Frustrating Times At The Ea Offfice Indeed

[pablopatito]

Also something to consider gs, if the prices had already dropped by 20pct by the time you came to exchange contracts would you not be tempted to try for another 5pct or more?????????????????????????

If I bought a house and was a cash buyer and therefore at the bottom of the chain, I'd want to complete within 6 weeks. If other people in the chain held it up for say 3 months or more, I might think it reasonable for me to pay less if the house I'm buying has depreciated in the time between when I wanted to complete, and when it actually completed. If I was in the middle of the chain I'd have some protection as the house I'm selling would have depreciated by roughly the same amount. But as the cash buyer at the bottom of the chain, I have no protection. So it would seem fair, no?

[Penny Drop]

Gazzumping like gazzundering is under-hand...but property probably falls under the "all being fair in love and war" category. The best (worst) gazzump I ever heard of was on the supposed day of exchange and completion (simultaneous at the buyer's request) the seller saw that their neighbours across the road were also moving house...and the horror dawned when she recognised her buyer (new neighbour) moving into the house opposite and she came over to her house with a huge bunch of roses hoping they could let bygones be bygones...I am glad to say that she chased her new neighbour off and threw her roses out after her.

Personally, I dont think I'd gazzump or gazzunder - but never having been in the position, I dont know how I'd react. Such large sums are at stake, that you do need to act in your best interests ultimately. I did buy a house in NW4 that due to a chain took several months to complete and between the offer being made and completion, the house was already worth several grand more but the seller, thankfully, didnt try to up the price...

[Telometer]

Interesting about EAs valuing properties. I sold last spring and had the following valuations:

525,540,550,650,700(Foxtons),800,800,800,825,900(Felicity Lord)

I put it on at 795 and accepted 790 a fortnight later. In retrospect, I wish I'd gone with the 900 valuation as it sold far too easily.By last summer it would definitely have been marketed at 950.

Confusingly next door had sold at 510 in December, completed in February. Agents who looked at nethouseprices came up with the 500s valuations; those who priced it on the basis of what the buyers on their books would pay for a 3 bed house came up with 800ish.

[Carrington]

If I bought a house and was a cash buyer and therefore at the bottom of the chain, I'd want to complete within 6 weeks. If other people in the chain held it up for say 3 months or more, I might think it reasonable for me to pay less if the house I'm buying has depreciated in the time between when I wanted to complete, and when it actually completed. If I was in the middle of the chain I'd have some protection as the house I'm selling would have depreciated by roughly the same amount. But as the cash buyer at the bottom of the chain, I have no protection. So it would seem fair, no?

I think if a chain has been going for some time pab, and house prices can be seen to be dropping (via houseprice monthly index etc), then to ask for a reduction for houseprice depreciation has to be considered reasonable.

Best regards

Carrington

[pablopatito]

I think if a chain has been going for some time pab, and house prices can be seen to be dropping (via houseprice monthly index etc), then to ask for a reduction for houseprice depreciation has to be considered reasonable.

Actually, as I recall, when I when from STR back to buying in 2004, my offer said something like "£150k, subject to a quick completion", so I'd put something in writing that could be used to change the price if fair. As it turned out a couple of weeks after accepting my offer, the sellers went from agreeing to rent to "looking for somewhere to buy", so I pulled out.

I then had an offer accepted for a house 3 doors down for £142k. In that case, the seller pulled out the day before exchange because "her friends told her house prices were shooting up so she shouldn't sell". I was delighted to read yesterday that she sold her house last year for £150k - so her friends we're right, her house shot up a whopping 8 grand in 3 years (or 2% pa). I hope she's thrilled. I just wish she'd waited till this year before selling.

[Telometer]

'Confusingly next door had sold at 510 in December'...not confusing,you struck a deal at exactly the right time.

Confusingly FOR the EAs that is.

[The Conveyancer]

I had forgotten just how slow house price downturns are to gain momentum....

