House valuation, and buying just before the referendum.
Discussion
I've been renting the same house privately for almost 10 years. Landlord advised me last month that he has to sell (needs to raise capital for something else). He's not a professional LL, in fact the only reason he put this house up to let was because he had trouble selling it when he moved out himself.
He's offered me first refusal on it, before it hits the open market. He's had one estate agent come and value the place so far, and I feel the valuation is a bit on the high side (from a buyers perspective). I can fully understand putting it on the market at said price (275k) - he can always reduce if there's a lack of interest. Initially, he offered to sell to me for 5k less (basically the 5k he'd otherwise be paying in agent's fees). But I'm reluctant/can't really afford to pay over 250k, as I feel that's a fair price. LL lives in the South East, and he has no real idea of current property values down here, so he's going entirely on what the estate agent tells him.
It's incredibly difficult on put a value on the place, because it's in a very rural location in Cornwall, so not much nearby to compare it to. It's in the middle of a row of 5 terraced cottages, but they've all been extended and altered to the extent that they are all quite different to each other (and two of them haven't changed hands in over 30 years, so little sale history on them). Ours has a loft conversion to make it 3 bedrooms, with two of them small bedrooms in the loft. The agent even commented on how small they are, "it's not really 3 bedrooms, more like two if you opened them out into one decent sized room").
The house on the end of the row is up for £365k (it has been extended to twice the size, and has half an acre of gardens). That one isn't getting a sniff of attention, even the agents are saying it's hideously over priced. The house next to ours (original size, 1 bedroom) sold for 115k about 2 years ago (but they've since completely rebuilt and extended it, so it's now 2 bedrooms.
A moderately similar house nearby sold for 250k a couple of months ago, but that was a semi, and from what I can tell slightly bigger inside, with 3 decent sized bedrooms. I think that's a fair comparison really. It is a very nice and peaceful location, no traffic noise, fields all around (but no substantial views as we're in the bottom of a hollow). This obviously puts a premium on the value that is hard to quantify. We're about two miles outside of the nearest town (which is tiny). Similar sized (i.e. 3 bed) houses in the town vary from about 140k to 210k, depending on style, condition, size. Much bigger 4 bed houses start at about 250k in town.
These are all asking prices, from a few minutes digging on Rightmove. I'm guessing that a lot of house sales don't achieve their full asking price, but end up taking an offer somewhat lower? Obviously it's difficult to work out what that is 5%, 10%? So my argument is that even if the estate agent values it at 275k, and he advertises it for that, it's quite possible he'll only get lower offers. My gut feel is that it would probably attain 260 to 265k fairly easily, 275k is a bit optimistic, and it'd sell quite quickly at 240k. Incidentally, that's what the LL paid for it back in 2005, although he admits he probably paid over the odds back then. It's also got 10 years of wear and tear on it since then. Nothing major, just lots of little things that any owner occupier would get sorted, but a LL wouldn't be bothered by. When he tried to sell it in 2006/7, he advertised it at 275k then. I don't know how much interest he got, but it obviously didn't sell. And we've since had the crash and a recovery that makes it difficult to gauge prices, but most people round here feel they're just about back to, or slightly above, what they peaked at.
I'm almost tempted to tell them to put it on the market at 275 and see if they interest/offers. A total gamble, but it's the only way to get a true measure of the market value. I've looked around at other places, and if I'm prepared to move out of the area (10 miles or so), I can get a similar sized house for 160k in a more built up area, although it doesn't have as much off road parking as I'd like. I've also got to try and put a value on not having to move, which could realistically cost me a couple of months income (I'm self employed and my work is just coming into peak season).
Now the second part - I'm stretching myself to get to 250k, and the last thing I want to do is take on a huge financial burden and potentially end up in negative equity especially, with the uncertainty of the referendum just around the corner. I suspect the market is dead on it's feet at the moment (in terms of buyers), as why would anyone risk buying now when all kinds of house price, interest rate, economic prophecies are being bandied about by the campaigners. I guess the market/prices could pickup once the referendum is over, or it could trigger a crash. But my hand is being forced here, I probably can't string out making a decision/agreeing a price until after the referendum, unless I risk this place going up on the open market. What if we do agree a price and start the ball rolling, at what point would it be impossible/cost me to pull out?
