I’d love some help with this

[B2L Newbie]

Hi - I’d really appreciate some advice regarding a deal that’s coming to a conclusion soon.

I had an offer accepted on the property back in June, when the market felt very very different.  The process has been a long one!  Since that time, sentiment seems to have changed significantly.  Fortunately, I’ve secured a 2.78% 5 year fixed mortgage deal but I’m wondered whether I’m now paying too much and if I should try to get some money taken off the asking price?

At the time, the price (£275k) seemed fair.  There are nine properties that are identical, with the one of them being sold for £7k more 4 years ago.  However that same house was put back on the market and couldn’t sell during the early stages of the pandemic and it’s now sold once more for £15k less than I’m paying.

I feel in a bit of a dilemma having watched Rob Ds latest YouTube video with the Zoopla estimate that house prices will fall by 5% next year.  The house is in a more expensive area which, from what Rob was saying, May get hit harder.

I’d really appreciate any advice and, if you feel I should negotiate further, how to go about it.  The vendors have been friendly and, with the use of an online estate agent, I’m having to contact them directly for everything.

Many thanks 

Paul

[adam_c2]

Without a doubt I would re-negotiate and if they are unwilling to re-negotiate I would pull out unless the ROI on this deal is very impressive (i.e. >10%). I have pulled out of a purchase this week, previously agreed a decent mortgage rate but the downside risks are too great and the ROI was still pretty poor - given the high purchase price.

As you say, the market has changed dramatically in the recent months and, imo, this is just the start of a much larger correction. Sit in cash and wait for a brilliant deal to come along. These opportunities don't come around that often. You can also be guaranteed that when the market does keel over big time (next year) the base rate will get cut so you'll get similar financing. 

You're only missing out here if prices continue to push on - fat chance of that happening in the short-medium term! - or prices don't correct enough and rates remain high. That is also unlikely as in that scenario purchases just won't stack up for landlords.  

[B2L Newbie]

It’s really helpful to get your view Adam.  I’ve obviously spent some money on the solicitors fee and survey etc but that’s relatively small compared to the big picture.

[B2L Newbie]

Any suggestions for going about the negotiation?  I was thinking of asking for 10k off which is less than the more conservative estimates of a 5% drop next year.  I know they’d not go below 15k as they were telling me what a bargain the most recent buyers have got.  Should I just go straight in with 10k?  I’ll be dealing with the vendor directly.

[adam_c2]

You should only go ahead with this if the numbers stack up. Forget what the vendors may think. Remember they will always want to achieve the highest price. 

I would be honest - explain that right now the numbers don't stack up. That you can achieve a return not too dissimilar in a savings account and that comes with zero risk & hassle. The market has changed hugely in just a short space of time. It's gone from an extremely strong sellers market up until August time to a buyers market now.

What may help you in negotiations is understanding the position they're in. Are they motivated to get this sale done or are they happy to wait and pull it off the market if necessary? If it's the former, they'll likely know they don't stand a chance of having a sale agreed in the current market at the price you've agreed so they may be happy to flex, especially if that means they get the cash asap. 

 

Ultimately, I came to the conclusion that it wasn't worth completing on the purchase I had agreed as the ROI wasn't strong enough to offset the significant downside price risk. I had agreed a 200k price for a property that's likely worth around 190k in today's market and may well be valued at 180k by next summer. That's before we get to the hassle of renting it out, the risk you get a bad tenant, the on-going and worsening government and societal tirade against landlords (EPCs, rent reforms, etc).

 

There will always be another chance for a deal.

[adam_c2]

One thing you could try depending on your lender and how much time you have left on the mortgage offer - can you port the mortgage offer to another property? If so, get hunting right now for a strong deal and port the offer if your current purchase falls through.

Unfortunately the lender I was using wouldn't allow it to be transferred to any other property.

[B2L Newbie]

Thank you once again Adam.  That’s really strong advice.  I think honesty is the best policy and you’ve helped create a strong argument.