We are in a complete standoff at the moment. Most of the agents in my town are still ramping like there is no tommorow but they appear to be selling very little. I continue to give competitive valuations, am selling the vast majority of what I am able to get but cannot get nearly enough volume at the right prices to keep the corporate bosses happy. I pride myself on giving factual evidence based valuations, so when i do manage to get one on the market it is generally the right price and therefore sells even in this market. I have had to put the fees back up to a no compromise 2% sole or 3% multi agency to compensate for the reduced volumes. Most agents must be hoping for a Spring bounce , that is the only possible reason for continuing to stockpile masses of overpriced houses, hoping I suppose to stay in business long enough to talk the vendors down to sensible money. When the Spring bounce fails to materialise the long anticipated large scale job culls from our industry will begin in earnest.

Small example to illustrate. The town where I currently work has a large sector of Victorian 2 Bed Terraced housing, the value of which is very easy to determine at any given time due the number of comparables available. In the peak of the market last Summer, a nice example was touching £150000 with around 6 on the market to choose from at any given time. By the end of 2007 these were sellling for £140000-145000 with around 20 to choose from. Today there are nearly 40 of these near identical places available for sale with all agents big and small priced variously between £135K and £145K. What do you think a professional agent acting in his clients best interests should be advising on price in the context of this market? I had a client today who was a preferential seller completely disregard my competitive valuation of £135000 in favour of a rival agent who looked her in the eye and told her with total conviction but no hard evidence that it would sell for £155000 ! The HPC is going to be exceedingly slow at this rate of progress. These houses will rent for £600 pcm and I reckon we will have to talk them down to below stamp duty (125K) before it looks attractive for a FTB to buy rather than rent. We have not registered a buy to let investor for many months now so the ramping effect from this sector has been all but eliminated locally. Sellers do not realise this yet , and are therefore expecting prices to remain consistent with last year or marginally down, when in reality, the bottom of the market is now being supported ONLY by demand from First Time Buyers who are not able to pay anywhere near these levels, are relatively few in number and understandably very hesitant to enter the market. A correction is therefore inevitable, it is just a case of how long it takes us to get there. There are some distressed sales coming through, but yet in sufficient numbers to force the market down to the level we require.

At the other end of the market, a quality 1930s 3 bed family home in a stable neighbourhood near good schools attracts 12 viewings on the second day on the market with the vendor being in the happy position of having 3 offers very close to the asking price to choose from as I left the office today.

Completed on my STR in JAN after a 6 months and 2 broken chains. Many of my estate agency collegues think I am completely mad. Now completely debt free with a tidy lump sum in the bank, hoping I am able to steer my family through what I expect to be fairly choppy waters ahead.

I wonder if you are finding the same as me. I went into the letting agents today to find a bigger house to rent. She said the new development up the road is selling ok but most of the purchases are on a part exchange basis. Most of my clients from who are buying from a developer are part exchanging now, two new ones today (different developments in two different counties). Are they filtering through to you from the developers? If not maybe you should speak to the developers to see if you can get this work!

[TheCountOfNowhere]

edit.just realised I'm a veteran.....I spend way too much time on here.

Reaper, I joined this forum just before you and i'm more than half the number of posts behind you, and I think I spent all my time on here!!!

You need therapy!!!

[TheCountOfNowhere]

I'm not the only one.

injin joined 15/9/7 3000+

paddles 4/9/7 900+

bllo loo is over 2000 and he joined sept07 I think

methinks she 29/8/7 1365

and goldfinger 24/2/7 near 6000

to be fair,I work in between posts and this is in a way to do with my work.It has been an education too.so many people so many backgrounds/jobs.I've learned a lot.before this I used to float around politcal blogs and this is way more interesting.

Thanks for that reaper, now I dont feel so obsessed as I thought i was :-)

It certainly is entertaining and educational on this site. Im hoping it'll shut down soon...i.e. the crash will have happened and it will be pointless.

Edited February 28, 2008 by TheCountOfNowhere

[grey shark]

I wouldnt do it personally gs but there will imho be a lot of it happening pretty soon as certain buyers become more desperate to sell, and like gazzumping it isnt illegal so there is nothing to stop it happening.

best regards

Carrington

My feeling is that those who are prepared to take 15-20% off asking price will be very serious / keen or desperate to sell . Kite flyers and optimistic dreamers who havn't even found somewhere themselves are very unlikely to take to accept 15-20% and i would have them down as timewasters .

