Search For The Greatest Fool

[Battenberg]

My daft sister has bought a house last week. Having sold her last one October 07 and sitting on a fine sum of money she has, rather foolishly to my mind, just bought again.

She was in a good position, living with boyfriend who has a low mortgage, thousands in the bank etc.

I do feel partly responsible for her stupidity. When she last visited me I showed her Property Snake as a way to convince her prices were going down. She saw a house she liked and couldn't believe her luck that it had dropped 20K so now she's gone and bought it.

It wouldn't be so bad but she is the original Mrs Pepperpot and will want to move again in 12 months.

[CharlieChuck]

This couple from this times story from a few months back, must be close to qualifying for the greatest fools:

http://business.timesonline.co.uk/tol/busi...icle3779359.ece

A LIFETIME TO PAY

For first-time buyers Kate Rosser and James Huntley, there was no option but to add their mortgage fees to their loan. All their extra cash had been eaten up in surveys, and valuation and solicitor’s fees.

The couple, both aged 24, pictured left, bought a £250,000 one-bedroom flat in East Dulwich in December, and had to raise a £25,000 deposit with the help of her parents to secure the loan with Bank of Ireland.

Rosser, a partnerships executive for an online company, said: “We did not have any cash left over to pay the fee. It was very difficult for us because the wages we are on meant that we had to get five times our joint income and a 10 per cent deposit.

“I did not really know there was a fee as our broker did not mention it until the end of the process, and then he said ‘you can add that to the loan’, so we did. We had no option.”

So, a one bedroom flat bought at the peak and part funded by the bank of mum and dad. A Five times joint income mortgage, their joint salary is 45,000 or 50,000 (dunno what a partnerships executive is but it can't be that well paid for london wages).

They really are destined to be stuck in a one bedroom flat in negative equity for 10 years. What happens when one of them loses their job, or, god forbid, they decide to breed.

They're too young to remember the last crash, but their parents aren't, and by helping them buy it, I'd blame the parents for ruining their lives by misguidedly trying to help them.

[worzel]

I bought (completed) september last year, so pretty much at the top of the market. Having said that we got a place outside of the uber bubble of London (an hour south on the train in a nice smallish town in Sussex). We knew we would lose value but given our deposit, the mortgage is about what we would be paying in rent on a property of a similar size, although in reality it would not be as nice as in general rented accomodation is not maintained as well. The mortgage was 1.5x joint income, and now through some over paying and pay rises its closer to 1x. We will be happy where we are for at least a few years and put down a 35% deposit. I can quite see that deposit evaporating, but its a bit of a hedge in a way as my next house will be a lot cheaper than it otherwise would have been. Dont really consider myself to be a fool other than knowingly buying at the top of the market, but then there are more important things than having a large pile of cash, I would not have bought the Porsche otherwise lol.

ps. Have absolutely loved being a house / debt owner, am into my gardening and have a really nice space to have friends and family to visit.

Edited July 11, 2008 by worzel

[Kuma]

Unfortunately I am more than aware of my bad timing and really regret it, however Im not suicidal over it, Im financially secure and will recover from it one day, hopefully in a few years.

Good stuff, I couldn't work out if you had a strong character or were wallowing in self pity, glad to hears it's the former

[JohnnyB]

This couple from this times story from a few months back, must be close to qualifying for the greatest fools:

http://business.timesonline.co.uk/tol/busi...icle3779359.ece

So, a one bedroom flat bought at the peak and part funded by the bank of mum and dad. A Five times joint income mortgage, their joint salary is 45,000 or 50,000 (dunno what a partnerships executive is but it can't be that well paid for london wages).

They really are destined to be stuck in a one bedroom flat in negative equity for 10 years. What happens when one of them loses their job, or, god forbid, they decide to breed.

They're too young to remember the last crash, but their parents aren't, and by helping them buy it, I'd blame the parents for ruining their lives by misguidedly trying to help them.

That's a goodun, seriously, why do people think one bedroom flats that cost about £40k 10 years ago are now worth a quarter of a million quid?? I'm the same age as them yet not nearly as ignorant.

[charley]

Friend of ours bought a flat (sorry-I keep forgetting it's a luxury 2 bed apartment) brand new, first one in the new development so had his picture in the paper etc. I told him he was mad, he insisted that they were a fantastic investment and was even trying to persuade others to go and view them becuase they would definately make money on them.

