ElDuderino Posted April 6, 2012 Share Posted April 6, 2012 Hi guys, long time lurker, first time poster. Any advice much appreciated! Been saving hard for 7 years or so, looking on from the sidelines during my 20s while the world went mad, home shows took over my TV and prices went through the roof. Thought to myself "a crash must be round the corner, and if it ain't well I'm screwed thanks to being born 10 years too late". Kept plugging away tho, getting married 3 years ago set the funds back a bit but now in my early 30s and enough in the pot for a 10% deposit plus all the necessary tax/fees. Have spent past year or so scanning the usual sites, keeping an eye on the local market and viewing several properties. Trend, as reported on here, is generally one of overpriced houses sitting there for months on end. The words 'delusion' and 'greed' springs to mind. Anyhoo, the wife and I finally decided to move on one we liked. On market for 6 months, not a single offer yet - guide price recently lowered by a paltry 5k. Deceased former owner (mortgage long since paid off) needs a lot of modernising throughout. Frankly, it's well overpriced in current climate. Hints from agent and vendors however that after "trying their luck" they are now very keen to sell and will accept lower offer. Go in at 60k under asking, unsurprisingly rejected. Go back in at 10k higher (still 50k under asking), listing why I think it's a fair offer. Point to fact that it needs a lot of work, that market currently at 2005 levels, and last similar house on row went for 65k less than their current asking price in 2003. EA (who actually seems like a decent guy) tells me I'm "spot on" with my analysis and that it is in his opinion a "reasonable" offer. My family however (who bought before or during boom) think I'm nuts going in so low, haha. Anyway second offer is duly rejected, and EA suggests the vendors will need at least another 10k to even entertain my offer - which is the maximum figure I had in mind anyway. I really like the house but absolutely will not get sucked into approaching the asking price. 10k more (i.e. 40k under asking) is my bottom line. If I do go in at that price, it's still quite possible my offer will be rejected - in which case fine, I'll move on. But in the meantime I've been reading up some more on here - checking the graphs, hearing opinions of bears and just yesterday seeing that DM article about 50% crash on the horizon. Starting to get, if not cold feet, then a few doubts. If I'm planning to live in the house for the forseeable future, is it still a good time to buy? Or should I let all the delusional local vendors sweat it out for a few more months as they drop their prices painfully slowly? Where do people think we are on the "DNA of a bubble" graph? Being debt-free and having waited this long, do I hang about to see if the REAL crash arrives before saddling myself with a mortgage? Or, given I'm chucking away 8 grand a year on rent, should I just get on with it? My instinct at the moment is to continue trying to buy, but only if/when I agree a considerable discount (like, 15% plus) off the asking price in order to cushion possible falls down the line. Thoughts? Quote Link to comment Share on other sites More sharing options...
Mrs Bear Posted April 6, 2012 Share Posted April 6, 2012 Hi guys, long time lurker, first time poster. Any advice much appreciated! Been saving hard for 7 years or so, looking on from the sidelines during my 20s while the world went mad, home shows took over my TV and prices went through the roof. Thought to myself "a crash must be round the corner, and if it ain't well I'm screwed thanks to being born 10 years too late". Kept plugging away tho, getting married 3 years ago set the funds back a bit but now in my early 30s and enough in the pot for a 10% deposit plus all the necessary tax/fees. Have spent past year or so scanning the usual sites, keeping an eye on the local market and viewing several properties. Trend, as reported on here, is generally one of overpriced houses sitting there for months on end. The words 'delusion' and 'greed' springs to mind. Anyhoo, the wife and I finally decided to move on one we liked. On market for 6 months, not a single offer yet - guide price recently lowered by a paltry 5k. Deceased former owner (mortgage long since paid off) needs a lot of modernising throughout. Frankly, it's well overpriced in current climate. Hints from agent and vendors however that after "trying their luck" they are now very keen to sell and will accept lower offer. Go in at 60k under asking, unsurprisingly rejected. Go back in at 10k higher (still 50k under asking), listing why I think it's a fair offer. Point to fact that it needs a lot of work, that market currently at 2005 levels, and last similar house on row went for 65k less than their current asking price in 2003. EA (who actually seems like a decent guy) tells me I'm "spot on" with my analysis and that it is in his opinion a "reasonable" offer. My family however (who bought before or during boom) think I'm nuts going in so low, haha. Anyway second offer is duly rejected, and EA suggests the vendors will need at least another 10k to even entertain my offer - which is the maximum figure I had in mind anyway. I really like the house but absolutely will not get sucked into approaching the asking price. 10k more (i.e. 40k under asking) is my bottom line. If I do go in at that price, it's still quite possible my offer will be rejected - in which case fine, I'll move on. But in the meantime I've been reading up some more on here - checking the graphs, hearing opinions of bears and just yesterday seeing that DM article about 50% crash on the horizon. Starting to get, if not cold feet, then a few doubts. If I'm planning to live in the house for the forseeable future, is it still a good time to buy? Or should I let all the delusional local vendors sweat it out for a few more months as they drop their prices painfully slowly? Where do people think we are on the "DNA of a bubble" graph? Being debt-free and having waited this long, do I hang about to see if the REAL crash arrives before saddling myself with a mortgage? Or, given I'm chucking away 8 grand a year on rent, should I just get on with it? My instinct at the moment is to continue trying to buy, but only if/when I agree a considerable discount (like, 15% plus) off the asking price in order to cushion possible falls down the line. Thoughts? Nobody can tell you what to do, but here's a case I know of. House of an aunt who had to go into a home, also needing modernising. Relatives handling the sale believed the EA on the IMO vastly over-optimistic price and stuck with it for ages. Though it wasn't through greed - they felt duty-bound to achieve the best price for the aunt, who might have needed care home fees @ £40-odd K p.a. and rising, for years. IIRC it was originally on for around £400K. Among others, there was an offer of £350K, young couple with one child and another on the way, turned down. Months went by, a few low offers, price reduced bit by bit. Eventually, after nearly a year, the couple who'd offered £350K eventually got it for about £310K. So you never know... Quote Link to comment Share on other sites More sharing options...