He's offered me first refusal on it, before it hits the open market. He's had one estate agent come and value the place so far, and I feel the valuation is a bit on the high side (from a buyers perspective). I can fully understand putting it on the market at said price (275k) - he can always reduce if there's a lack of interest. Initially, he offered to sell to me for 5k less (basically the 5k he'd otherwise be paying in agent's fees). But I'm reluctant/can't really afford to pay over 250k, as I feel that's a fair price. LL lives in the South East, and he has no real idea of current property values down here, so he's going entirely on what the estate agent tells him.
It's incredibly difficult on put a value on the place, because it's in a very rural location in Cornwall, so not much nearby to compare it to. It's in the middle of a row of 5 terraced cottages, but they've all been extended and altered to the extent that they are all quite different to each other (and two of them haven't changed hands in over 30 years, so little sale history on them). Ours has a loft conversion to make it 3 bedrooms, with two of them small bedrooms in the loft. The agent even commented on how small they are, "it's not really 3 bedrooms, more like two if you opened them out into one decent sized room").
The house on the end of the row is up for £365k (it has been extended to twice the size, and has half an acre of gardens). That one isn't getting a sniff of attention, even the agents are saying it's hideously over priced. The house next to ours (original size, 1 bedroom) sold for 115k about 2 years ago (but they've since completely rebuilt and extended it, so it's now 2 bedrooms.
A moderately similar house nearby sold for 250k a couple of months ago, but that was a semi, and from what I can tell slightly bigger inside, with 3 decent sized bedrooms. I think that's a fair comparison really. It is a very nice and peaceful location, no traffic noise, fields all around (but no substantial views as we're in the bottom of a hollow). This obviously puts a premium on the value that is hard to quantify. We're about two miles outside of the nearest town (which is tiny). Similar sized (i.e. 3 bed) houses in the town vary from about 140k to 210k, depending on style, condition, size. Much bigger 4 bed houses start at about 250k in town.
These are all asking prices, from a few minutes digging on Rightmove. I'm guessing that a lot of house sales don't achieve their full asking price, but end up taking an offer somewhat lower? Obviously it's difficult to work out what that is 5%, 10%? So my argument is that even if the estate agent values it at 275k, and he advertises it for that, it's quite possible he'll only get lower offers. My gut feel is that it would probably attain 260 to 265k fairly easily, 275k is a bit optimistic, and it'd sell quite quickly at 240k. Incidentally, that's what the LL paid for it back in 2005, although he admits he probably paid over the odds back then. It's also got 10 years of wear and tear on it since then. Nothing major, just lots of little things that any owner occupier would get sorted, but a LL wouldn't be bothered by. When he tried to sell it in 2006/7, he advertised it at 275k then. I don't know how much interest he got, but it obviously didn't sell. And we've since had the crash and a recovery that makes it difficult to gauge prices, but most people round here feel they're just about back to, or slightly above, what they peaked at.
I'm almost tempted to tell them to put it on the market at 275 and see if they interest/offers. A total gamble, but it's the only way to get a true measure of the market value. I've looked around at other places, and if I'm prepared to move out of the area (10 miles or so), I can get a similar sized house for 160k in a more built up area, although it doesn't have as much off road parking as I'd like. I've also got to try and put a value on not having to move, which could realistically cost me a couple of months income (I'm self employed and my work is just coming into peak season).
Now the second part - I'm stretching myself to get to 250k, and the last thing I want to do is take on a huge financial burden and potentially end up in negative equity especially, with the uncertainty of the referendum just around the corner. I suspect the market is dead on it's feet at the moment (in terms of buyers), as why would anyone risk buying now when all kinds of house price, interest rate, economic prophecies are being bandied about by the campaigners. I guess the market/prices could pickup once the referendum is over, or it could trigger a crash. But my hand is being forced here, I probably can't string out making a decision/agreeing a price until after the referendum, unless I risk this place going up on the open market. What if we do agree a price and start the ball rolling, at what point would it be impossible/cost me to pull out?
You have plenty of time to pull out. The referendum will be well gone by the time you get close to any deadlines.
