Haggling/new builds/trade-in/LTV's
Discussion
The wife and I are thinking of moving.
Possibly trading in for a new build to save us the effort of selling ours, and saving on some EA fees etc, and not having much cost in the new property.
I'm just wondering which is the best way to haggle.
I've made a nice calculator on Google docs spreadsheet.
LTV is the issue. My wife who doesn't do credit, which means we have an LTV limit with our current lender at 80% or below. Others will do 90% at similar rates, but that means cancelling our current deal and hassle etc. We could do that, but for now...
In my spreadsheet, if I drop the new house price by say £10,000, the actual amount short we are from the deposit amount only moves 20% of that (due to the 80% LTV), so £2,000 less from the deposit.
However, if we could say we will pay full asking price if they pay £10,000 more for our property, then the deposit amount is much more favourable.
The maths is good, but it feels wrong. Why does it feel wrong? I have a feeling it's worse for the sellers to do that? Tying more cash up in more property rather than just getting cash there and then?
What do people advise in this situation? My main worry longer term is making sure our equity we have already spent years building up is retained. If the house prices rise/drop generally I'm ok, just as long as we don't lose out the wrong way when doing this deal.
Is haggling OUR trade price up £10,000, better than us haggling them DOWN £10,000 on their sale price AND us having to subsidise about £8000 from savings ourselves too?
The only cost I can think of right now is extra stamp duty paying full asking price, and if we sell two years later for £10,000 less, we did ultimately get £10,000 extra at trade in anyway.
All a bit confusing so any help would be really much appreciated.
Or, we could just start a new mortgage with a new lender at an LTV of 85% and be fine
But then in that case, what is a reasonable rate to get off a ~ £190,000 new build 3 bed ~ just under 1000sq.ft, garage etc.
Again, it seems haggling up on our valuation is ultimately better than haggling them down on purchase price for what appears to be the small increase in stamp duty as the only cost?!
Thanks for any help!
Dave
Possibly trading in for a new build to save us the effort of selling ours, and saving on some EA fees etc, and not having much cost in the new property.
I'm just wondering which is the best way to haggle.
I've made a nice calculator on Google docs spreadsheet.
LTV is the issue. My wife who doesn't do credit, which means we have an LTV limit with our current lender at 80% or below. Others will do 90% at similar rates, but that means cancelling our current deal and hassle etc. We could do that, but for now...
In my spreadsheet, if I drop the new house price by say £10,000, the actual amount short we are from the deposit amount only moves 20% of that (due to the 80% LTV), so £2,000 less from the deposit.
However, if we could say we will pay full asking price if they pay £10,000 more for our property, then the deposit amount is much more favourable.
The maths is good, but it feels wrong. Why does it feel wrong? I have a feeling it's worse for the sellers to do that? Tying more cash up in more property rather than just getting cash there and then?
What do people advise in this situation? My main worry longer term is making sure our equity we have already spent years building up is retained. If the house prices rise/drop generally I'm ok, just as long as we don't lose out the wrong way when doing this deal.
Is haggling OUR trade price up £10,000, better than us haggling them DOWN £10,000 on their sale price AND us having to subsidise about £8000 from savings ourselves too?
The only cost I can think of right now is extra stamp duty paying full asking price, and if we sell two years later for £10,000 less, we did ultimately get £10,000 extra at trade in anyway.
All a bit confusing so any help would be really much appreciated.
Or, we could just start a new mortgage with a new lender at an LTV of 85% and be fine
But then in that case, what is a reasonable rate to get off a ~ £190,000 new build 3 bed ~ just under 1000sq.ft, garage etc.
Again, it seems haggling up on our valuation is ultimately better than haggling them down on purchase price for what appears to be the small increase in stamp duty as the only cost?!
Thanks for any help!
Dave
Number one ignore the doom mongerer's who will tell you not to buy a new build. Yes, they lack character, yes they tend to cram far too many onto a plot but they serve a purpose, especially in situations like yours. Also, if you buy an older property, once you have it you are liable for the costs when things go pop where as when things go wrong in a new build you call the developer and they put it right. If they are still on site when you move in then get the foreman's mobile number and things will normally get sorted in a matter of hours rather than days.
Number two, don't be afraid to chuck in a cheeky low offer. We bought ours at the pit of the crunch and managed to negotiate 30% off the asking price. From the purchase price you've mentioned I'm assuming you're buying outside the M25 where the industry is still not in a particularly good place so I'd go in a good bit lower than the £190k asking price, maybe around the £150k mark and work from there. Also, with this in mind try to find out when their financial year end is and work to that as a completion date. They will want the money in the bank before then so it goes in their favour. (If it's Taylor Wimpey then it's the end of June).
With regards to costs, if they're offering you free flooring DO NOT TAKE IT and use that as a negotiating tool. Bar the two bathrooms, we had the rest of the house (3 bed town house) done by a small local firm who did an outstanding job using good quality carpets and oak flooring for about £7k. We've since seen the neighbours who had their flooring put in by the developer and, at best, it's s
te.
On your LTV question, you have to do what's right for you but for me I'd want as much money off the asking price as possible, especially in the current economic climate. The best part of this is when the actual sales prices start appearing on the internet and you find out a neighbour paid £100k more than another neighbour. Its even better when the neighbour who paid too much also turns out to be an absolute arse of a person!!
Number two, don't be afraid to chuck in a cheeky low offer. We bought ours at the pit of the crunch and managed to negotiate 30% off the asking price. From the purchase price you've mentioned I'm assuming you're buying outside the M25 where the industry is still not in a particularly good place so I'd go in a good bit lower than the £190k asking price, maybe around the £150k mark and work from there. Also, with this in mind try to find out when their financial year end is and work to that as a completion date. They will want the money in the bank before then so it goes in their favour. (If it's Taylor Wimpey then it's the end of June).
With regards to costs, if they're offering you free flooring DO NOT TAKE IT and use that as a negotiating tool. Bar the two bathrooms, we had the rest of the house (3 bed town house) done by a small local firm who did an outstanding job using good quality carpets and oak flooring for about £7k. We've since seen the neighbours who had their flooring put in by the developer and, at best, it's s
te.On your LTV question, you have to do what's right for you but for me I'd want as much money off the asking price as possible, especially in the current economic climate. The best part of this is when the actual sales prices start appearing on the internet and you find out a neighbour paid £100k more than another neighbour. Its even better when the neighbour who paid too much also turns out to be an absolute arse of a person!!
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