techieMan Posted April 6, 2012 Share Posted April 6, 2012 "I'm chucking away 8 grand a year on rent"...., as opposed to chucking away £8k per year on Mortgage Interest, if not now perhaps in the future? In any case I think - and i say this without being an old meanie - you are not going to get impartial advice here. If you think the market stays the same its a straight Rent v Mortgage cost equation. If it goes up then you are - all things being equal - better off buying. Remember though the additional costs of the move Stamp Duty for example. And how safe is your employment - you dont want to put large lumps down only to be a forced seller if the job goes t1t5 up. My own view is that we are due some more falls BUT it does have something to do with location also, of which you are going to be more expert than me. Having said that its difficult to pick a share that goes up when the FTSE is plummeting, if you get my drift. No one can fortell the future but in Nov of 2008 the seeds were sown to generate the DCB. A few months ago on the news blog i said that the DCB had run its course and we are due the next leg. But no one has a monopoly on Wisdom so your family (definitely well intentioned) may have a point. Whatever happens look at the worst case scenario and decide what would make most sense for you. Quote Link to comment Share on other sites More sharing options...
Bland Unsight Posted April 6, 2012 Share Posted April 6, 2012 If I'm planning to live in the house for the forseeable future, is it still a good time to buy? I see you're not into the whole brevity thing. I would say that it is a very strange time in the UK market. I think the million dollar question is how close to London are you talking about buying and to what extent might you be competing with people trading down out of the London bubble. If neither of those apply then there should be a pretty clear downwards market trend already in the Land Registry data in which case renting is not throwing away money, but rather a premium you pay for not bearing the risk of owning the falling asset, you ought to be able to cobble together a spreadsheet with a local trend that shows you that renting a little longer might not be the end of the world! On the other hand if prices have already reached a point where they are very affordable to you and you could easily tolerate an interest spike that took mortgage rates up to 8%, (unlikely over the next 2 years, but not impossible within 5 years), then its really just a question of forgetting about the investment aspects and moving on with your life. Remember The Dude was a renter - can't you just get yourself a rug that really ties the room together? Quote Link to comment Share on other sites More sharing options...
ElDuderino Posted April 6, 2012 Author Share Posted April 6, 2012 Haha! The dude was indeed a renter, tho he wasn't too hot on payin the rent on time Thanks to all for the advice. Regarding location, I'm in the southwest (cornwall to be precise) so a long way from London but in an area overly distorted by second-home buyers during the boom. Job wise I am pretty secure but that said, local job opportunities are ltd and i wouldn't want to feel trapped in my current position indefinitely in order to finance a mortgage. Guess I'm figuring I could rent it out/move in with fam if circumstances change. Prices locally are sadly out of the reach of most first timers, and there's not much movement further up the ladder right now, so my feeling is we're in a pretty strong position to negotiate - particularly with this property which needs work, since there are few developers out there with cash these days and, I'm guessing, few second time family types with the desire/time to completely renovate their next home. Regarding possible interest rises, I could withstand a real (i.e. bank, not base) rate of 6% or so but anything over that will soon put the squeeze on (once it hits 7 there'd be no spare for holidays etc). Lotta threads goin on in old duder's head here! Quote Link to comment Share on other sites More sharing options...
ElDuderino Posted April 6, 2012 Author Share Posted April 6, 2012 P.s Excuse my ignorance but what does DCB stand for? Quote Link to comment Share on other sites More sharing options...
