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Sensible Pricing In Edinburgh


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Funny how it's never "greedy" to want to buy at less than the market value.

Of course, to want to buy at less than the market value could be "greedy" - as, perhaps, could be in the case of the property in question. But come on, many people on this forum might be guilty of precisesly that.

However, by many accounts, properties are still massively overvalued, and are out of reach for many people. I am not talking about this particular property. I am talking about the effect of this sale on the future prices of other properties.

Each sale at a price below market value tends to decrease future market value of other properties. This may happen for at least three reasons. 1) Surveyers use past selling prices to evaluate the current price "locally" in the neighbourhood (by the way, this property is in one of the most desirable neighbourhoods in Edinburgh which so far seen mostly stable prices). 2) the neighbours will eventually learn about the selling price of the property and thus will reevaluate their own properties - which then may contribute to their willingness to sell their own properties at a lower price, which is another "local" effect of the house sale. 3) a lower sale price contributes to a "global" lower average price statistics compiled by Registers of Scotland (and this effect is particularly important for properties at the upper end, such as the property in question, because of its large effect on an average price), and this lower price statistics will then appear in newspapers and will have a "global" effect on overall house price expectations.

So a sale of one upper-end property at a "sensible" price may lead to an increase in the number of future "sensibly priced" properties in your neighbourhood.

Edited by curious
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I genuinely can't understand what "sensible pricing" is, it's certainly not an economic concept. From what I can understand it's a political one, which roughly translates as "my preference group should have what it wants (note - not needs) at someone else's expense". Now we can argue that the housing market isn't Pareto efficient and that loose money supply has distorted the pricing mechanism, but can we please drop this childish rubbish that it's "unfair".

I've said this before, but there is no such thing as a fair price only the market value and the marginal utility value. In the case you mention, curious, I can see that there could be a disutility to the vendors in dragging out the sale for a higher price and so they discounted, and if everyone felt that way the aggregate marginal utility value of discounting would lower the market value. It has bugger all to do with "sensible" generosity, greed, affordability or fairness.

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I genuinely can't understand what "sensible pricing" is, it's certainly not an economic concept. From what I can understand it's a political one, which roughly translates as "my preference group should have what it wants (note - not needs) at someone else's expense". Now we can argue that the housing market isn't Pareto efficient and that loose money supply has distorted the pricing mechanism, but can we please drop this childish rubbish that it's "unfair".

I've said this before, but there is no such thing as a fair price only the market value and the marginal utility value. In the case you mention, curious, I can see that there could be a disutility to the vendors in dragging out the sale for a higher price and so they discounted, and if everyone felt that way the aggregate marginal utility value of discounting would lower the market value. It has bugger all to do with "sensible" generosity, greed, affordability or fairness.

By ‘sensible pricing’ in the title of this thread, I meant setting the asking price in line with the current sale prices for similar properties, with the result that the property sells reasonably quickly. For instance, for a Marchmont flat, FP 265 is a ‘sensible price’, as the flat in question sold quickly, presumably for 250K, whereas OA 300 is an aspirational, optimistic, and hence ‘not sensible’ price. (Several flats with asking prices in that area have been on the market for a few months now.) If a seller wants to sell a property, if they advertise it for a price which brings in the buyers, that is what I would call ‘sensible’, rather than setting the asking price at a level which attracts little or no interest. Sorry if that wasn’t more obvious, and that my knowledge of economic theory is not more comprehensive …

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Come on, if I were the lucky buyer, would I be on this forum? No, it is simply that if people behave nicely why not praise them for their nice behavior?

The point is that the sellers could have sold the place for more then what they asked. Do I relly need to go in details why they could have sold it at a higher price even in this market? (As it happens I am sufficiently informed about this case - but no I am not an agent and not a relative.) These people were not greedy. Really. Really. Their actions speak for their intentions - a very rare property these days.

To tell the truth, I am still perplexed at their behavior. The only theory that I have why they are willing to take a loss of £1.2 million - £775K = £425K (!) is that they perhaps sold their previous property for above a million. So perhaps for them all this house price money is a silly money, and a house price game is a game which they do not want to play. So perhaps they sold their property at about 35% (!) loss simply because the price that they were asking was about the same as the price they are paying for their new property.