He paid £185k then, now there is an ad for them on local radio with deposits paid and mortgage subsidy offers for the last 'few' remaining (we've been to see him and there look like loads empty to us) at £163k.

His only redemption is that he had a huge deposit (something between £40-50k) He told us he wouldn't buy without a large deposit because he was too financially savvy for that! lol

[5lab]

yup me. ftb, completed in feb. 10% deposit and added about 10% to the value of the property through work, so got another ~10% drop before I'm in neg equity. mortgage £1200, rent 2 doors down is £1000 so slightly better value than renting, if you ignore the equity loss.

[Sonic the Hedge Fund]

Workmate brought mid 2007 with full knowlege of my STR, discusions about cost of buying Vs. renting, decline of the money markets etc. He actualy asked for my advice about buying, I said somthing along the lines of 'Iwouldn't, but it's your decsion, and if you must buy then make sure you have plenty of room for falling prices/higher interest payments'.

So he went away and on a £45K salary brought his first house in Essex for £295K, I don't know the size of the mortgage but he did let slip that the payments were £1700pm IO. And this on a 2 year fix that presumably will not be repeated in the near future. So I geuss that the payments are about 70% of his salary and he was totaly banking on continued HPI

The guy simply refused to beleive that house prices can fall, I dont even need to say 'I told you so' because he can't even look me in the eye now it's all so obvious, but I don't feel much sympathy since he so blatently ignored my advice. I have another young coleage who decided to wait and see, now he can't thank me enough for telling him to be very carefull.

[worzel]

yup me. ftb, completed in feb. 10% deposit and added about 10% to the value of the property through work, so got another ~10% drop before I'm in neg equity. mortgage £1200, rent 2 doors down is £1000 so slightly better value than renting, if you ignore the equity loss.

So its £200 a month more for the mortgage hwich makes it slightly cheaper? I am confused, or just a bit tipsy from Friday lunch time drinking.

[Nil Crede]

Someone I know bought two houses in Liverpool city centre for approx £1.2 million at the top of the market last year.

The plan was to cash-in on the "Capital of Culture" by using them as holiday lets, for stag-does, etc.

£2000 a week each he claimed to be pulling in - to begin with...

Oh, and he doesn't declare it for tax, and fiddled the stamp duty (two large houses converted into flats, he registered the flats separately, each just under the threshold) He's got a few other flats around the city centre, doing the same lark.

He's a council employee...

[worzel]

Also - my assistant at work just (between exchange and completion at mo) bought an ex LA place on a 100% mortgage with only a modest right to buy discount. She's borrowing 4.3x income. Started a thread on it to try and think of ways of stopping her, didn't work though. She will be in serious trouble if she's not careful.

[Minos]

Someone I know bought two houses in Liverpool city centre for approx £1.2 million at the top of the market last year.

The plan was to cash-in on the "Capital of Culture" by using them as holiday lets, for stag-does, etc.

£2000 a week each he claimed to be pulling in - to begin with...

Oh, and he doesn't declare it for tax, and fiddled the stamp duty (two large houses converted into flats, he registered the flats separately, each just under the threshold) He's got a few other flats around the city centre, doing the same lark.

He's a council employee...

I bet he votes labour too.

[shippers]

My ex bought a house in one of the North Wales coastal towns in May 2006. Didn't want me on the mortgage for a variety of reasons. I paid her a reasonable amount each month. The place was bought for considerably more than other houses in the same street, it was detached rest are semi's. Massive garden. She had a decent sized deposit of +10%

Hope she enjoys the rest of her working life there as I don't think she'll be able to leave it soon

Both of us 40+ now, no kids.

[scuuzeme]

My sister! Sept 2007.

She makes a habit of it, she managed to do the same in 89 ...

I did tell her! Still, she wanted a home not an investment and did so with her eyes open, so I guess it might all even out by the time she next moves in a decade or so.

[juvenal]

After 10 years of rising prices there were those who believed that absolutely anything you bought must be resaleable quickly for a decent profit. This can only explain the following:

The last house in a local road in Poole is a dismal thirties 3 bed detached, in poor condition, with a front garden composed of hardcore. Amenities include:

A busy main railway line at the end of the short overgrown garden

A busy road junction with traffic outside the door.

A light industrial estate within 50 yards, offering the permanent aroma of the pie and pastie factory

The house was bought in FEB 2008 for £299,000

This was a record for such a house in the road by a clear £50,000. The seller trousered £100K profit over their purchase price in 2003.

