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Darkman

In The Market To Buy.... Some Depressing Observations

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My wife and I are seriously considering buying a small place in the UK (west london). I waited a looong time for this "epic crash" and now believe the establishment will only allow a slow motion crash over a decade at least (and that's optimistic). But that's not the point I want to make..... no one knows for sure which way the market will go.

Having contacted some agents and got some research done on what our cash can buy us... some things have become clear. And they're not encouraging for people looking for a home.

Firstly, it appears to be a sellers market in the extreme. But this isn't only due to many buyers looking for a place to live obviously. The main competition we've observed in the small home market are investors. Lots of them.

We are fortunate in being cash buyers. And so it seems are most investors. So the advantage of being able to move quick is not an advantage. In fact for most buyers with a mortgage, it's got to be a terrible struggle to compete.

Secondly our big lesson has been agents favour investors over first time buyers etc. But this isn't only due to investors flashing wads of liquid cash. I guess the reason is agents look at investors as good future prospects for business. An agent might get work managing the property for the landlord, or the investor might buy more properties in future. This is a dire situation for people searching for a home to live in. Investors are blatantly given preferential treatment in the market.

One of the first questions each agent has put to us is "are you an investor or home buyer?"

And here's another scenario along the same lines. We came across a pair of maisonettes on the same plot. We only wanted one to live in, but oddly the seller and agent didn't appear interested in our cash. We actually put an offer in over the asking price. And still no interest. The reason turned out to be that the freeholder selling wanted someone to buy both not just one maisonette. This would make financial matter easier i.e. one contact for charging ground rent, annual charges etc. Now obviously people looking for a home aren't wanting to buy two maisonettes. They want one. And so in this scenario once again the home buyer loses out to the investor.

All this has been a depressing education. I'm not up to speed with UK law to assist home buyers in preference to investors (is there any?). I was in the states for about 2 years, and certainly over there home buyers are given advantages over investors in a few ways (HUD homes etc). So at least in the USA it's recognised as moral to favour people who need somewhere to actually live over business and profit. And the USA is supposedly more right wing and capitalist than the UK!!

In the UK it seems no one fights the corner for people looking for basic shelter at all. Unless there is some legislation you can tell me about?

Anyway, in our case we may have an out waiting for us. We joked about how nice it would be to cut out the agents altogether, and soon after a manager of mine hooked us up with a colleague about to sell his maisonette privately. So if suitable we may not deal with the slime at all :)

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Firstly, it appears to be a sellers market in the extreme. But this isn't only due to many buyers looking for a place to live obviously. The main competition we've observed in the small home market are investors. Lots of them.

There appears to be massive demand for the 'affordable' band in London - not least because people who would ordinarily be looking at larger family homes don't have a chance of affording those now - so you've got 95% of buyers looking at the lowest 20% price band.

I also suspect when one of the big houses sells, lets say they've owned it 20 years - some of that equity released ends up buying a small flat in London as a second home as they downsized (upsized in sqft) outside London - further screwing the stock situation.

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Secondly our big lesson has been agents favour investors over first time buyers etc. But this isn't only due to investors flashing wads of liquid cash. I guess the reason is agents look at investors as good future prospects for business. An agent might get work managing the property for the landlord, or the investor might buy more properties in future. This is a dire situation for people searching for a home to live in. Investors are blatantly given preferential treatment in the market.

One of the first questions each agent has put to us is "are you an investor or home buyer?"

Yeah this I think is sadly the case. I'm not after a house at these insane prices but am after a garage - I would get sufficient value from one at the prices asked for round here. I phoned up about one I saw on rightmove, ready to buy at full asking and was fobbed off I think because I wasn't an investor looking for a managed rental, but horror of horrors, someone who actually wanted a garage to use as a garage.

At the end of the day, I don't think you can blame the agent for this - of course they would prefer an additional revenue stream. The problem is the public's obsession with property as a pension. Not going to end well.

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Tell them you are an investor.

That was my thought while reading it through. Darkman - as you're a cash buyer why not just present yourself at the agents as a BTL'er looking for your first (of many) properties for your portfolio (urgh I hate that term). You can bullsh*t along if they ask to manage the property etc etc.

As far as I'm aware, there's no law yet that prevents someone buying a property and deciding to use it as an actual home to live in.

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Tell them you are an investor.

Yep, in reference to the above post about garages, I absolutely will do that next time.

'Sorry changed my mind, it's now full of my sh1t'.

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Tell them you are an investor.

Yeah that did occur to me too. I hope we can get the place with no agents involved, because dealing with them brings me a fraction closer to a breakdown :)

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As far as I'm aware, there's no law yet that prevents someone buying a property and deciding to use it as an actual home to live in.

Interesting idea this- but I doubt it will ever catch on

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Whole blocks in west London remain empty for years as they've been securitised by hedge funds. No other country allows this kind of rediculus commoditisation of their housing stock.

It's a speculators market now, I just pray for the day that sentiment goes seriously south.

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Whole blocks in west London remain empty for years as they've been securitised by hedge funds. No other country allows this kind of rediculus commoditisation of their housing stock.

It's a speculators market now, I just pray for the day that sentiment goes seriously south.

Isn't that the real point a hedge funds - to provide an opposite to some other position - so they don't really give a stuff if that asset goes down as it is backed off to some other investment that will go up.

So it becomes a true investment asset - and may never need to be populated whether it values go up or down.

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MMR restricts lending to OOs

MMR doesnt apply to "investors".

We will obviously have a period where the investors pile in.

Prices will rise till investors are no longer viable.

one of two things will happen...MMR is dropped, or Investors go bust and sell up.

Either way, this is a bad bad time to buy where leverage is again at max.

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Given that investors are a far more fickle and mobile group , I think is actually a very positive anecdote.

