Search For The Greatest Fool

[FortuneFTB]

A mate of mine bought a 220K house that was about three years old last July, he thought he was getting a bargain as he got it for less than it cost new ! There are houses in his road now going for offers around 185K, he got a 90% self cert interest only mortgage so he has already lost 20K of his own money and is in negative equity.

He is also a late to the table BTL landlord who pid 80K for a one bed flat in a dodgy area of Peterborough, he now has to add money to the rent to pay the mortgage and the place is dropping in value like a stone... It was never ever ever worth 80K anyway.

A bloke I know who runs a Succesfull business started his BTL empire last year by buying 4 flats in Peterborough, all new builds off plan... all not covering the mortgage payments...

And so on

[Timil]

I will have new neighbours next Friday from what I gather they haven't sold their existing house, I'd imagine this means bridging finance etc sale was agreed by them three months ago presumably to give them a chance to sell existing house, I haven't met them yet but I hope it works out for them..

[Method Man]

friends of mine. not mugs. owned a house for about 15 years, next to no mortgage.

trying to upgrade in booming 2006. got sick of missing properties. so sold.

banked the cash, and roughed it with family for almost a year. looking all the time.

by april 07, sick of living that way. finally settled on a house, far from their original remit.

completed august 07!

they arent stuffed in any way. but gotta pee them off a bit, with that timing.

[jonjo]

I know someone who STR'd in 2002 - right at the bottom - and gets on the telly as some kind of financial prophet - does that count?

[mrcutegurlzz]

the house next door to me sold for £154,000 in August 2007 - and yo be honest, thats sort of a good deal and because its a bit of a low value i cant see any fall seriously damaging its worth. Sure a bit of negative equity might be a bit uncomfortable but the long term picture is pretty safe. I would love for her to make a huge loss as i hate her but i really cant see it happening. A 50% drop would be nice but the reality in this area is that there is no house price ctrash.

I have a business parter in a side line venture and he just brought, I cant be assed to look it up but its a terrace north of london, Hatfield way I think? and it cost £280k and that was November 2007 if my memory serves right. Again, I cant see hime suffering. He made financial plans to repay a certain amount at the time and I cant imagine him missing that. The only thing he will have missed is a bargain. That might suck a bit, but again, the long term is that he has a house and a home. I havn't discussed it with him as I dont want to upset him, it might appear rude to say, Hey have you lost loads of money yet? Its interesting because it was like he was beating me to the punch to buy and making me feel a bit crap because I was renting. It sort of put a bit of pressure on me but I was still sure that buying was not a great idea. So i'll be keeping an eye on him, thats for sure.

I have another pal that brought an industrial unit in 2006-7 for £500k. I sort of talk to him agout things but I think its a bit of a sensitive subject. I dont think hes stung yet, so we'll have to wait and see. He was always like, BUY BUY BUY - You have to buy, property is a full proof bet. Even speaking to him in March he asked me how much I had and said he would meet that and go halves on a house with me - Financially - he is married and about 65 years old. I said no but we bet that the graph on the front of this site would have dropped 'significantly' by August. The wager is a pint of beer. Im interested to see if he thinks its a significant drop in August. It sort of only looks like a dip right now.

[impatient_mug]

I know someone who STR'd in 2002 - right at the bottom - and gets on the telly as some kind of financial prophet - does that count?

LOL! Thats a sure-fire way to get a ban from all Fubra sites ;-)

[notrich]

Well technically you are correct, with the only exception that two sets of tennants are kindly repaying the interest and the capital on my behalf...much appreciated!

On a separate note: I read this forum with interest and agree with many of the views (although I find the doom-mongers to be awfully biased - but I guess an opinion is an opinion..). I do not agree with the view that we are heading for a disaster nor with the view that with sensible financing (and liquidity in the bank) properties and not a safe place to be.

If one has bought at a good price/s, has the ability to rent if needed (I am lucky to have bought in London in locations that are very rentable), has a long term outlook and is able to hold down a job, I do not think has anything to worry about.

If the worse come to the worse, one (meaning me) can always revert all to minimum maintenance (interest only) bugger off abroad and "enjoy" (not literally) the income generated.

Go stay with 2 bob bubb. I never understand what causes people to come on a website of total strangers and boast about their financial acumen a bit off topic as well.