I just wish that there would be more people around who do not see their house as a source of wealth but rather a source of happiness. Then there would be more "sensible pricing" around. This is why cheers to the rare people who willingly contribute the prices falling to "sensible" levels.

If they truly sold their property for a lot less than they could have got for it with minimal extra effort then they have been naive or foolish or both, possibly badly advised and taken for a ride. If they want to be 'nice' why not go to closing date, get the market value for the property and give £100k to charity? If they sold a 900k property for 800k then all theyve done is hand £100k to some lucky (and rich) buyer. Hardly a deserving cause. It all sounds very bizarre if you ask me. Hell if I was the EA I'd have bought it for £775k. Think about it...

And as for this wishy washy notion of not seeing your house as a source of wealth but of happiness-I'm sorry but what planet are you on? What on earth is wrong with trying to get the most for your property? No different from a buyer wanting to pay the least for their property. Any idiot that sells their place for well under market value will quickly find themselves trading down to the arches under waterloo bridge after a few moves. But what the hell-they'll have spread some "happiness" and have been "sensible" in your eyes :blink::blink:

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By ‘sensible pricing’ in the title of this thread, I meant setting the asking price in line with the current sale prices for similar properties, with the result that the property sells reasonably quickly. For instance, for a Marchmont flat, FP 265 is a ‘sensible price’, as the flat in question sold quickly, presumably for 250K, whereas OA 300 is an aspirational, optimistic, and hence ‘not sensible’ price. (Several flats with asking prices in that area have been on the market for a few months now.) If a seller wants to sell a property, if they advertise it for a price which brings in the buyers, that is what I would call ‘sensible’, rather than setting the asking price at a level which attracts little or no interest. Sorry if that wasn’t more obvious, and that my knowledge of economic theory is not more comprehensive …

Exactly. I'd say that anything that sells in 2 months is sensibly priced in any market. Anything that does not is clearly over-priced.

In a bear market is is particularly imprudent to market at non-sensible prices since a few months later the previously sensible price will be too high!

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Agreed, that place would be amazing with a bit of effort. If only it had been on the market (and I'd had twice as much money) when I was looking at flats earlier in the year.

Compare it to a new build flat you would get for a quarter million in central Edinburgh...

Bathroom: Tiny compared with the flat size at 6' x 4' - I would have hesitated to wash a dog in it, full refurb needed

Kitchen: Again tiny at 10' x 6'. Again, rip it out and start again condition.

Living Room: I'd say they were chain-smoking in here for all the 33 years. Lots of work needed incl floorboards, but worst of all though was the bulging/cracked plaster work across the ceiling and (very detailed) cornicing/ceiling rose so would require specialist plasterer etc. This room would cost a small fortune to rectify due to the (admittedly impressive) size.

Main Bedroom - Huge. Again needs full refurb. If possible would try to steal some space to give to Bathroom/Kitchen as the built in cupboards back onto those rooms but I didnt look to see if the back wall was load-bearing which it well could be.

Second Bedroom: Nice condition, sensible room.

All windows needed refurbishment or replacement.

No central heating and no mains gas in the flat. The owner wasn't a fan of gas and didnt want it so the supply was terminated on the floor below. At the opposite end from the Kitchen.... Currently heated by electric panel heaters.

Exterior stonework very bad at top floor level above living room window, which wasnt mentoned in Home Report. Together with various stuff that was mentioned, I'd expect a big communal bill in the near future and bear in mind theres only 4 flats sharing that bill.

I'm no expert, but I guessed that you could sink at least £50k+ into this flat to get it to the standard required and more to rectify communal areas - maybe even more considering I didn't look too hard into cupboards/floorboards etc as I usually do this on a second visit.

The owner's wife has cancer and could no longer manage the stairs so I'd guess that £200k would have bought it. On balance, in a falling market, it was no for me.