Although to get the ball rolling you will need to pay for things such as a solicitor, valuer and mortgage application.
If I were you it might be worth spending a little time on Zoopla.
Look for houses in the near area that have sold over the last 2-3 years.
Then google the address to see if you can find the original advert on Zoopla or elsewhere.
Build up a little database showing original asking price (and a date) combined with the eventual selling price.
That will give you the average % discount between the two.
However, if all you can afford is 250, then offer 250 (or 245 with room for one raise).
You can't realistically offer more than you can afford - that's just wasting everyone's time.
Also - contact Sarnie on here for mortgage advice. Highly recommended. (Maybe you can afford a little more!)
Although to get the ball rolling you will need to pay for things such as a solicitor, valuer and mortgage application.
If I were you it might be worth spending a little time on Zoopla.
Look for houses in the near area that have sold over the last 2-3 years.
Then google the address to see if you can find the original advert on Zoopla or elsewhere.
Build up a little database showing original asking price (and a date) combined with the eventual selling price.
That will give you the average % discount between the two.
However, if all you can afford is 250, then offer 250 (or 245 with room for one raise).
You can't realistically offer more than you can afford - that's just wasting everyone's time.
Also - contact Sarnie on here for mortgage advice. Highly recommended. (Maybe you can afford a little more!)
Get it valued by a local Chartered Valuations Surveyor (RICS) - they will provide you with a report on how much it's actually worth, why it's worth that much and insurance to back up their opinion of value. Whilst it may cost £250-£500 (I'm guessing) it could save you thousands and provides you with a solid negotiating position.
The LL offered to sell us the place about 5 years ago (for 225k at that time), and we had a survey done then. We had to push him to give a valuation, and all he would say is that 225 was a fair price. Obviously that's an out of date figure, but I'd be reluctant to commission another survey (wouldn't use the same surveyor again), and only get a vague 'that sounds reasonable' sort of answer.
I wasn't getting anywhere with mortgage advisors, until I remembered that someone I know is an IFA. He was very helpful, gave me immediate guidance in a single phone call, and offered to knock £100 off his fee for me. The amount I could borrow, along with my (substantial) deposit brings me over 200, but short of 250. My parents have offered to help out with cash, but they feel that I shouldn't be paying over 240k (my mum has a somewhat unhealthy addiction to Rightmove, and she's constantly got an eye on what comes on the market and what it fetches). I've convinced them it's worth 250, but I can't go above that unless they change their minds.
I really like this place, and my parents want me to stay here (to give my kids some needed stability), but we're trying not to be emotional about agreeing a price.
I wasn't getting anywhere with mortgage advisors, until I remembered that someone I know is an IFA. He was very helpful, gave me immediate guidance in a single phone call, and offered to knock £100 off his fee for me. The amount I could borrow, along with my (substantial) deposit brings me over 200, but short of 250. My parents have offered to help out with cash, but they feel that I shouldn't be paying over 240k (my mum has a somewhat unhealthy addiction to Rightmove, and she's constantly got an eye on what comes on the market and what it fetches). I've convinced them it's worth 250, but I can't go above that unless they change their minds.
I really like this place, and my parents want me to stay here (to give my kids some needed stability), but we're trying not to be emotional about agreeing a price.
Beetnik said:
Is the agents valuation with vacant possession or with a sitting tenant? I suspect the former...
Yes, vacant possession I expect. My tenancy is obviously periodic by now, so it's only a two month notice period. The LL is happy for me to stay on until they accept an offer, and then serve official notice. I guess there is a risk to the buyer that the current tenant could be awkward about vacating on time. How much of a sticking point that is, I don't know?Just had another agent (one that I'd asked) come round to value it, and he said 250 to 255 is a realistic expectation, but it's not inconceivable that it could end up selling for a bit less than that. Basically what I wanted to hear, rather than what the LL wants to!
I would let him market it at £275,000, remind the LL to tell the estate agent to exclude you as a fee paying buyer and just wait. It's a bit of a punt but you will probably find that if a buyer shows up they will not bid the near the full ask. If there is an offer you can afford to match go for it.
