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sympatex

House Buying Anecdotal

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I've been looking with my gf for over a year at buying a house, when we first started and prices were at the peak and it didn't sit right that a 2bed mid terrace cost 210k, we put it off buying but kept looking for anything resembling perceived decent "value".

We felt we'd found one about a month ago and we've been gently persuing it. It had originally been on since June at OIEO 270k, came down to £240k in September and then £230k last month. We put in an offer for 205k, which meant we had to borrow 3.5* joint earnings. Still quite a risk but there isn't anything better around here and comparing previous sales with the national average according to nationwide it appears the road has always been 50% above the national average, dating back to 1995. So 155k + 75K ish 240 would be current price, protect ouselves against 25% further falls job done, the rest of the risk we'll take.

We got rejected, so we looked at some other houses.

They came back last week and said "we will now accept 205", we were looking at another house by this time which we were told would accept 200k. So we countered with an offer of 200 to the original house. They rejected that saying they had a 200k cash offer!? who'd turn down 200k cash when they were considering 205 with a mortgage attached (FTB but still).

Phoned back today suggesting 204 would be our final offer and got rebuffed again, apparently they aren't going to "give it away" and want in excess of 210 now. DOH!

They must be watching a whole set of different news to me, i didn't think i'd hear the words "they've raised the asking price and don't want to give it away".

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You have just been saved from making a very expensive mistake, in my opinion. Wait another 6 months - you will have a better idea about your job security and this house or similar may well be sub 180. Then, you should review the position of the market.

Edited by D'oh

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Perhaps D'oh but in 6months we'll have to get a new mortgage approved which with the deposits now being asked forwe probably won't be able to even get one. Got in on the Tuesday before the rate cut last month with a tracker and 90% LTV, it would be a shame not to be able to use it!

But equally i can see if we can't get a mortgage then there will be others who will also struggle forcing house prices down. Just seemed a good opportunity while there wasn't too much competition at a price which seemd historically correct for the road allowing for a 20-25% further fall in house prices.

Hopefully this will be the bad one that got away and not the good one in the future!

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Offering 204 on a 205 priced house shows, IMPO, that you are desperate to buy. Hard-ball would have been saying "We offer 180K, take it or leave it. Call us when you decide but we have other properties we are considering!".

D'oh is right - give it 6 or 12 months and they might be lucky to get 150K for that.

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I think you should be looking at 175 - the SDLT barrier.

And whilst I note you have a 90% tracker, that'll save you, what, 2%? at best p.a. on 180k loan, so £3,600 per annum for the next 2? 5? years until the world changes/your mortgage runs out. So maybe 10-15k to be saved.

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over 210 you say.. mmm..

phone back, offer 211

when they phone back to accept offer, say you have changed your mind and will now only pay 150

if they are going to waste your time , why not waste theirs too

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I think you should be looking at 175 - the SDLT barrier.

And whilst I note you have a 90% tracker, that'll save you, what, 2%? at best p.a. on 180k loan, so £3,600 per annum for the next 2? 5? years until the world changes/your mortgage runs out. So maybe 10-15k to be saved.

Good point - yep, 175K and not a penny more. Remember, if your offer does not embarass you you are offering too much.

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over 210 you say.. mmm..

phone back, offer 211

when they phone back to accept offer, say you have changed your mind and will now only pay 150

if they are going to waste your time , why not waste theirs too

genius.

where's my phone... :lol:

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lol, i'll consider the 211 approach.. getting fed up with EA's and vendors telling me what their house is worth, I'LL TELL THEM WHAT ITS WORTH TO ME!

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Perhaps D'oh but in 6months we'll have to get a new mortgage approved which with the deposits now being asked for we probably won't be able to even get one. Got in on the Tuesday before the rate cut last month with a tracker and 90% LTV, it would be a shame not to be able to use it!

I do understand your point about the mortgage...is it a lifetime tracker (i.e. stays at that rate for the full term of the mortgage) or is it one of these 2 year trackers. A lot of the tracker margins are only for short (relatively speaking) periods these days. I agree that cheap money certainly has to be taken into consideration, but see my next paragraph. Also, I bet you will find that the house you put an offer in for is still for sale in a few months...in which case it is not a bargain at 205k or 210k or whatever. I agree with a poster above who said that at a maximum I would pay 174,999. Do you know what the sellers paid for the house from the Land Registry data or can you estimate an upper bound if they bought it earlier than the figures available? Is a useful piece of information to know.

But equally i can see if we can't get a mortgage then there will be others who will also struggle forcing house prices down. Just seemed a good opportunity while there wasn't too much competition at a price which seemd historically correct for the road allowing for a 20-25% further fall in house prices.