Edited by covvy
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Exterior stonework very bad at top floor level above living room window, which wasnt mentoned in Home Report. Together with various stuff that was mentioned, I'd expect a big communal bill in the near future and bear in mind theres only 4 flats sharing that bill.

Bear in mind that if something is NOT mentioned in the home report and a subsequent buyers survey picks up a big issue backed up by specialists estimates then an adjustment in the price can easily be demanded by the buyer to take this into account. After all the home report valuation is not taking this issue into account.

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Thanks for that covvey, I was going to take a look at it myself but didn't get the chance. I noticed it had a flat roof and wanted to ask them if they had any work done on it. I'm horrified, but not wholly surprised, the home report was a load of rubbish. You'd think it would at least mention a sagging ceiling!

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Heh, the more properties I see, the more I think that surveyors just stick head in the sand and a wet ass in the air to judge home value. I saw a flat yesterday with a HR value of £230k that needed a new kitchen, bathroom and full stripping/redecoration restoration of blocked fireplaces etc. This is with with an identical one across the road available in immaculate condition at £210k Fixed Price....

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Funny how it's never "greedy" to want to buy at less than the market value.

I've said this before, but there is no such thing as a fair price only the market value and the marginal utility value. In the case you mention, curious, I can see that there could be a disutility to the vendors in dragging out the sale for a higher price and so they discounted, and if everyone felt that way the aggregate marginal utility value of discounting would lower the market value. It has bugger all to do with "sensible" generosity, greed, affordability or fairness.

You seem confused !!

Personally I think there is market value and that is it. Whatever something sells for is it's market value. Anything else is just over complicating matters IMO.

As for this old dears flat in the West End ? Outside repairs were the first thought I had when looking at the schedule.

I can imagine some of the repair notices for these sort of places are massive.

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You seem confused !!

Do I? Greed isn't a notion I'd use, I was commenting on the irony of curious's position hence the inverted commas. Or am I missing something, where am I confused?

The stand I take is just orthodox neo-classical price theory all value is utility. The market value is just the monetization of the aggregate utility of the market's participants, if the latter changes the market follows, how else do we explain price changes?

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Kenzdawg, now we are talking the talk.

I genuinely can't understand what "sensible pricing" is, it's certainly not an economic concept.

I have never used the word "fair" - please do not ascribe it to me.

Instead, by "sensible" pricing I mean a price closer to that elusive "fundamental" value as opposed to "bubble" value - both of which are economic concepts. The max price that a person is willing to pay (which will in the end determine the market price) is partly determined by the expectations of what one will be able to sell the property in the future, as well as the transaction cost and "search costs". Future price expectations are particularly important for bubbles being formed. I meant that these people were pricing their property closer to the fundamental value rather than the bubble value. By doing so they affect future price expectations.

By selling a property at a price which is closer to the fundamental value, the seller can sell the property quicker - which would be a "sensible" price in a sense of MH.

can we please drop this childish rubbish that it's "unfair".

I've said this before, but there is no such thing as a fair price only the market value and the marginal utility value.

It has bugger all to do with "sensible" generosity, greed, affordability or fairness.

Please do not forget that the modern economic theories take seriously the sentiments that people have, including those involving greed, fairness, etc. These are not childish rubbish anymore.

But again I am not talking about "unfair" prices - because, just like you, I have no idea what those are. Perhaps you confuse me with some other poster.

Greed isn't a notion I'd use, I was commenting on the irony of curious's position hence the inverted commas.

The stand I take is just orthodox neo-classical price theory all value is utility. The market value is just the monetization of the aggregate utility of the market's participants, if the latter changes the market follows, how else do we explain price changes?

Well, again, the modern economic theories allow for a desire not to be greedy to be a part of one's utility. I think this would be called "behavioral economics" as opposed to "neo-classical" economics.

***

If they want to be 'nice' why not go to closing date, get the market value for the property and give £100k to charity?

Adamxxx, indeed you may be right on this one. It depends on the possible aggregate effect of this lower selling price on the entire market, which may potentially far exceed the value of £100k gone to a charity. That is to say, of course, if one thinks that bubbles hurt society. (I actually saw an academic economics paper arguing that bubbles are good. But this is very much aside, I am not going to go into it.)