As my new m8 Pablo says , the promise of NOT gazundering must come with a quick sale and i would also ask for the property to not be advertised any more . In return the seller will know that despite taking a huge chunk off the asking they can set their mind at rest knowing that with a quick sale they will get what was offered , with no funny business in the last 48 hours .

It's a 100% buyers market now .

Edited February 28, 2008 by grey shark

[HonestEA -]

I wonder if you are finding the same as me. I went into the letting agents today to find a bigger house to rent. She said the new development up the road is selling ok but most of the purchases are on a part exchange basis. Most of my clients from who are buying from a developer are part exchanging now, two new ones today (different developments in two different counties). Are they filtering through to you from the developers? If not maybe you should speak to the developers to see if you can get this work!

Yes quite a few part ex valuation requests coming through, not that many turning into instructions for me though as they have not been liking the prices that I have been giving them until the last few weeks.

Consider this, the developer asks for a price that will "guarantee" a sale in 4 weeks, some of them ask for 2 weeks! Now what kind of price do you think we are talking about to achieve that in todays market? Where I work that figure would need to be around 10-15% less than the last historical comparable evidence. I tell em how it is and they have been instructing one of my more optimistic rivals. Just recently however I have had 2 developers come back and instruct at the price I reccommended several weeks ago. That tells me all I need to know about where the market is headed. I even managed to get my 2% out of them, whereas before they were offering 1-1.5% take it or leave it.

[Carrington]

My feeling is that those who are prepared to take 15-20% off asking price will be very serious / keen or desperate to sell . Kite flyers and optimistic dreamers who havn't even found somewhere themselves are very unlikely to take to accept 15-20% and i would have them down as timewasters .

As my new m8 Pablo says , the promise of NOT gazundering must come with a quick sale and i would also ask for the property to not be advertised any more . In return the seller will know that despite taking a huge chunk off the asking they can set their mind at rest knowing that with a quick sale they will get what was offered , with no funny business in the last 48 hours .

It's a 100% buyers market now .

So are you saying that when you have agreed a 20pct reduction in the purchase price in return for a quick sale, and the quick sale materialises in 6 weeks as agreed, that when it comes to exchange of contracts and house prices are still plummeting you would honour the agreement and exchange?

best regards

Carrington

[grey shark]

So are you saying that when you have agreed a 20pct reduction in the purchase price in return for a quick sale, and the quick sale materialises in 6 weeks as agreed, that when it comes to exchange of contracts and house prices are still plummeting you would honour the agreement and exchange?

best regards

Carrington

Yes , i would honour it with out doubt , they would still be reeling from the 20% reduction anyway , remember IF i get my 20% reduction it came with the extra goodwill/promise that there would be no gazundering from me at the end if i got a quick sale offer to exchange hopefully 3 - 4 weeks .

It is very unlikely that house prices will be plummeting in those 3 - 4 weeks as well maybe 1% so that was a over exageration there Carrington .

My 20% reduction has factored in a lot of the falls expected anyway , i don't even care if in 2 or 3 years even after allowing for my 20% that prices have fallen more . I know what i want and how much i'm prepared to pay , it's a buyers market , i'm a cash buyer that makes me in control , i call the shots .

Edited February 29, 2008 by grey shark

[The Conveyancer]

Yes quite a few part ex valuation requests coming through, not that many turning into instructions for me though as they have not been liking the prices that I have been giving them until the last few weeks.

Consider this, the developer asks for a price that will "guarantee" a sale in 4 weeks, some of them ask for 2 weeks! Now what kind of price do you think we are talking about to achieve that in todays market? Where I work that figure would need to be around 10-15% less than the last historical comparable evidence. I tell em how it is and they have been instructing one of my more optimistic rivals. Just recently however I have had 2 developers come back and instruct at the price I reccommended several weeks ago. That tells me all I need to know about where the market is headed. I even managed to get my 2% out of them, whereas before they were offering 1-1.5% take it or leave it.

I would keep in there with the developers. I do alot of work for them. They can never find good local estate agents. It is normally sixteen year old "man at Burton" boys who dont know how the property market works. They will come round in the end. They tend to want their pound of flesh and expect plenty of chasing, but work is work in this market. The valuers for the part exchange schemes are offering less and less now (£40k off a mid range house) so they are waking up to what is happening. Thing is the clients dont want to accept their low offers quite a bit of the time. They will, soon.