Bingo. You seem to be in stable jobs with a "normal" sized deposit. Many, many, many people aren't so lucky. I think we are still at the beginning of this recession. This is going to be a very, very bad one in my opinion. Almost everyone I know in private companies has lost their job, is losing their job, or is at risk of losing their job and breathing a sigh of relief that they have been passed over so far. ( I haven't been paid for last month yet!) I suspect that we are going to see much worse than even many people here expect. If both you and your partner work in the public sector, you might be fine (e.g. if you are both doctors, then the following arguments might not apply.) Otherwise be careful about biting off more than you can chew. Remember the historical 2.5 to 3.5 multiple was 2.5 to 3.5 times the main breadwinners salary plus (perhaps) 1 times the second wage earner's salary, not 3.5 times the combined salary. Suppose things got bad and one of you lost your job (through redundancy, or effectively losing it through pregnancy followed by outrageous childcare costs) and the interest rate on your mortgage went to 10% (as might be possible if IRs have to go up to support government plans to borrow money). In this case, the interest on your mortgage would be 70% of your gross salary i.e. probably all of your net salary, i.e. you would have no money to pay back capital or eat/pay council tax/ turn a light on. At 7% interest, you would be looking at only having 20-25% of one gross salary left over for food, travel, energy and council tax. Could you survive like this? Would your relationship survive this? In your position, given what little I know of it, in the current economic climate, I just would not take the risk.

My partner and I could, using your logic, buy a 400k house in our area. We rent (see arguments above). I certainly wouldn't buy a 400k house now even if I got a 20% discount, as those relying on private salaries supporting these nutty prices are, on average, going to be hit very hard.

The other thing to take into consideration is that your deposit also gives you a huge amount of freedom. My deposit allows me to move whenever I feel like it. If you end up in negative equity, you will be trapped in your job or similar jobs in the local area.

Hopefully this will be the bad one that got away and not the good one in the future!

Let's hope, but don't outweigh the true risks of borrowing in this uncertain market with an offer of 0.5% less interest that what you would otherwise get on a tracker for 2 years.

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I'm also looking at longer term fixed rates now - i can't believe interest rates are going to stay low for more than a year or two, and a tracker at 2% above base rate (which is what i'm seeing on offer for FTBs at the moment) would hurt severely if rates go back up to 5% even!

Shame is that looking at fixed rates best i can get is 2 above base%, while my parents mortgage is now at base rate. Pity we can't swap..

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Doh, good response i have considered all of those factors while going through the rigour of dealing with my GF who wants to buy with heart over head and i'm the complete opposite.

"Do you know what the sellers paid for the house from the Land Registry data or can you estimate an upper bound if they bought it earlier than the figures available? Is a useful piece of information to know."

Yes i used the link on the front page of this website to find they bought it in 1997 at 105k. Using HPI inflation for our area (Surrey Heath) the house at current HPI "should" be around 270, house prices have inflated 155% apparently. This is why i thought getting it at 200-205 would represent good value.

I work for BT (don't laugh!) i'm permanent and the work i do is funded for 3years. At which point i presume either it gets extended or i find new work within BT, they have generous redundency packages and don't sack people unless they've been naughty! So i feel secure here, perhaps naievly i don't know, if i'm to be made redundent i'll be the last to know just like everyone else. Gf's job is a little less secure, graphic design so probably reliant on marketing and stuff, the company she works for seem to be taking people on at the moment so again you can't really tell things are wrong until you're told to leave!

Edit to say yes its a lifetime tracker at .99 +BOE

Edited by sympatex

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Doh, good response i have considered all of those factors while going through the rigour of dealing with my GF who wants to buy with heart over head and i'm the complete opposite.

"Do you know what the sellers paid for the house from the Land Registry data or can you estimate an upper bound if they bought it earlier than the figures available? Is a useful piece of information to know."

Yes i used the link on the front page of this website to find they bought it in 1997 at 105k. Using HPI inflation for our area (Surrey Heath) the house at current HPI "should" be around 270, house prices have inflated 155% apparently. This is why i thought getting it at 200-205 would represent good value.

I work for BT (don't laugh!) i'm permanent and the work i do is funded for 3years. At which point i presume either it gets extended or i find new work within BT, they have generous redundency packages and don't sack people unless they've been naughty! So i feel secure here, perhaps naievly i don't know, if i'm to be made redundent i'll be the last to know just like everyone else. Gf's job is a little less secure, graphic design so probably reliant on marketing and stuff, the company she works for seem to be taking people on at the moment so again you can't really tell things are wrong until you're told to leave!

Edit to say yes its a lifetime tracker at .99 +BOE

Hmm...so I presume you are in Suffolk then? I think 200k is a bit expensive for that part of the country for a 3 bed. My feeling was that housing was supported in that area by:

[a] People retiring to Woodbridge and similar

People who worked for BT

[c] People who commuted to London.