Edited July 12, 2008 by notrich

[pppeter]

A friend of mine sold in January but the process took a few months and it was squeaky bum time all the way with various mortgage offers coming and going. The girl he sold to didn't have a deposit so had to borrow from a cousin to prove to the bank that she could partly fund the purchase . Unfortunately the cousin would need the money back so, instead of gazundering, she offered in excess of the asking price on the condition that my friend handed the difference over on completion. Yes folks, using a LIAR LOAN during a credit contraction! So she's in instant negative equity and clearly has no savings, but once she fixes the roof the house will be habitable.

[Si1]

banked the cash, and roughed it with family for almost a year. looking all the time.

by april 07, sick of living that way. finally settled on a house, far from their original remit.

completed august 07!

they arent stuffed in any way. but gotta pee them off a bit, with that timing.

why did they not rent a nice place instead? oh sorry, 'dead money' (I guess). f*ckwits.

[Si1]

it's interesting that people aren't observing drops,much, in many SE commuter locations. They will, it's quite breathtaking how fast the bottom has fallen out of the regional/northern BTL markets, and we'll see price falls in fits and spurts elsewhere over the coming years.

Those that say 'so and so will be ok as they bought carefully and won't lose their job' may well find these situations vis a vis sticky price and safe job becoming steadily eroded over the next 3 years, and possibly longer. IMHO.

[Downtraded]

I bought a house in July 2007, some what against my wishes, for my mum. I managed to talk 15% off the (reasonable) asking price and I was dragging it out towards the end and trying to convince my mum it was a bad idea to do this until she sold the old family home.

Neadless to say she has not sold the lovely old mortgage free 3bed semi I grew up in and we've resorted to renting that out, which at least covers the mortgage I had to take out. As she was downsizing the idea would be that she has a tasy lump sum to enjoy into retirement and I have gently brought her around to the idea that the house will not sell for as much as she still believes it to be worth (based on a 2006 sale a few doors away) and would probably just about cover the cost of her new smaller home.

The original idea was that she sells that place and buys the new one from me, hence I took a more expensive mortgage with no ties. I'm not looking for anyone's sympathy (this would be the last place I tried) but it's pretty unpleasant that my mum has to struggle and more so that she feels so bad about the inconveniance to me, even though I've assured her that it's ok.

Papitogrande, bad luck on the chain of events - The day we "price" our nearest and dearest is the day we "sell" them.

No-one is a fool for trying to do what they think is best for their parents but IMO, sort out this dual house thing ASAP.

Don't confuse doing what's best for your mum's happiness with looking out for her wealth. You might be able to afford it but that is the worst form of care. It is far better to insure that she is financially independant and NOT tied to you in this way.

The only way this could be OK is if she has signed over both houses to you.

You're not a fool ATM but with the greatest respect, YOU WILL BE if you don't sort this out quickly.

Not only that you will have to live with the thought that you harmed your mum's (and your own) wealth out of a naive desire to "do what's best".

I'm not trying to be evil to you, I just think that the info you've given here doesn't sound right.

Unless you have a cast iron IHT reason, you need to sell the original house VERY QUICKLY.

THINK - you are "losing" on the value of 2 houses.

Good luck and I hope you read this.

[twatmangle]

Half of the people I know fall into this category.

Some examples:

1. Young couple (about 26 years old), combined salary of about 30K, but maybe less. Got a mortgage of >£180K in 2006. What scares me about them is that even pre-crunch, only one lender would touch them with these figures (A+L). They won't be able to re-mortgage off the SVR when it resets. I fear they may lose the house and have about £50K of NE following them around for years to come. Oh, and both of them are looking at redundancy/relocation as their office is closing down.

2. Young bloke, single about 28, quite a low salary in a share-with-a-mate 2 up/2 down terrace. Boutght in mid 2007. The arguments have already started, and they both realise it's not quite so harmonious as they thought. I can't see any exit strategy.

3. I know someone who is in the process of buying a 1 bed new build. He hasn't' even tried to renegotiate the price they agreed last summer. He hasn't put any deposit down, and can walk away at any time. He is going ahead, and is really excited about it

I have given up with people.

Mr.Mangle

[mdman]

Someone I know sold to move nearer his kid's school in 2006, and bought another house to move into. Kept on the old house as an 'investment' with negative net income. Then bought a new-build 1-bed for 225k in Jul 2007 'for the kids and their future'.

I told him to sell up in September 2007; after briefly chasing the market down for a few months this year (which I also warned him against), he's given up on trying to sell, and thinks the Olympics may propel house prices back up in a few years.