The site agents I speak to are finding it increasingly difficult to find any buyers for our clients at the moment. I hate estate agents on the whole (sorry but I have to deal with some total prats) but a good one is worth his weight in gold and the developers know that too.

[The Conveyancer]

the whole part ex thing confuses me.It's growing,every developer offers it,but surely it must mean they're leveraging up to do it.Now every fule know that leveraging up into a recession is madness.

edit.just realised I'm a veteran.....I spend way too much time on here.

Not necessarily. If the property the client already owns is worth more than the one they are buying they will still accept it for part exchange and the client gets the balance. Normally they use a third party company for this sort of transaction though.

[Blue Peter]

Consider this, the developer asks for a price that will "guarantee" a sale in 4 weeks, some of them ask for 2 weeks! Now what kind of price do you think we are talking about to achieve that in todays market?

I would have thought that the builders would want a low price on a part exchange, since they would get more actual money, and thus that they would be hinting to EAs to value lower. But I guess that I'm wrong.

Also, as with any purchase/sale, can the part exchange price be then lowered after the surveyor's report? or is the EA's valuation what is used?

Peter.

[The Conveyancer]

I would have thought that the builders would want a low price on a part exchange, since they would get more actual money, and thus that they would be hinting to EAs to value lower. But I guess that I'm wrong.

Also, as with any purchase/sale, can the part exchange price be then lowered after the surveyor's report? or is the EA's valuation what is used?

Peter.

Not really, quite often it is a third party part exchange company. Also you have to have an offer at a level that the client will accept. I think what the honest estate agent is saying is when the developer comes to sell on the property they want a decent price. Quite often because they have had to offer a good price to the original seller to get them part exchange in the first place.

[dissident junk]

This thread has been very interesting.

I think the market is going to be even further skewed as common ideas about the strata of buyers and what they require begin to be challenged. Let me explain what I mean.

I think the general attitude is that there are FTBs, and FTBs require a certain type of property, which recently, in many minds, has been either a two-bed flat, or a tiny two bed terrace. It seems that many EAs think in this language, the property ladder language, and believe that FTBs buy small and cheap, then upgrade in increments until they reach a viable family home size. It is this idea that fuels the notion of FTBs fuelling the bottom of the market.

But I think these notions are going to become unstuck, even with house prices decreasing, and this could do some very interesting things to a fluctating, struggling buyer-dependent market.

Many FTBs in many areas have been so priced out of the market for so long that they are now becoming an age where a tiny two-bed terrace, with no parking, garden, or possibility to extend, is no longer fit for purpose, even if said properties drop by 50%. These FTBs no longer want what EAs perceive as FTB property.

Instead, these FTBs are coming to the point where they need lower-mid range properties -- the 3-bed semi with a dining kitchen and lounge, say -- as having the space needed for their living situations.

And this is where things becoming very interesting. Around where I am in West Yorks, your tiny 2-bed terrace has been around £140-150K, out of reach of an FTB who doesn't want to take a high LTV or go IO. Now say this decreases to a more managable £70K. There's not going to be a mad rush of all the priced out FTBs that have stacked up over the last six years, because most of those older FTBs will feel the property is too small, and so long as they can rent what they need for a reasonable price, they still won't buy. Instead, it will be the smaller pool of young FTBs that go for these properties.

The difficulty is those older FTBs not being able still to purchase the property they want for their time in life, because those 3-bed semis, even thought they too have dropped 50% to, say, £140K -- those older FTBs will STILL not be able to afford to purchase the housing they need, particularly in a tighter lending climate.

Here I think you may get a situation where it is the second/third rung of the ole' ladder that collapses.

What do people think?

[Telometer]

When I was a FTB, I spent £350k on a 3/4 bed house in central London. I sold it five years later to another FTB for 800k.

That's what FTBs want.

[OLDFTB]

When I was a FTB, I spent £350k on a 3/4 bed house in central London. I sold it five years later to another FTB for 800k.

That's what FTBs want.

Well the chances are they are not going to get that kind of return for an awful long time?

[mitchbux]

This thread has been very interesting.

I think the market is going to be even further skewed as common ideas about the strata of buyers and what they require begin to be challenged. Let me explain what I mean.

