luigi, on 18 December 2010 - 08:57 AM, said:
I suppose the only thing a smart agent can do to get things moving at the moment is to negotiate the onward purchase on behalf of his vendor ie. you can afford to accept this offer cos I've found this place for you at a discount. If everyone takes a drop things might get moving again.
I've been saying that and sounding like a broken record since mid 2007.
The two big issues I encounter are ego/ignorance and equity. Vendors often think they have the best house in the best condition on the biggest plot in the best street in the area. Of course this is very rarely true. They don't know better because what vendor shops for houses similar to the one they are selling? They don't know their competition and then get insulted when we try to inform them. I often encounter vendors who for some reason think that all the news stories they hear and see on the radio and telly each day somehow don't apply to them.
I have more than a few vendors who have looked at the comparable evidence that I have presented them with and announced that they think I am wrong and that their house is worth x. When I ask how they come to their valuation, they either then tell be that they can't (and visibly deflate as the reality hits them) or try to bluff their way onwards whilst getting worked up that I dare to question their judgement about their own home. If that happens I just have to back down and list it for the price they want or lose the business.
The other reason for high prices is equity. Not necessarily negative equity, although that is happening more and more but the fact that the vendor needs to achieve a certain figure to get a particular mortgage rate on the next house or just to get a mortgage at all due to the change in LTVs required by the banks. They won't or can't take less for their home because they know they then can't buy the next house. I have a friend who is trying to sell a flat in Brighton who is in this very predicament. If he sells it at or close to the asking price (and the same asking price as all the other similar flats in the area) after fees he will just have a 10% deposit to buy the next house. If he sells it for market value (i.e. what the others in the area that have sold actually went for) then he'll lose about 15/20k equity and will need a 96% LTV deal to buy the house (which of course he can't get any more).
So people like him don't sell and come off the market - one of the reasons why the RM HP Index is so much higher than the Halifax/Nationwide HP Index. This of course means that there is less housing stock availalbe and works as a balance in the supply/demand equation, meaning that we are less likely to see a sudden crash and instead a slow reduction in prices.