Bland Unsight Posted April 6, 2012 Share Posted April 6, 2012 (edited) P.s Excuse my ignorance but what does DCB stand for? Dead cat bounce. A cat dropped from high enough will bounce. It's supposed to capture the idea that once a market fall some people will jump in, making it rise again, however if the market hadn't reached the bottom yet once the dead cat bounce is over it resumes it falls. Some people think that's what happened once the BoE slashed rates and made borrowing so (temporarily) cheap. Edited April 6, 2012 by ChairmanOfTheBored Quote Link to comment Share on other sites More sharing options...
Bland Unsight Posted April 6, 2012 Share Posted April 6, 2012 Haha! The dude was indeed a renter, tho he wasn't too hot on payin the rent on time Thanks to all for the advice. Regarding location, I'm in the southwest (cornwall to be precise) so a long way from London but in an area overly distorted by second-home buyers during the boom. Job wise I am pretty secure but that said, local job opportunities are ltd and i wouldn't want to feel trapped in my current position indefinitely in order to finance a mortgage. Guess I'm figuring I could rent it out/move in with fam if circumstances change. Prices locally are sadly out of the reach of most first timers, and there's not much movement further up the ladder right now, so my feeling is we're in a pretty strong position to negotiate - particularly with this property which needs work, since there are few developers out there with cash these days and, I'm guessing, few second time family types with the desire/time to completely renovate their next home. Regarding possible interest rises, I could withstand a real (i.e. bank, not base) rate of 6% or so but anything over that will soon put the squeeze on (once it hits 7 there'd be no spare for holidays etc). Lotta threads goin on in old duder's head here! First thing to do is get yourself a suitable drug and alcohol regimen going, to keep your mind limber. If you could bear to, probably worth giving it six months to see what London does. Prices outside of London are not going to go up any time soon, gross lending by Council of Mortgage Lending lenders last year was only £140bn, less than half what it was in 2006 (£363bn) and less than it was in 2001 (£160bn). It was the stupid lending that allowed people to bid up the crazy prices and the really stupid lending has stopped, (it was £254bn in 2008 and hasn't been more than £143bn a year ever since). It's all about drawing a line in the sand. Good luck whatever you do! Quote Link to comment Share on other sites More sharing options...
catmandu Posted April 7, 2012 Share Posted April 7, 2012 It's always the time to buy if the price is right. Sounds like you have a pretty clear idea of what the right price for this house is. I think you are wise to be cautious about over-paying for any property. It's very clear that in most places in the country there is a battle between buyers and sellers - and there is quite a big gap between the two at present. One way or another this gap will close to allow the market to resume. Since bubble levels of lending will probably not reappear for decades, it stands to reason that prices will go closer to what buyers can afford, i.e. down. I'm in a similar position to you - I even also bid on a probate property needing quite a bit of work done to it (rejected). If the house and the price are right, and you are comfortable giving up the freedom that comes with renting, then go for it. There are few desperate sellers out there right now, but yours must be aware that buyers don't come along often. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted April 7, 2012 Share Posted April 7, 2012 "I'm chucking away 8 grand a year on rent"...., as opposed to chucking away £8k per year on Mortgage Interest... Or there's a third option. Buy it outright and chuck away £8k+ interest per year on the cash that is now tied up in an illiquid, depreciating, asset rather than in the bank. Quote Link to comment Share on other sites More sharing options...
Democorruptcy Posted April 7, 2012 Share Posted April 7, 2012 Hi guys, long time lurker, first time poster. Any advice much appreciated! Been saving hard for 7 years or so, , given I'm chucking away 8 grand a year on rent, Surely your savings must be earning some income which can be offset against your rent? If you can save above what you pay in rent, if house prices are not increasing where you are, then you each £1 you save is worth £2. Each £1 on your mortgage incurs 92p interest at your 6% over 25 years. It comes down to whether you think house prices will rise and the value you put on owning rather than renting. Quote Link to comment Share on other sites More sharing options...
porca misèria Posted April 8, 2012 Share Posted April 8, 2012 Or there's a third option. Buy it outright and chuck away £8k+ interest per year on the cash that is now tied up in an illiquid, depreciating, asset rather than in the bank. Just totted up my VC income from the last financial year. It's more than half the rent, and that's on a net investment less than I was expecting to put down as 40% deposit on that cottage. Quote Link to comment Share on other sites More sharing options...
Son of Taeper Posted April 9, 2012 Share Posted April 9, 2012 You ask some strange questions Imo Going in at £60k below asking means nothing the same as going in at £1.00 below or £100. million below. You need to throw a location out and a link to the property if you want a half sensible answer. Even then, it would only be advice I'm sure. Quote Link to comment Share on other sites More sharing options...
buyerbeware Posted May 7, 2012 Share Posted May 7, 2012 Or there's a third option. Buy it outright and chuck away £8k+ interest per year on the cash that is now tied up in an illiquid, depreciating, asset rather than in the bank. You won't earn that interest as the taxman will take it. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted May 7, 2012 Share Posted May 7, 2012 You won't earn that interest as the taxman will take it. That depends on your circumstances. Quote Link to comment Share on other sites More sharing options...
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