Now emigrating to US so holding on to 3 loss-making 'assets' that he has to manage from abroad, one of which is in negative equity, while earning in a currency that will soon collapse. His only hope is in the UK joining the US down there.

[Happy Teaboy]

The greatest fools are certainly those that STR too early!!! (including the lauded Financial Planner that now is appearing on tv and radio). STR like B2L is a gamble. Fact. Noone knows when they STR that their timing is correct (FP in 2002 certainly didn't !). The most foolish thing of this strategy is the STR is only half of the action. They have to then 'time' when to buy again. Are they sure they can time things right? I question it! They will be in fear of buying ! In the meantime the money they made when STR is probably in shares for example which are tumbling 20% from the peak !! House prices are related to the wider economy. It is not isolated. The market downturn they so wished for is also effecting their other investments, and even their job potentially.

The decision to STR also affects every day you live... now in rental accommodation and all the potential problems that exist with this.

ALSO lets make it clear the foolish STR are not FTB ! They are not those that from current circumstances can't buy...they are looking to make money, they now want prices to fall for their own vested interest.

If you STR in 2007 and are confident you can pick a good time to buy again and are happy to live in rental then fantastic for you. The greatest fools are therefore those that sold to rent in years such as 2002 and now shout that they have been correct all along. Take no advice from such fools ! They made an error..hold your hands up ! Pity the fools !

[uncle_monty]

Whoever's just bought my siblings house (completed yesterday).

98% of asking, equivalent to +160% in 4 years. Achieving that in this economic and media gloom is truly amazing.

I'm in awe of the stupidity of their buyers but its a zero sum game.

Monty

[Mikhail Liebenstein]

I gave this storey on anecdotals, but I know a couple who have effectively ended up doing the splits after taking a bridging loan.

They decided they wanted to move and before they sold the old house, the home of their dreams came up. Part of the problem for them was that had just had an inheritance (£700k) which you would think would have set them up nicely. Unfortunately some people just can't resist spending and off they want and bought the new house for just under £1.3m.

Now to be honest, the new house is not worth anywhere near that much. It is on a fairly normal sort of road, and has been chavved up by a builder -they have fallen into the same trap as a lot of the new build buyers. It is worth no more the £950k tops, houses that are equally as large without the builders extensions and loft conversion are marketing for £800k and selling for £740k.

To my reckoning they have overpaid by £350k minimum.

Of course the second issue is the old house. The price of this has now been reduce by £120k and still no takers.

So, without even having sold, I reckon they are down at least £500k already on where they thought they were, and it will almost certainly be more, as there has been no interest in the old house even at the new lower price.

Always a mistake to buy high and sell low.

[Harry Monk]

Has anyone you know made such a foolish purchase at the top of the bubble? Share your story.

My unfaithful ex, when we separated last year. We agreed to transfer the house into her sole name while I got half the equity, and struck the deal in September, since when it has dropped by £20,000.

Still, never mind, eh?

[Bemused Badger]

It's a convoluted story, but I'll try to keep it brief:

Older friends have just (moved in yesterday) paid £280k for 3-bed detached house - 'liveable', but needs updating throughout - bathroom, ensuite and cloakroom all in 1970s colours, basic kitchen, needs double-glazing. For comparison, similar (but immaculate house) was on the market last year for £299k, but didn't sell. The house in question came on the market in March this year at £325k, friends offered £260k initially and eventually agreed at £280k.

We all know what happened to the market between March and June this year - so, knowing the house they were buying was an executors' sale with the proceeds going to various charities, we suggested they 'chip' before exchange. They were horrified, "We couldn't possibly do that. We have an agreement." Admirable morals, but...

It gets worse, the newbuild flat they bought for £210k in May 2005 hasn't sold or let. There's a mortgage on it - don't know how much, but it shouldn't be large given their circumstances. The new house is financed 100% by two loans and a mortgage (good ol' Lloyds TSB).

They've found a temporary solution - aged parents (in their 80s) are going to move into the flat and pay half the equity (how the heck do they quantify that?!). For the parents this means a move of over 200 miles, but at least they'll be near their daughter. The idea is that when the parents' house is sold they'll buy the flat.

The only saving grace is he has a reasonable Forces pension and is currently working, but he'd been looking forward to retiring for good in the next couple of years and realises that may now be just a dream.

[BLOW FLY]

Ok,

Couple in 1st floor flat above me bought said 1 bedroom flat in late 2005 for £120K IO mortgage less £10K deposit from BOMD. Sold said flat last year for £137k.