Much, much better similar detached 3 bed houses within 100 yards are now for sale (and failing to sell) at 55K-75K less than this, and falling.

The house in question is currently let. The owner is losing a pile each month on the rental. If he/she ever sells it there's a £120K plus haircut waiting. Maybe more.

If there's a greater fool out there, it had better be a good 'un....

[Orsino]

Friend happily rented in Balham, South London. May 2007 the BTL landlord said he wanted to sell up as he thought the market had peaked. They thought about buying the house that they rented but realised there was no way they could afford to. They just about scraped together enough on a 100% mortgage to buy a new-build in Streatham in September 2007. Would imagine they're 20%-30% in negative equity already. I feel so terribly sorry for them. I wish I could have warned them but felt it was none of my business. Those colleagues encouraging them to commit financial suicide had no such reserverations.

[DinosaursAreAwesome]

I bought (completed) september last year, so pretty much at the top of the market.

join date sep 20 06: posting as a bear for one year on HPC before deliberately buying at peak- I think you win.

completed in feb. 10% deposit and added about 10% to the value of the property through work

I'm sure it would fly off the shelf at 10% over previous purchase price, its o.k because you can always

ignore the equity loss

close second imo.

I have a stepbrother and his misses who bought last year @ 5x joint on 100%IO and my Dad was desperate to develop some flats in Cardiff city centre a couiple of months back- (un?)fortunately his income is needed to pay the mortgage and other debts associated with his failed restauraunt so hes going to miss out on that one. I have a smart family.

[Austin Allegro]

A fellow I know bought a 2-bed terraced cottage in Tottenham for £270k in December '07, with his g/f who is now pregnant.

I doubt their combined income is more than 60k at the very most.

I said at the time 'I guess it shouldn't be too bad if you haven't overstretched yourself'.

His reply: 'er...I have, actually'...

I feel very, very sorry because he is a decent chap.

[Papitogrande]

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.

[Blue Peter]

This is a story of three people, lets call them Matt, Amy and Lucy. These three people all work in a new media design job for the same company, and have been friends for a while. Matt and Amy are a couple, but do not live together.

Being strong believers in what the property programmes have told them, Matt and Lucy have agreed to pool their resources to buy a place together, with the express intention of keeping it for a while and selling after a few years to realise the gains on the value of the property. In November 2006 they buy a Victorian terraced 3 bed flat in south London. Approximate price: £280K Not a bad place, but needs a bit of work to make it a dream flat. They pump in about 30K for improvements, including new bathroom, kitchen, garden and fitted bedrooms, using all their savings plus racking up around 5K on credit cards.

In September 2007, Amy buys a 1 bed flat a mile or so away. Approximate price: £207K, and spends around 5K on doing the place out.

I'm a bit confused by this. We didn't Matt and Amy buy together, since they were the couple? Is it more normal to have partners but live with someone else (Lucy seemed to be doing the same thing)? Or is it just a Londinium practice?

Peter.

[worzel]

join date sep 20 06: posting as a bear for one year on HPC before deliberately buying at peak- I think you win.

Thanks for the recognition. Was lurking for a long time before that though.

Seriously though, we knew we would lose moeny which is why we got somewhere as cheap as we could but that would still give us a nice place to live that we could make our own etc. And we didn't deliberatly buy at the peak as buy knowing that we were at the peak. I think I stand to lose a lot less than people that bought much earlier in London or a new build anywhere.

[Minos]

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.

Do you have enduring power of attorney? If so, declare her unfit and sell it PDQ.

[Minos]

I'm a bit confused by this. We didn't Matt and Amy buy together, since they were the couple? Is it more normal to have partners but live with someone else (Lucy seemed to be doing the same thing)? Or is it just a Londinium practice?

Peter.

I thought it was some kind of love triangle. Disgusting.

[lardboy]

I'm a bit confused by this. We didn't Matt and Amy buy together, since they were the couple? Is it more normal to have partners but live with someone else (Lucy seemed to be doing the same thing)? Or is it just a Londinium practice?

Peter.

Yeah, I thought it a bit weird as well. Matt and Amy were only a relatively new couple when the plan was hatched, and Matt didn't want to settle down into domestic bliss with his missus so early on. Instead he chose to buy a work colleague. It's a pretty common practice in London recently.

Edited July 11, 2008 by lardboy

[JohnnyB]

Vote for the winner here:

http://www.housepricecrash.co.uk/forum/ind...showtopic=81872