And as for this wishy washy notion of not seeing your house as a source of wealth but of happiness-I'm sorry but what planet are you on? What on earth is wrong with trying to get the most for your property?

Well, it depends what is included into your utility (i.e. what is the trade-off between monetary and non-monetary components) and whether you are a utility maximizer or you are a utility satisfiser.

***

Guys, indeed, as many of you mentioned, these sellers could have had all sorts of non-sentimental reasons to sell their property at a lower price.

What I am saying is that by foregoing a possible profit opportunity, these sellers may potentially have some kind of knock-off effect on the rest of the market, which potentially may benefit all future house-buyers. If all sellers were to take off a few tens of thousands from their prices rather than letting their properties to sit on the market for months and years, that would have the price-decreasing effect. Because of these knock-off efects one can see a price-reducing action not only as a "sensible" move, but also as a (possibly unintended) "altruistic" move.

I see these sellers as being "nice" to me because they may potentially have an indirect beneficial effect on me, even though I did not directly benefit from this sale.

By the way, one of the reasons why we do not see more altruism around us is simply because altruists would be sneered upon and would be seen as stupid rather being rewarded and cheered.

Edited by curious
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Do I? Greed isn't a notion I'd use, I was commenting on the irony of curious's position hence the inverted commas. Or am I missing something, where am I confused?

The stand I take is just orthodox neo-classical price theory all value is utility. The market value is just the monetization of the aggregate utility of the market's participants, if the latter changes the market follows, how else do we explain price changes?

I took your post as menaing something else - anyway not important.

As for the theory - I take the simple view. Something's market value is what someone else will pay for it at a point in time.

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I have never used the word "fair" - please do not ascribe it to me.

Instead, by "sensible" pricing I mean a price closer to that elusive "fundamental" value as opposed to "bubble" value - both of which are economic concepts. The max price that a person is willing to pay (which will in the end determine the market price) is partly determined by the expectations of what one will be able to sell the property in the future, as well as the transaction cost and "search costs". Future price expectations are particularly important for bubbles being formed. I meant that these people were pricing their property closer to the fundamental value rather than the bubble value. By doing so they affect future price expectations.

By selling a property at a price which is closer to the fundamental value, the seller can sell the property quicker - which would be a "sensible" price in a sense of MH.

Please do not forget that the modern economic theories take seriously the sentiments that people have, including those involving greed, fairness, etc. These are not childish rubbish anymore.

But again I am not talking about "unfair" prices - because, just like you, I have no idea what those are. Perhaps you confuse me with some other poster.

Well, again, the modern economic theories allow for a desire not to be greedy to be a part of one's utility. I think this would be called "behavioral economics" as opposed to "neo-classical" economics.

I'm sorry if I implied you'd used the word "fair". It's an attitude you come across a lot on this forum, folks railing against the "unfairness" of the market. The problem here is that "sensible" "greed" etc are moral evaluations which are confusing the issue. The genius of the marginal revolution is we don't have to define utility, it can cover some pretty pathological behaviour as Veblen showed in the Theory of the leisure class. The vendors you mentioned are also engaged in utility maximisation, in their case pricing in the cost of a quick sale. Inescapably we are all doing the same thing, couching it in moral terms is just trying to obscure that fact.

I'm glad you mentioned intrinsic value. I've been looking for some solid research into UK house prices (in fact it's the reason I hang out here). A lot of investment analysis (including some peddled in this forum) consists of heuristic "market feel" stuff and pretty embarrassing some of it is too. I once knew someone who claimed to be a stock broker who insisted she knew the direction of the market thanks to fibonacci regression *facepalm*. So if you know what the intrinsic value of Edinburgh houses in relation to,say, discount cash flow analysis is, please tell me. Really, do, I'm not being sarcastic, I want to read the research papers.

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Kenzdawg, now we are talking the talk.

I have never used the word "fair" - please do not ascribe it to me.