The vendors seem keen to get it tied up but I guess they would be at a good price from their side of things.  They’ve indicated that they’d let it out themselves if the deal falls through as they’ve other properties - I did wonder whether they were simply trying to strength their hand by saying that as the market had started turning downwards at that point - I know they’re looking to liquidise their assets though and a sale is what they want ideally.  I think they’re sensible enough to allow a little drop.   I’m wondering whether to ask for 15k off with the hope of settling at 10k or going saying I want 10k and holding firm on that(?).

Unfortunately, as the deal has dragged on, the mortgage deal is coming to an end in the next month so there’s no chance of moving it to another property.

[haf1963]

13 hours ago, adam_c2 said:

That's before we get to the hassle of renting it out, the risk you get a bad tenant, the on-going and worsening government and societal tirade against landlords (EPCs, rent reforms, etc).

These are reasons for deciding whether property is a worthwhile investment for you at all - rather than affecting any particular deals. I know quite a few people in a similar situation where the majority are coming to the conclusion that its better to invest in pensions etc where you are getting tax/regulation  incentives rather than dis-incentives.

The ones who are going forward with BTL are those that have maxed their pension and have sufficient funds available and are planning on a multi-property business rather than getting 1-2 BTL’s. 

Personally speaking, I am not expanding until around next summer when we will have clarity of regulations as well as any more tax hits in the budget plus whatever ‘correction’ in the market becomes clearer

Good luck

[B2L Newbie]

Thank you :).  It’s great to hear your take on it.

I’ve been really keen to get into property but the economic activity in recent months has changed my confidence at the time being.  I feel I need to have a better deal at this point in time to go ahead.  The likely reality is that I’d only go for 1-2 properties (although who knows in the future).  Finance wise, I can only really afford one at this point in time.

[B2L Newbie]

On 12/7/2022 at 7:38 PM, adam_c2 said:

You should only go ahead with this if the numbers stack up. Forget what the vendors may think. Remember they will always want to achieve the highest price. 

I would be honest - explain that right now the numbers don't stack up. That you can achieve a return not too dissimilar in a savings account and that comes with zero risk & hassle. The market has changed hugely in just a short space of time. It's gone from an extremely strong sellers market up until August time to a buyers market now.

What may help you in negotiations is understanding the position they're in. Are they motivated to get this sale done or are they happy to wait and pull it off the market if necessary? If it's the former, they'll likely know they don't stand a chance of having a sale agreed in the current market at the price you've agreed so they may be happy to flex, especially if that means they get the cash asap. 

 

Ultimately, I came to the conclusion that it wasn't worth completing on the purchase I had agreed as the ROI wasn't strong enough to offset the significant downside price risk. I had agreed a 200k price for a property that's likely worth around 190k in today's market and may well be valued at 180k by next summer. That's before we get to the hassle of renting it out, the risk you get a bad tenant, the on-going and worsening government and societal tirade against landlords (EPCs, rent reforms, etc).

 

There will always be another chance for a deal.

Thanks once again for this advice Adam. I managed to negotiate £15k off the price and it completed a couple of weeks ago after a few last minute conveyancing issues.

Your advice really helped and it’s greatly appreciated!

[B2L Newbie]

On 12/8/2022 at 9:42 AM, haf1963 said:

These are reasons for deciding whether property is a worthwhile investment for you at all - rather than affecting any particular deals. I know quite a few people in a similar situation where the majority are coming to the conclusion that its better to invest in pensions etc where you are getting tax/regulation  incentives rather than dis-incentives.

The ones who are going forward with BTL are those that have maxed their pension and have sufficient funds available and are planning on a multi-property business rather than getting 1-2 BTL’s. 

Personally speaking, I am not expanding until around next summer when we will have clarity of regulations as well as any more tax hits in the budget plus whatever ‘correction’ in the market becomes clearer

Good luck

Thanks also for your help on this (see above).  I really appreciate it 👍

[adam_c2]

Great news! Glad to have been of help

[bracecrop]

I would be honest - explain that right now the numbers don't stack up. That you can achieve a return not too dissimilar in a savings account and that comes with zero risk & hassle. The market has changed hugely in just a short space of time. It's gone from an extremely strong sellers market up until August time to a buyers market now. 9apps

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