What should I offer ? How low should I go ?

HOORA

Hello to all - I am a less frequent visitor here than Id like to be.

I intend to buy in Cheltenham, which is a nice area but traditionally expensive.

After being in debt to the tune of 8k three years ago, Im now in a position where I will have 40k cash by June for a deposit, and have a mortgage approved for 136k.

Im looking at houses between 165000 - 200000 but my question is how low should my first offer be ? Im a FTB and have always paid rent so have no experience at all on this. There seems to be a 10 percent drop in asking prices in the area I want since last year (Ive been tracking it) - the local peak was about July/Aug 2007.

Would a 20% offer below todays asking price be far too cheeky? that is 40 grand off an asking price of 200k. I think it would get rejected out of hand, but Im hoping to get at least 10 percent off asking price which is still 20 grand.

With IMF saying UK property is 30 percent overvalued, and banks wanting 25 % deposits for BTL (Im assuming to protect themselves by a projected 25% fall) then Im loathe to offer anymore than I have to.

Any constructive advice on offers and strategy gratefully received.

cheers

IveSeenTheLight

First of all, well done on getting yourself out of debt and a 40k deposit in three years.
Very good MSE

You have a mortgage approved for 136,000 and have 40k deposit.
This would suggest that the maximum you could afford to offer is 176,000.

I think that at present you are right in suggesting that if you offer 160k on a 200k property, it will be rejected out f hand, but you never know.
especially as you are saying the properties in your area have already been marketed 10% lower

What do you think the prices will drop by? If you find a property at say 180k and it drops by 20% (or lets say a further 10% given that prices have already been marketed 10% lower, then you could possibly get the house for 144k or 162k (further 10% or 20% drop). This would put you in a position where you need to borrow less which is always very good.
What if prices dont drop by so much or the sellers decide not to sell at that price. Only you can decide on the affordability

Don't get too hung up on the value of the property you want to buy i.e. between 160k to 200k. You really want to look at the type of property, location, schooling, infrastructure etc etc etc and then base your desire affordability on that.
You also need to consider competition for the property, but you may have a better chance with that at this time.
Of course ideally we all would like to get the house as cheap as possible.
Find the house you like, then assess the value to you and in the current market.

Good Luck

PasturesNew

I'd wait a further year. Minimum. Start looking in June 2009 and keep your hand firmly on your sixpence as my mum used to say.

You're seeing drops already, more to come. Take your time to look around and enjoy the feeling of your savings growing more and more.

If house prices drop by 20% over the next two years (10% per year) and if your savings are increasing by £15k you are saving plus interest, then in 2 years' time the figures would change roughly thus:

Now - Buy £200k now. Mortgage of £136k

In two years' time - that house will be £160k, your savings will be £40k+£15k+£15k+£6k interest = £76. Mortgage of £84k

Zammo

If you don't feel embarrassed by your first offer then it's too high.

In this market I'd be looking at 30% off.

mr.broderick

Zammo wrote: »

If you don't feel embarrassed by your first offer then it's too high.

In this market I'd be looking at 30% off.

If its overvalued by 30% you may have a chance with that advice

Zammo

mr.broderick wrote: »

If its overvalued by 30% you may have a chance with that advice

99.9% of homes are overvalued by 30%+.

mr.broderick

Zammo wrote: »

99.9% of homes are overvalued by 30%+.

Wonder if mines in the 0.1%

Zammo

mr.broderick wrote: »

Wonder if mines in the 0.1%

It would be if you've managed to get 30% off the asking price.

HOORA

Many thanks.

Anyone know the Cheltenham area ?

Any local advice ?

30 percent seems to be unrealistic as although it may get thereby the end of next year, right now it is still only asking 10 percent below last year.

60000 is a lot for anyone to either lose (or think theyve lost because it isnt what theyve gained, if you know what I mean).

Ill take a viewing and say 20 percent below is what I think its worth, then minus the defects from there. As a first offer I expect to go up from there.

Also - what is your strategy for an empty home? There is a property previously owned by an elderly lady who has moved to a nursing home - needs full modernisation. thanks for advice on the topic.

jamtart6

what are similar houses going for? thats what i'd ask myself then place an offer. probably 20% off with room to haggle between 10-15% off.

empty home- do it up! we're dying to get one!!

jamescredmond

welcome to the board, hoora.

99% of the advice on this board strenuously advises against buying now.

this, of course, ignores such issues as personal circs, location, etc.

you've saved hard for your deposit. wiser heads than mine will counsel 'patience' . I tend to agree.

I know nothing of cheltenham.

personally, I'd rather go for a swim in barrymore's swimming pool than get involved in the market, right now.

your choice.