Instead, by "sensible" pricing I mean a price closer to that elusive "fundamental" value as opposed to "bubble" value - both of which are economic concepts. The max price that a person is willing to pay (which will in the end determine the market price) is partly determined by the expectations of what one will be able to sell the property in the future, as well as the transaction cost and "search costs". Future price expectations are particularly important for bubbles being formed. I meant that these people were pricing their property closer to the fundamental value rather than the bubble value. By doing so they affect future price expectations.

By selling a property at a price which is closer to the fundamental value, the seller can sell the property quicker - which would be a "sensible" price in a sense of MH.

Please do not forget that the modern economic theories take seriously the sentiments that people have, including those involving greed, fairness, etc. These are not childish rubbish anymore.

But again I am not talking about "unfair" prices - because, just like you, I have no idea what those are. Perhaps you confuse me with some other poster.

Well, again, the modern economic theories allow for a desire not to be greedy to be a part of one's utility. I think this would be called "behavioral economics" as opposed to "neo-classical" economics.

***

Adamxxx, indeed you may be right on this one. It depends on the possible aggregate effect of this lower selling price on the entire market, which may potentially far exceed the value of £100k gone to a charity. That is to say, of course, if one thinks that bubbles hurt society. (I actually saw an academic economics paper arguing that bubbles are good. But this is very much aside, I am not going to go into it.)

Well, it depends what is included into your utility (i.e. what is the trade-off between monetary and non-monetary components) and whether you are a utility maximizer or you are a utility satisfiser.

***

Guys, indeed, as many of you mentioned, these sellers could have had all sorts of non-sentimental reasons to sell their property at a lower price.

What I am saying is that by foregoing a possible profit opportunity, these sellers may potentially have some kind of knock-off effect on the rest of the market, which potentially may benefit all future house-buyers. If all sellers were to take off a few tens of thousands from their prices rather than letting their properties to sit on the market for months and years, that would have the price-decreasing effect. Because of these knock-off efects one can see a price-reducing action not only as a "sensible" move, but also as a (possibly unintended) "altruistic" move.

I see these sellers as being "nice" to me because they may potentially have an indirect beneficial effect on me, even though I did not directly benefit from this sale.

By the way, one of the reasons why we do not see more altruism around us is simply because altruists would be sneered upon and would be seen as stupid rather being rewarded and cheered.

Giving £100k to charity = altruistic

Selling £900k property for £800k = stupid. And before you go into more market theory-it sounds like 900k was achievable with little extra effort so £800k is even below the utility satisficing level

PS. You have a bizarre definition of "nice" as someone whose action may indirectly benefit yourself. Would you view me as "most incredibly fantastic" if I sold up for £100k less than my house is worth??

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  • 1 month later...

more auction results...this time in Pencaitland

lot 64

Assured tenancy and no rent payable until Aug 2011, but at this price....

What does this mean exactly ?

Def seems like a more reasonable price anyway.

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  • 2 months later...

I think he probably does have smaller outgoings paying the mortgage instead of rent. I'm just a bit worried he has stretched himself too far but more importantly for the wrong house. He does website design and his salary isn't guaranteed.

I don't think that basing a purchase on immediate outgoings because interest rates are at a 300 year low is a good idea. If he had a 10 year fix at a slightly higher rate I would feel better about it. Once he had decided to buy I suggested he got as long a fix as possible for peace of mind (probably more my mind than his!). Time will tell about interest rates.

There are 6 of them. The farmhouse had 4 large bedrooms, a study (he works from home remember) and a dining room. Now he has 3 bedrooms. His outgoings maybe a little less but he has a lot less house. One of the main drivers for selling his house was to get some acres. The house he has bought has the same size garden as the one he sold. He has since seen a 4 bed with study and 11 acres go quite quickly for £185k and wishes he had hung on for that, though the kids would have had to move school as it was 15 miles away.

Incidentally the mortgage is in the 90k's and he was worried he wouldn't get it but Lloyds offered him £115k. I think I mentioned that at the time in another thread on here.

(Edited after finding the brochure for the £185k house)

Oh well it's only money....

