The blog has been a bit quiet of late but that is really because there is not much to report.
Today (Saturday) really marks the end of the 2nd week that the house had been on the market and available for viewing. We have had 5 or 6 people round so far and no offers to date. I am not worried about this although it would have been nice to have had an offer of some kind – even one to turn down! At least that would stop Tim pointing out signs in estate agents windows saying "Under Offer" and reminding me how much I have lost in interest payments during the time it took to eat a curry!
The agents initially estimated that they would "sell the house in a fortnight". The last time she made a prediction was when we sold our old house and she got that right. I think that somebody is going round for a second viewing today so you never know – she could be right again.
12 comments:
isnt two week sale a bit bullish - I've heard of optimism but isnt that taking the michael? if you want an offer I'll go £150,000 cash?
The glass is always half full.
The glass may be smaller than you think.
Seriously, any house that sells in 2 wks is underpriced.
Tim, you cannot possibly believe that. If you follow that argument to a logical conclusion any house that is sold to quickly is too cheap and anything that takes too long is too expensive. Therefore there must be an optimum time frame which, if you sell your house within it, means you offered it at the right price. What is that time frame?
I would have thought that your best bet is to sell the house in the first three weeks or so.
Without trying to write a formulae to work it out there will be more people looking to buy a house when you put yours on the market than there will be for x weeks afterwards as it takes time for new registrations to exceed the total number of searchers at the start of the process. Therefore if you sell in the first few weeks it is going to be from people who are already looking rather than those who decide to start looking after the house is placed on the market.
There is a good discussion of this in Levitt's Freakonomics (which is as good a read as people say). As you say, there is an optimal length, and 2 weeks is too chort. New people come onto the market all the time, and there is a chance that one of them likes it.
Of course, if the market is slow, the optimal length of time increases. But if it isn't under offer within 6 weeks, then it is overpriced. You then get the choice of reducing the price, or waiting.
My mum accepted 19% below the midpoint of the initial range (which the estate agent was hoping to better - helped by the prospect of a 5% commission for anything over that). She has been offered a price 17.5% below the initial asking price for the one she is interested in. We have offered 21.75% below.
We have settled for a price 20% below the asking price for the one mum is buying (and that is 20% below the "offers in excess of" minimum). A house is only worth what someone will pay for it, and hers was the only credible offer on the table.
Agreed.
In my opinion a 20% reduction indicates the asking price was too high.
20% too high :-)
More seriously, when credit is tight, those with cash can drive a hard bargain. Someone did that to my mum - whose house was already on the market for far less than it would have fetched a year or so back. This person was the only credible buyer who could move forward, although there was lots of interest from people who said that they would buy it in a flash if only they could sell their property. Similarly mum was the only credible buyer for the one she is buying.
When we bought our current house the developer had sat on it for 18 months, taking the view that it would sell for the asking price or thereabouts sooner or later. In fact he got three offers on the same day (ours was first by an hour - I rang him direct). And the rest, they say, is history.
He probably got 10-20% more by waiting. It was a rising market, and the oversupply of this type of house from the St James Park development evaporated as they were sold.
The big q for you is when the market will turn. If it turns in a year, significantly, then holding for a year is a good thing. But if it falls like the early 90s then cutting and running is best.
Is your agent prepared to tell you what other properties they have sold, after how long, and at what price? Have you drawn up a list of competitor properties in the area, and are watching them? Remember you can find what they are sold for by expressing interest and asking the estate agent, when they are under offer, what price you have to beat to get them...
I note Tim’s use of an increased level of commission for his mum’s agent; we have used this before and did so the last time we sold a property in Surbiton. We all accept that that sales people should be incentivised, but the difficulty when dealing with standard commission rates is that, financially, the only incentive is to get the deal through, rather than getting the best price. We have used between 5% & 20% over a certain figure in the past to good effect.
In respect of getting information from other agents, rather than using subterfuge you might do better just telling them your situation. In this market many agents will be desperate to hold onto any sales they have and, for the reasons above, would not want to rock the boat to increase their commission by a few quid.
We used non-linear commission on our estate agent when we sold. I think that the standard was 2%, and we said 1.75% on the whole thing unless you sell it for the asking price, in which case 2%, and 5% for anything over. The agent did not like it, but they accepted. Basically it was £800 off if they did not get the asking price, and a bonus over that. These things work - the freakonomics chapter sets out the evidence for the US in more detail.
It does mean that it can take a while (we ended up owning two houses for a couple of months) but it sold for over the price and we ended up about £7k better off.
As well as non-linear, we've also used cash (to the actual agent) and case of champagne to good effect.
I reckon that as of tomorrow the house has been on the market for four weeks. What is the thinking from here? Is it to hold? Is it to cut? Is it to rent?
You earlier mentioned a carrying cost of £31 per month. I assume that is the interest charge. In reality the cost is higher than that, both because you are presumably having to pay utilities (insurance certainly, but perhaps gas, electricity and water, council tax as well?) In addition, there is the interest foregone on the bit you don't owe. (ie if you borrowed £175k at 6.5%, you could not only repay that £175k, but you could also pay off another £50k if you sold it for £225k tomorrow).
And there is a small risk of something going wrong (neighbours decide to do big building works, squatters, leaking something, etc).
My guess is that the true economic cost is about £45 a day - which means about £1250 for 28 days owning an empty property.
In general the market is still sinking - Halifax was down 2.5% month on month last time I looked. The underlying local economy is still strong - London increased its employment 33k in the last quarter, but most of the prognoses for London are pretty grim (Oxford Econ Forecasting reckon it will be the worst hit area, notwithstanding its resilience so far). At 2.5% fall a month, the property loses almost £200 in value a day.
Clearly the big q is when you think you can sell and at what price. If you think you can sell soon at a decent price, then great. But otherwise the attraction of renting it out for three to five years to ride out the slump must be appealing.
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