If after 3 months it's unsold make him an offer
Don't be difficult over viewings or keep the house untidy etc, you will annoy the LL and lose out.
(I am an agent in the SW...not Cornwall)
If after 3 months it's unsold make him an offer
Don't be difficult over viewings or keep the house untidy etc, you will annoy the LL and lose out.
(I am an agent in the SW...not Cornwall)
To update on this - had a couple more estate agents come and value the place. Both said 275 wasn't realistic, and 250 to 260 was, in their estimation. So, LL came down and we've agreed on 250. I'm getting stuff ready to make a mortgage application now.
In the meantime, I've had a look around, seen a couple of other places that I quite liked (not more than this place, I'd still rather be here I think), some of which are a lot cheaper (even factoring their cheaper location). The market seems pretty stagnant, hardly anything has sold in the last 2 months, and the only stuff that has, looked good value, compared to what remains. It feels like most of the stuff on the market is about 20% over valued, when you see something priced more realistically it almost sets alarm bells ringing 'there must be something wrong with it at that price'. As a FTBer it seems I've got a bit of an advantage - you can see estate agent's eyes light up when they realise I'm not stuck in a chain with a place to sell myself. I've got a friend who's received an offer on their place, but the estate agent talked it down as it was from someone who's own house had been on the market for months and wasn't even close to selling (i.e. overpriced).
My gut feeling is that the market has topped out in the current situation - BTL market has stopped propping/pushing it up, and everyone is nervous about the referendum since the remain campaign's scaremongering of house prices crashing in the event of a leave vote. I guess if the referendum result does send a shockwave through the housing market next week, I've still got time to pull out/renegotiate.
In the meantime, I've had a look around, seen a couple of other places that I quite liked (not more than this place, I'd still rather be here I think), some of which are a lot cheaper (even factoring their cheaper location). The market seems pretty stagnant, hardly anything has sold in the last 2 months, and the only stuff that has, looked good value, compared to what remains. It feels like most of the stuff on the market is about 20% over valued, when you see something priced more realistically it almost sets alarm bells ringing 'there must be something wrong with it at that price'. As a FTBer it seems I've got a bit of an advantage - you can see estate agent's eyes light up when they realise I'm not stuck in a chain with a place to sell myself. I've got a friend who's received an offer on their place, but the estate agent talked it down as it was from someone who's own house had been on the market for months and wasn't even close to selling (i.e. overpriced).
My gut feeling is that the market has topped out in the current situation - BTL market has stopped propping/pushing it up, and everyone is nervous about the referendum since the remain campaign's scaremongering of house prices crashing in the event of a leave vote. I guess if the referendum result does send a shockwave through the housing market next week, I've still got time to pull out/renegotiate.
mjb1 said:
I guess if the referendum result does send a shockwave through the housing market next week, I've still got time to pull out/renegotiate.
Do you think that, no matter what next weeks outcome is, that next week everyone selling a house will drop their asking prices to affect your own purchase/position?Any impact on the market would be at the very least a year or two down the road when when any economic impacts are being filtered through to the housing my market.
In my opinion of course....
Sarnie said:
Do you think that, no matter what next weeks outcome is, that next week everyone selling a house will drop their asking prices to affect your own purchase/position?
Any impact on the market would be at the very least a year or two down the road when when any economic impacts are being filtered through to the housing my market.
In my opinion of course....
I thin you are right with people who have already listed their properties. But for anyone who has to sell, the result will definitely affect market confidence etc.Any impact on the market would be at the very least a year or two down the road when when any economic impacts are being filtered through to the housing my market.
In my opinion of course....
I'd factor in the fact that regardless of house price IF you later sell, once paying down the capital part of the mortgage you'll benefit from the lower interest rates which are currently in force. The interest part of your repayment may well be less than your current rent. Even if not, it'll reduce over time as the principle is repaid.
Edit.. by IF you later sell I mean you've already been there 10 years so obviously like the place. Another 10 years and it's bound to go up.
Edit.. by IF you later sell I mean you've already been there 10 years so obviously like the place. Another 10 years and it's bound to go up.