My cousin has decided the house they bought in June isn't the right house and they aren't going to be happy there at all.

It was on for offers over £165k and he paid £166k with a £2k arrangement fee added to the mortgage. He had £75k equity so took out a £93k loan on a salary of £18k-£19k which he blagged to £23k due to a one off bonus and I think family credit.

He has just had the house valued at £160k by an agent with home report to follow and been quoted £7,100 for buying/selling costs to buy another house around the same price.

He has been in Moray for 15 years and is thinking of moving to Caithness. I cannot remember how this finished up in the Edinburgh thread.

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Sensibly-priced properties in Edinburgh actually sell! Where I am, in Marchmont, a two-bedroom flat in Spottiswoode Road came to the market on 21 October. Today, 27 October, it has gone from the ESPC and a ‘sold’ sticker been pasted across the sign. The flat was the standard size (around 85–90 m²) and in good condition. Rather than arsing about with prices like OA 300, OO 285 or whatever, the owner of this one put it straight on at FP 265. I would guess it has sold for 250K. The owner bought it for 222K five years ago, and it has been let out at least for the last three years, so he could afford to sell it for a sensible price. Even so, the speed of the sale has surprised me.

I had posted previously about a genuine three-bed flat on the same road which had been on since late June, firstly at OA 340, then OO 330. On 10 October the price suddenly dropped to OO 295. Lo and behold, the flat sold – at least, it has gone from ESPC. With an asking price lower than that of some two-bedroom flats, it looked almost like fair value.

Another two-bedroom flat has come to the market this week. It needs a new kitchen and bathroom and a lick of paint, but is on a very prestigious road, and has come straight on at OA 250. I expect this one, too, will sell quickly.

Meanwhile a whole load of two-bedroom flats in Marchmont with asking prices around 285–315K continue to languish on the market. Evidently their owners are not bothered about whether they sell or not. Similarly there are a few larger flats in Thirlestane Road with just silly prices – 370–400K – which have been sitting around since the late summer. Presumably their owners also don’t care whether they sell or not.

Please post any information about similarly sensibly-priced properties throughout Edinburgh in this thread.

As somebody else has resurrected this old thread of mine, I may as well add that the flat I mentioned at the top, which came to the market at FP 265, actually sold for the full 265, and not 250 as I had imagined. Clearly some people like nothing more than paying an extra five grand to the government!

The three-bedder which went OO 340, OO 340, then OO 295 sold for 307. Asking prices for the occasional three-bedroom flats which come up in the area are now back to 340, e.g. 44 Spottiswoode Street (OA 345).

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  • 7 months later...

Oh well it's only money....

My cousin has decided the house they bought in June isn't the right house and they aren't going to be happy there at all.

It was on for offers over £165k and he paid £166k with a £2k arrangement fee added to the mortgage. He had £75k equity so took out a £93k loan on a salary of £18k-£19k which he blagged to £23k due to a one off bonus and I think family credit.

He has just had the house valued at £160k by an agent with home report to follow and been quoted £7,100 for buying/selling costs to buy another house around the same price.

He has been in Moray for 15 years and is thinking of moving to Caithness. I cannot remember how this finished up in the Edinburgh thread.

Who would blag (well, lots, but I still can't believe it lol).

£7.2k for buying and selling costs? What a NIGHTMARE.......!!!!!!!!!!!!!!!!!! What ARE typical buying/selling costs (it's been ~4 years since I almost bought something so out of touch now)? Seems a LOT.

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Who would blag (well, lots, but I still can't believe it lol).

£7.2k for buying and selling costs? What a NIGHTMARE.......!!!!!!!!!!!!!!!!!! What ARE typical buying/selling costs (it's been ~4 years since I almost bought something so out of touch now)? Seems a LOT.

I was surprised his moving costs were that much.

At the moment they have abandoned any plans to move. I think he is now resigned to being stuck where they are now. His main frustration is that he wanted a bit of land and after they had bought, he saw a few houses with some land, that he would have been better placed to buy if he had stayed renting longer.

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