I think [a] and [c] are not going to be doing so well over the next few years. I also think that BT is still in a long term decline.

I worked for BT (errr...correction...was paid by BT) in Martlesham for a year in the late 1990s. My experience was that what BT giveth, BT taketh away. A statement of funding for a project for x-years should be taken with a pinch of salt unless it is undeniably part of their future core business. Very few long term plans in that company. It is always in a state of perpetual internal revolution. For instance, BT is a company that spent some ridiculous sum (many, many, many millions) sorting out the semi-conductor labs in the mid to late 90s, and then the moment the refurb was finished they pulled the plug - moving everyone to "management" or retiring them. I saw them do the same to countless smaller projects. Obviously, I worked for the company 10 years ago and things may have changed significantly...but I doubt it somehow. Too much momentum.

I also wouldn't count on BT being able to giving as good redundancy packages as they have in the past if things get even direr. My partner's company was also ex-government, but when things got tough the unions cut a deal and all the old certainties, such as pensions and pay rises, disappeared overnight. It was, until it happened, inconceivable that the unions would agree to this sort of thing. I remember the early part of this century when BT was making people redundant in tranches of 9000 at a time...it might happen again...their share price hasn't been looking so hot for a long time...and it has been outperforming the rest of the market this year, in the bad sense.

So, if you are in Suffolk, and you lost your job, where would your next job be?

As for your partner, graphic design sounds like a very risky line of work at present.

A lot of my friends have been "forced" to buy houses in the past few years by their partners; some even bought as the market began to crash at pre-crash prices. My partner almost begged a couple of her friends not to. They are all stressed and miserable at this point in time. That emotional nesting instinct can be very dangerous. I'm lucky with Miss D'oh in that, although we both want a house, and hate renting, we have agreed that it would be financial suicide to do anything about it at present. You sound like you are seriously concerned that buying a house may be a bad idea. Good luck with whatever you decide, but don't let a girl ruin your financial future because she isn't in control of her nesting instinct. It is a sad fact of life that when money troubles come through the door, love very often flies out the window.

Edited by D'oh

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Doh, yeah quite true over nesting instinct, eugh! However i'm not in Suffolk, Surrey Heath is Surrey. I'm a norwich city fan though and confusing me with our lesser neighbours from suffolk is criminal.

hmm well we'll keep looking and watching while gleaning information from here. Thanks for all the insight.

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Yes i used the link on the front page of this website to find they bought it in 1997 at 105k. Using HPI inflation for our area (Surrey Heath) the house at current HPI "should" be around 270, house prices have inflated 155% apparently. This is why i thought getting it at 200-205 would represent good value.

£105k in 1997 using general inflation calculator is £135k today. Doesn't sound like the £205k is that good value as prices could fall further.

Re: tracker: If in a years time you can get a say 2% lifetime tracker, the cost per year of missing out on the 1% BR tracker is £1,800. When IRs go up again in the future there will be 1% BR trackers available again, so say this saving is for 3 years - £5,400.

However if house prices drop by another 25% next year, the same house will be worth £150k - thats a saving of £50k of the purchase price and less risk of NE. And less monthly interest too even with higher IR. Thats why we are waiting!

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Eve, I just put the figures into the nationwide HPI house price calculator. so it said if u paid this for that house in this area in 1997, hpi would mean todays value would be x.

i don't think i can even buy a 1bed flat for 135k in this area so some perspective has to be considered. Your point about the house falling to 150 is of course valid but the reasons behind it falling so low is probably barriers to entry to FTB's, and only cash buyers can profit from it hence why so low as there's not many cash buyers with 150k in their pockets who'd look at this type of house.

they didn't drop 25% this year did they? And i don't know what will happen next year, but i did sa that if house prices on this particular street have historically going back to 1995, have alwaysbeen 50% higher than the nationwide average, then 240 is the price currently, with your 25% drop this will mean it will be 180k by the end of next year., not 150.

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they bought it in 1997 at 105k

Ohh right at the start of the bubble. This means they can afford to take a lot less without losing out. Anything over £150,000 would be too much of a risk against further falls, if you have time, wait it out, things are changing fast at the moment so sit back and enjoy the drama.

4 months ago I was looking at a flat similar in price to this one at 280k fixed price, it has since been reduced to 235,000 and is now looking rather expensive. If the EA had said to me back 4 months ago that they would take 235,000 I would have been very intrested, now im waiting for it to fall to 150k. What will I want it for in another 4 months?

