden days!). We didn't have a new kitchen for four years after moving in and saved for it rather than borrowed. We got a better design as we spent time thinking about what we wanted and when you live somewhere you do get ideas and change them! We also saved interest on the borrowings.

I don't know where people go - into rented or to family, I assume. The other thing we found, was the odd state repos would be in. That's why we favoured the one we did which was just a desparate seller. The repo whilst - potentially - a beautiful house had the biggest kitchen you could imagine..........and nothing in it but a very old stand alone cooker and a sink unit! The lounge had a cream carpet which could have been cleaned but someone had cut it right down the middle! I assume whoever had owned the house was so upset at losing it (I can understand that - we had negative equity ourselves and had to save to move) they had gone a bit berserk.

lisal0u

Hello again,

Our financial advisor has done some digging (which I'm taking with a piece of salt!) and has found out that the vendors will accept a minimum of £95, 000. My boyfriend and I have discussed that we are willing to pay a maximum of £90k. He is wanting to put an initial offer in of £85k and then leave it for a while.

Do you think they would consider coming down an extra £5k. I know the longer we leave it the market may depress further and so we might be more likely to get that price. As far as I know there has only been developer interest and no new viewing while we have been looking at it.

Thanks again for any advice
Kind regards
Lisa

Lennys_Shinpad

I'm enjoying this thread.

I'm a first time buyer myself and like the tactics discussed here to ensure getting the best deal.

Just a question for Kez, how can I find out if what houses have been repossessed in the area I am looking in? Is there a central list somewhere?

Thanks,

Lenny.