Edited by bmwmike on Wednesday 15th June 14:27
Sarnie said:
Do you think that, no matter what next weeks outcome is, that next week everyone selling a house will drop their asking prices to affect your own purchase/position?
Any impact on the market would be at the very least a year or two down the road when when any economic impacts are being filtered through to the housing my market.
In my opinion of course....
Yes, quite possibly I would expect a leave result next week to have a fairly rapid effect on asking prices. I think that the market is already stagnant and overpriced, and has been for a couple of months, basically since the BTL stamp duty changes (judging by what is selling and what isn't). Estate agents are well known for talking the market up and advising sellers with top end/optimistic valuations. The referendum result could be just the tipping point to make people realise the true state of the market.Any impact on the market would be at the very least a year or two down the road when when any economic impacts are being filtered through to the housing my market.
In my opinion of course....
It's much the same as nervousness in the financial markets - we've already seen exchange rates and the stock market being affected by the uncertainty of the referendum. I'm sure there is a similar effect going on with the housing market. Up until a few days ago, everyone thought a remain result was the most likely, and that it would have a minimal effect on prices, whilst a leave result was threatening a drop. As much as I favour brexit personally (for the greater good of the country ad future generations), I was expecting the result to be remain. If anything, I feel that would have helped the housing market to pickup again.
There are obviously significant regional variations, so I appreciate the rest of the country might be quite different to here at present. Cornwall (and Devon perhaps even more so) are substantially skewed by the holiday home market and people relocating from up country (notably London and the SE). The county has a much higher house price to wage ratio than the UK average, so the BTL and holiday home market must be what has fuelled house prices down here. Demand for both of those is going to be more elastic than for primary residences, so there's more scope for a downward swing than other parts of the country.
My choice is clear, either buy this place or go through the rigmarole of moving my home and business. I'm happy to stay here, fairly ok with the prices we've agreed, I'm just s
t scared of getting in a negative equity situation.I think this is relatively simple. Don't let this sudden 'opportunity' cloud your judgement.
Look at the property objectively and dispassionately and decide for yourself what you are willing to pay for it. Arrange a provisional mortgage etc and then let the current owner put it on the market for whatever he wants. If it doesn't sell then you are ready to take it and at a price you are happy with not some compromise. If it does sell then you've lost nothing as it went for more than you beloved it was worth or willing to pay.
Of course, you could don a 'bd hat', stop paying rent and point out that it's worth bugger all with a sitting tennent but you're willing to help him out of his predicament. 
But in all seriousness the first question you have to ask yourself is do you want to own the property and the second is to establish what price you are willing to pay to help him get a quick sale, realise his funds and swerve fees.
Look at the property objectively and dispassionately and decide for yourself what you are willing to pay for it. Arrange a provisional mortgage etc and then let the current owner put it on the market for whatever he wants. If it doesn't sell then you are ready to take it and at a price you are happy with not some compromise. If it does sell then you've lost nothing as it went for more than you beloved it was worth or willing to pay.
Of course, you could don a 'b
d hat', stop paying rent and point out that it's worth bugger all with a sitting tennent but you're willing to help him out of his predicament. But in all seriousness the first question you have to ask yourself is do you want to own the property and the second is to establish what price you are willing to pay to help him get a quick sale, realise his funds and swerve fees.
Sarnie said:
SunsetZed said:
In principle I agree but it also affects you if you want to get a new mortgage as well which can be another aspect that is an important consideration IMO
Take a longer term fixed rate......thats what they are for, to remove concerns over market fluctuations 
NRS said:
Particularly since you said 250 000 would be stretching things. I would suspect interest rates are much more likely to start going up if the Brexit doesn't happen, so if you're already stretched...
Why would you think that? - I think the converse is true. A 5 year fixed rate sounds good. Times are very uncertain Beggarall said:
Why would you think that? - I think the converse is true. A 5 year fixed rate sounds good. Times are very uncertain
I think the Bank of England said it would likely go up if Brexit doesn't happen when the kept the rate the same recently. Plus the actual interest rates of mortgages can't really go lower (they won't go negative), so there is very little upside and more downside in terms of interest rates.Why would they go down/ negative in the 5 years without Brexit? US is starting to recover, China is still growing massively, just not as quick as before...
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