Yields are already getting v compressed in London and I don't reckon rents have far to go either, everyone I know in London who's renting is paying well above that magic 35% of take home pay that makes them classed as "stretched". Generally it's more like 40/50% in my experience. Hardly conducive to yield growth.

Last of the mug money ?

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Prices will rise till investors are no longer viable.

Dear god when will that be? UK residential property must already be the dumbest thing a person can put money into. How do people with less intellect than a dairy cow get to be in a position to buy property?

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Dear god when will that be? UK residential property must already be the dumbest thing a person can put money into. How do people with less intellect than a dairy cow get to be in a position to buy property?

If there is one thing in life that I've learnt its that - it doesn't matter how clever you are or how many exams you passed. The only thing that matters is executing a plan and relentless focus. Those two things beat intelligence every time.

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I think there's further to go on yield-squishing (and therefore, price rises). Compare with agricultural land - this is currently on wafer-thin yields but still thinner than UK resi property (actually, London may be giving it a run for its money by now).

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If there is one thing in life that I've learnt its that - it doesn't matter how clever you are or how many exams you passed. The only thing that matters is executing a plan and relentless focus. Those two things beat intelligence every time.

You forgot to add "and luck". There's plenty of renters-since-2003 who've executed the "I'm buying at these bonkers prices" plan with relentless focus who'd probably say that sheer bad luck has won out over maths, logic and economics.

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I think there's further to go on yield-squishing (and therefore, price rises). Compare with agricultural land - this is currently on wafer-thin yields but still thinner than UK resi property (actually, London may be giving it a run for its money by now).

Others probably know more than me but isn't agricultural land one of the ways you can avoid paying inheritance tax on your wealth? A few hoops to jump through but I don't think overly arduous. Thus used for intergenerational wealth retention rather than to "get rich quick". You can't do that with BTL.

Edited by wish I could afford one

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It's finding the bargains that is the trick, they are few and far between, the repossessions etc. building a rapport with estate agents so you are in their head when something comes up. I if a property is not really suitable, if there is enough of a discount to market price you can use it as a way to get to where you want.

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It's finding the bargains that is the trick, they are few and far between, the repossessions etc. building a rapport with estate agents so you are in their head when something comes up. I if a property is not really suitable, if there is enough of a discount to market price you can use it as a way to get to where you want.

Ah, a ladder cultist.

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We are fortunate in being cash buyers.

...

but oddly the seller and agent didn't appear interested in our cash. We actually put an offer in over the asking price. And still no interest.

The problem is you are expressing too much interest and they are gaming you -- to increase your offer and beg them to accept. (Because they already know you are cash rich so they want to assist you in stretching your budget and emptying your wallet.)

Please never do that.

You have a major cash advantage (even in this market), and you must use it. Never let the estate agents ******** you about other foreign cash investors from whom they claim they 'already have offers'.

If they say they already have offers for the full asking price, then tell them you are not interested.

Otherwise, offer well UNDER the asking price and impose a 48 hour time limit to the offer, at which point you withdraw the offer (if not accepted and property taken off the market).

(Withdrawing your offer stops them from using your offer as a means to initiate a bidding war)

As you know, they are obligated to forward your (low) offer to the seller.

Now, walk away. Put down the phone and do not call back about that property.

Never increase your offer.

Do this for a few properties you actually want. In some cases there is a small chance they'll realise your offer was the maximum REAL offer they have received and they will call you back within two weeks.

At this point you have the upper hand because you don't have an open offer on that property, so they are in effect begging you to re-instate your offer.

<_<

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For financial well-being you need to treat buying a house like a guy on the pull - not one looking for love and marriage.

Ask loads and treat rejection as a numbers game.

Trouble is...when a woman is involved....

You'll know when property has peaked.

Its when its cheaper to divorce than to buy a house.

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The problem is you are expressing too much interest and they are gaming you -- to increase your offer and beg them to accept. (Because they already know you are cash rich so they want to assist you in stretching your budget and emptying your wallet.)

Please never do that.

You have a major cash advantage (even in this market), and you must use it. Never let the estate agents ******** you about other foreign cash investors from whom they claim they 'already have offers'.

If they say they already have offers for the full asking price, then tell them you are not interested.

Otherwise, offer well UNDER the asking price and impose a 48 hour time limit to the offer, at which point you withdraw the offer (if not accepted and property taken off the market).

(Withdrawing your offer stops them from using your offer as a means to initiate a bidding war)

As you know, they are obligated to forward your (low) offer to the seller.

Now, walk away. Put down the phone and do not call back about that property.

Never increase your offer.

Do this for a few properties you actually want. In some cases there is a small chance they'll realise your offer was the maximum REAL offer they have received and they will call you back within two weeks.

At this point you have the upper hand because you don't have an open offer on that property, so they are in effect begging you to re-instate your offer.

<_<

I agree. Although I am not a cash buyer and buying in the North East, where prices are 1/10th of those in London, I used that very tactic. Lowered my offer twice and then imposed a time limit. Owner came back at the deadline begging for the first number - still much lower than the asking price.

It was a gamble, but I was prepared to let it go and I don't negotiate with scum like estate agents or conveyance lawyers

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Ah, a ladder cultist.

Shhhhh ;)

But yes maybe, I mean so many houses get repossessed, but I never came across any when I was buying, maybe I just wasn't looking in the right place.

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That was my thought while reading it through. Darkman - as you're a cash buyer why not just present yourself at the agents as a BTL'er looking for your first (of many) properties for your portfolio (urgh I hate that term). You can bullsh*t along if they ask to manage the property etc etc.

As far as I'm aware, there's no law yet that prevents someone buying a property and deciding to use it as an actual home to live in.

Well there bloody well ought to be.

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