I think the general attitude is that there are FTBs, and FTBs require a certain type of property, which recently, in many minds, has been either a two-bed flat, or a tiny two bed terrace. It seems that many EAs think in this language, the property ladder language, and believe that FTBs buy small and cheap, then upgrade in increments until they reach a viable family home size. It is this idea that fuels the notion of FTBs fuelling the bottom of the market.

But I think these notions are going to become unstuck, even with house prices decreasing, and this could do some very interesting things to a fluctating, struggling buyer-dependent market.

Many FTBs in many areas have been so priced out of the market for so long that they are now becoming an age where a tiny two-bed terrace, with no parking, garden, or possibility to extend, is no longer fit for purpose, even if said properties drop by 50%. These FTBs no longer want what EAs perceive as FTB property.

Instead, these FTBs are coming to the point where they need lower-mid range properties -- the 3-bed semi with a dining kitchen and lounge, say -- as having the space needed for their living situations.

And this is where things becoming very interesting. Around where I am in West Yorks, your tiny 2-bed terrace has been around £140-150K, out of reach of an FTB who doesn't want to take a high LTV or go IO. Now say this decreases to a more managable £70K. There's not going to be a mad rush of all the priced out FTBs that have stacked up over the last six years, because most of those older FTBs will feel the property is too small, and so long as they can rent what they need for a reasonable price, they still won't buy. Instead, it will be the smaller pool of young FTBs that go for these properties.

The difficulty is those older FTBs not being able still to purchase the property they want for their time in life, because those 3-bed semis, even thought they too have dropped 50% to, say, £140K -- those older FTBs will STILL not be able to afford to purchase the housing they need, particularly in a tighter lending climate.

Here I think you may get a situation where it is the second/third rung of the ole' ladder that collapses.

What do people think?

I can see where you are coming from, but I personally don't think we'll see a collapse of the second/third rung.

Not all the traditional FTB properties have been sold for BTL's and there are plenty of people out there who are already owner occupiers, with low LTV, who have been desperate to climb a rung or two of the ladder because as you say their current property is no longer "fit for purpose". They've been forced to stay put because they can't afford the increase required to get a home that truly fits the bill. It's not just people living in FTB properties that have been forced into this situation either.

I think a good correction in house prices will see these people feel that they can afford to move upwards, therefore supporting the market for second/third rung properties.

I do think you are right about a certain section of the prospective FTB's though. They will have rented, had a child or two, and will realistically be in need of 3 or 4 bedrooms. I was just a bit too young to be an avid watcher of the last crash, so I've no idea what actually happened to people like them.

I suspect at that time anyone stuck renting was probably saving hard for a deposit because they were getting good interest on their savings. Not so sure about this time though, I suspect it's been spent on consumer goods not gone into savings, but I may be misjudging some people by making that generalisation.

[Telometer]

I think a good correction in house prices will see these people feel that they can afford to move upwards, therefore supporting the market for second/third rung properties.

So what you're saying is that there will be no crash as the moment prices drop a little these people will all be on the move again as they are desperate, and prices will be supported at a level not very far below the current?

Edited March 2, 2008 by Telometer

[hostman]

So what you're saying is that there will be no crash as the moment prices drop a little these people will all be on the move again as they are desperate, and prices will be supported at a level not very far below the current?

We'll need prices to drop 20-25% for the affordability to fall back to a level where people with small deposits will be able to borrow at an acceptable monthly cost.

I think the bigger impact comes from people already on the ladder. Someone with a large mortgage comes to an end of their fixed rate deal, they have a high LTV and will be forced to either pay more on the SVR or remortgage with another company with an equally high rate due to the large LTV, if they can be accepted, due to the tightening and reluctance of banks to lend to high LTV home owners / BTL'ers, they may be forced to stay on the SVR.

[Telometer]

We'll need prices to drop 20-25% for the affordability to fall back to a level where people with small deposits will be able to borrow at an acceptable monthly cost.

That's not a crash... That'll put prices back to January 07 levels... possibly June 06 levels. Is this really the crash that this website was set up during 2005 to pray for?

[hostman]

That's not a crash... That'll put prices back to January 07 levels... possibly June 06 levels. Is this really the crash that this website was set up during 2005 to pray for?

A 25% drop would be quite impressive, given the previous fast growth.