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Eve, I just put the figures into the nationwide HPI house price calculator. so it said if u paid this for that house in this area in 1997, hpi would mean todays value would be x.

i don't think i can even buy a 1bed flat for 135k in this area so some perspective has to be considered. Your point about the house falling to 150 is of course valid but the reasons behind it falling so low is probably barriers to entry to FTB's, and only cash buyers can profit from it hence why so low as there's not many cash buyers with 150k in their pockets who'd look at this type of house.

they didn't drop 25% this year did they? And i don't know what will happen next year, but i did sa that if house prices on this particular street have historically going back to 1995, have alwaysbeen 50% higher than the nationwide average, then 240 is the price currently, with your 25% drop this will mean it will be 180k by the end of next year., not 150.

thats an adjustment for general inflation, ie an indication of how low it MIGHT go!

no one knows how low it will go. i personally think there will be another 30 - 35% drop although not all in 2009. personally i'd only buy now if i felt i was getting a very very good deal and it doesn't seem like £200k is a very very good deal. i agree with the posters re: stamp duty threshold - ie at £174,995 you'd feel you were getting a good deal. if not well there will be other good deals. we have walked away from our perfect house even though it is now reduced by 35%.

re: the HPI - i just put in the house I just sold (got offer in July 2008, ie Q3 2008) we bought in Q1 2001 and HPI overvalued my house by over 10% to what we managed to sell for so thats just a rough guide. And things look worse now than in July.

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Blobby, exactly, in my previous post we originally looked at a 2bed mid terrace at 207, now wouldn't even look at one for more than 160. Our expectations have equally changed but the thing that led me to post in the first place was the fact we'd been given a very competative mortgage as a FTB and without much competition gave us a pick of the best houses in our price range. I've looked at renting and we might choose that option if nothing materialises before our mrotgage expires. However here it's bloody expensive to rent, for a 1bed flat its 700 minimum which is £200 more than the interest would be on our mortgage. (without the capital loss though!)

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How many ex Bt Martlesham workers on here...??

THink we are either seeing a sign:

1/ BT didnt pay us enough

2/ Maybe we are more over-critical or intelligent than the average bear...

I tend towards no.1 :ph34r:

Thankfully got out of Ipswich before I ended my own life...it is quite a hole and almost impossible to travel anywhere from.

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Blobby, exactly, in my previous post we originally looked at a 2bed mid terrace at 207, now wouldn't even look at one for more than 160. Our expectations have equally changed but the thing that led me to post in the first place was the fact we'd been given a very competative mortgage as a FTB and without much competition gave us a pick of the best houses in our price range. I've looked at renting and we might choose that option if nothing materialises before our mrotgage expires. However here it's bloody expensive to rent, for a 1bed flat its 700 minimum which is £200 more than the interest would be on our mortgage. (without the capital loss though!)

Given these figures, you are borrowing circa £150k - which means you have £55k deposit? If the price dropped to £175k you would only need a 120K mortgage and you would have a nice equity buffer...certainly your mortgage would be less than the inflation adjusted 1997 price. Having said that, depending on which part of Surrey you are in, I can see why the decision is less than trivial.

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thats an adjustment for general inflation, ie an indication of how low it MIGHT go!

Long term prices tend to track real incomes rather than RPI however it could be argued that real after tax incomes have not increased greatly in the last 10 years so RPI is a good analogue.

Actually in 1997 there'd already been a year or so of pretty steep HPI. perhaps this was 25% up on 1994 prices. My house sold for I think 20% more in late 2007 than it did 18 months earlier.

So RPI adjusted 1997 prices actually are an indication of how low it is likely to go. A plausible case can be made for going lower still, especially if we have a really sharp recession.

Of course the problem is the bubble has been going on for so long now that people have forgotten how cheap they used to be.

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I know it's not an easy one D'oh which was why i asked. GF & I will decide together what our next plan is as we will both have to belive strongly in the direction we choose. For the time being, as we've been rejected the decision is made for us.

In our specific situation it is a close call whether to buy now or wait, yes by waiting "a house" will be cheaper than the one we've been rejected on. However by waiting, we have to speculate probably not accurately about whether we will have the ability to 'afford' the 'cheaper' house, say in 9-12 months time. Yes we 'saved' 25k or whatever on list price but if we can't 'afford' it because of deposit barriers or high mortgage rates it's no use to us and we've saved nothing.

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I know it's not an easy one D'oh which was why i asked. GF & I will decide together what our next plan is as we will both have to belive strongly in the direction we choose. For the time being, as we've been rejected the decision is made for us.

In our specific situation it is a close call whether to buy now or wait, yes by waiting "a house" will be cheaper than the one we've been rejected on. However by waiting, we have to speculate probably not accurately about whether we will have the ability to 'afford' the 'cheaper' house, say in 9-12 months time. Yes we 'saved' 25k or whatever on list price but if we can't 'afford' it because of deposit barriers or high mortgage rates it's no use to us and we've saved nothing.

Ultimately it's your money and your choice but be aware that falls of 50% or more from peak are likely to be the order of the day. I can't see how anyone can rationally buy at <40% off peak at the moment.

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