Moved to 3 bed mid terraced new build shoe box on very very busy road in Feb this year after completing in Dec last year.

They paid £285K for this new slave hole and got 2 yr IO mortgage at back end of last year.

I don’t imagine either of them earn vast sums of money, her being a nanny and him in the building trade. The guy said to me their mortgage outgoings have more than doubled to accommodate this move as the bank said they had to have 2 mortgages or something to fund the move, (sorry for the sketchy details can't remember the full in's and out's of it).

I tried to gently persuade them that this perhaps wasn't the right time to be trying to move on and perhaps they should wait 6 months to see what the market does. Unfortunately I got the usual replies:

“There will be no crash the Government won’t let it happen…..”

“Even if we loose some money this year, houses will start going up in value again next year so we will be ok…..”

“We’ve made money on our flat so it is time to move….”

And my favorite last year:

“The missus found out we can move, so we are going to, you’ve got to do these things haven’t you….?”

To which I replied……”Um…..NO…..”

I gave up in the end and let them get on with it. I do feel sorry for them as I genuinely think they were led up the proverbial garden path by the EA’s, banks, property porn etc etc…..!

I just wonder how much NE they are in now. In fact I would have thought they would have been in NE from the day they moved in….!

AJ

[jungllie jim]

My Ex wife bought May of this year having agreed to purcahse in January at 100% of asking price, reckon it's lost 17K since. FMH sold for 237k against a 247k asking price. She got 91% of the equity i got to protect my forces pension ( £12k a year from age 40) and gratuity on leaving £56k.

Wonder just how much she will regret that decision, bit like getting £18k less in court than i had offerred as a divorce settlement in 2006., She had a shit solicitor never mind.

I reckon i can rebuy in 2010 and be Mortgage free.

Edited July 12, 2008 by jungllie jim

[fatmanblue]

Neighbour of a friend of mine.

Bought a nice 3 bed cotswold house in pretty village for c. £450K in autumn 2006.

Got the builders in, gutted it and turned it into two poky two bed houses. Builders were there for almost a year.

Put them on the market middle of 2007 at about £350K each.

TURNED DOWN an offer of £600K for the pair.

Reduced prices, eventually to £275K and £295K. No interest.

Is now renting them out. £800 a month.

[Badger]

Colleague bought late last year with her partner, having moved down from up north. She's convinced that prices 'down here' won't be affected much. She didn't look too impressed when I mentioned that if prices were plummeting in London, nowhere is safe.

Poor lass is only 24 & genuinely thinks that because shes now down south, house prices are immune to any downturn.

[betterToDo]

I started paying attention to what you were all saying mid 2006.

Since then, I've saved 2 people from buying by passing on what I learned, but witnessed the hideous demise of someone I know who is only managing to not default because of parents. He got married in 2003, bought a modest semi in 2004, *covers eyes* ... and then "invested" in a new build flat in 2006. No idea how they got the finance he cant be on more than 35.. l.i.a.r. loans someone?

His mantra was always the "property ladder", I used to see him as the boring sensible one. Not sure I still do lol. I must catch up but I'm scared of what I'll find out.

Bless you all, I used to think the same way as him before I came here and might so easily have done the same.

ps forgot to mention a business lady I know. Opened an estate agency late 2007. Enough said.

Edited July 12, 2008 by Fraccy

[fresh n minty]

Ex-flat mate. We were sharing a extremely nice and very affordable flat in Morningside in Edinburgh. We had several chats about buying property, and even though I hadn't discovered this site, I was alway of the opinion that prices were totally out of line with affordability, and he would agree saying there is no rush to buy (we are both mid-twenties).

THEN the son of a family friend bought a flat, and his parents wanted bragging rights. They pressured him into buying, saying the usual "Get on the ladder. Prices always go up. Rent is wasted money.". So he stretched himself, got the bank to count his salary plus bounses towards a x4.5 multiple, and bought a 1 bed basement flat in Leith for £130,000 last July.

Even at the time I thought he had overpaid, as the more desirable first floor flats were selling at around £120,000. Well now he's definately in -ve equity, as there are over twenty one bed flats on his street all fixed price around £110,000.

On the otherhand, when he bought and moved out, I downgraded to an even cheaper rented flat and started saving as much as I could. I wonder who has bragging rights now...

[headmelter]

I know someone who bought two BTL's, one in March 07 the other in May 07, both in N. Ireland.

He also moved house in Nov 06, substantially increasing his mortgage.

The penny is just dropping regarding how much he is totally fooked up the jacksy.