Update 23rd April 22:00 – (Yes that’s 1 day after I published this post) – We got a call that the vendor has been made redundant today! So everything is up in the air and we may not be moving just yet. There is a chance the guy can find another job quickly but convincing the mortgage lender will be the tough ask I think. We remain hopeful yet stoic about the situation. Anyway… what I have written below is obviously all still relevant, but I thought I would just add in this note to keep everything transparent on the blog. As I say shortly into the post… how about that (damn) property market, eh!!!!?
I’m starting to sound like a broken record recently but I will start off by apologising once again for lack of regular posts. The reason, as I have kinda half mentioned before here, is that we have recently “closed on a house deal” as property guru’s like to call it, so I thought a post about that was in order, seeing as this is after all a personal finance website, and buying a house is likely the biggest financial deal most folks will ever do.
So, how about that housing market, eh!?
You may be wondering what the hell has happened in between the post where I mentioned we got a flat evaluation, roughly 4 weeks ago, and now? Well let me sum it up:
Things are moving very quickly in the property market right now!!!!
I guess that much is obvious, but I reckon you’d still be very surprised at how quickly things are going right now if you put something on the market yourself. In less than a month we went from “thinking about moving” – to getting an evaluation – to putting the flat on the market – to having offers accepted on both sides. Almost unbelievable, especially considering that as first time buyers back in 2009, it took us about 3-4 months to even find anywhere we liked. To say things were “a bit slower” back then is like saying Mr T has “a mild distaste” for air travel.
How we found what we wanted so quickly
Well aside from the luck of draw in terms of what came on the market playing a part, along with the number of properties being churned right now, the main trick was to narrow down our options thus making the choices we were faced with a lot easier. We did this by imposing fairly tight criteria on what the house had to be:
- Had to be within a 10 minute walk to a train station (due to my train commuting). There are 3 stations in my town, but 1 of them is much more preferable to be near due to it being more of a mainline station. TFS Towers ticked this box nicely as it is near the “best” station.
- We don’t like newer build houses so all of those were out – TFS Towers is not one of those.
- 3 bedrooms minimum – Tick
- Nice sized garden – Tick
- Price between £200,000 (wishful thinking) and £250,000 – Tick, just about!
Some extra “nice to haves” were:
- South facing garden – Tick
- South facing roof for possible solar installation – Tick
- No Major renovation work needed before moving in – Tick (Kitchen is fine, see more pics below, bathroom may need doing in the next year or two)
- End of terrace or Semi-Detached – Tick
As you can see it ticked all of our boxes and them some! Compared to other houses we were looking at on Rightmove and then subsequently seeing in the flesh, there has been no comparison. I’ve even kept looking afterwards on rightmove, risking torturing myself if something better came up (I have called this game Rightmove Russian Roulette ) but nothing so far has come close and I am getting happier and happier with our decision to put the offer in every day.
I think to sum it up, it is a fine balance of having a tight criteria, but not actually being too fussy at the end of the day if you want to execute a house move in a short period of time.
Pulling the trigger
We were not 100% on the house after we saw it for the first time, so it was quite hard to pull the trigger on putting the offer in. The thing was, we knew this house would get an offer because they had over 10 viewing on the day we saw it, and we knew how quickly things were going. We had to make a decision that night otherwise someone else would be getting this house. We mulled everything over and looked again at rightmove at similar properties, both ones that were currently on the market, and ones that had recently been sold (Tick the Sold/STC box in the search options). Again… nothing really came close; similar houses from my point of view seemed to start at around the £270,000 mark yet this one was up for £255,000. Based on the pure hard facts and the price it seemed like we had no other choice but to put in an offer. The next decision to weigh up was whether we offer the asking price or undercut. My thinking was that this house was priced to sell at the asking price, so, we offered it (£250,000 plus £5k for fixtures and fittings, this is just within the limits that are “allowed” to avoid paying the higher rate of stamp duty)
Did we get a bargain?
Well, I’m not going overboard but I would say we’ve got a pretty good deal. I will reason this by looking at a few of the other front runners we looked at:
- £280k 3 Bedroom mid-terraced house – This was in tip top condition and had a big extension on the back, a cavernous kitchen, plus some nice decking in the back garden. However all of this was easily reflected in the price. Our main objections were: 1) A bit too high in the price range, we could have easily afforded the mortgage payments but it’s not all about affordability! 2) It actually felt a bit too big for just the two of us, and I could imagine the bills being unnecessarily high. 3) Mid-terrace so garden was kinda overlooked. 4) Was an 18 minute walk to the (good) station according to google maps, which was a little over my comfortable commute. (Note: I’m not worried about the length of the walk, it is just the extra ~20 minutes I would be losing from my day every day that I know would really grate on me after a while!)
- £230k 4 bedroom mid terraced house – Sounds like a snip and looked great on paper but it needed a lot of work doing when we went to see it. Easily £15k worth. And this was despite a recent kitchen and bathroom overhaul, which weren’t really to our style, so that would have been wasted on us. The 4th “bedroom” was a loft conversion which wasn’t up to standard and you’d just have used it like a normal loft, i.e. to store junk. Plus it was a mid-terrace, the garden needed a lot of work (broken fence panels, etc…) plus it wasn’t near the good station, which I would put a price premium of around £10k on, both of personal value to myself and just by looking at the prices around each area.
- £215k 3 bedroom mid terraced fixer upper – We wanted to look at all the options and are not afraid of some blood, sweat and tears to get the house we wanted, so went to see a fixer upper. This needed everything doing to it, windows, carpets, kitchen, bathroom, garden. Easily £25k worth of work we estimated (Maybe could be lower, but these things always tend to go over what you originally think). So we’d have ended up paying all of that out of pocket and ended up with a house that was maybe worth £240k judging by other prices, so about breaking even, but minus a lot of spare time to plan it and fix it all up. Plus we’d have to live somewhere else while doing it. Not very convenient. If I’m fixing something up and putting all that work into something, I want to be making or saving a tidy sum on it, not just 5-10k here or there.
So there you go, each to their own as they say but in our opinion TFS Towers won the race by a fair few furlongs.
Spotting Value and price Anchoring
Why do we think it was underpriced compared to others on the market? Well my dear readers, the answer was that the vendors needed a quick sale. I get the feeling that the other people viewing this house and making offers did not take this into account, and were more swayed by the initial price that the house was put on Rightmove for (£255k). This is called price anchoring, and it’s a psychological trick used by Thai market traders, amongst many, when bartering. They start at a ridiculously high price in the hope that the final price you agree on is slightly higher than it would have been if they hadn’t started the bartering so high. I think in the case of putting the offer in for TFS Towers the opposite effect was in force. Nevermind that this house was potentially worth £260k or even £265k – most people still went through the usual motions of putting an offer of £5k (or more) under the asking price. The alternative scenario of course is that we’ve been done up and smoked like a kipper and are shortly due to be eaten for breakfast by the vendors in their new McMansion they’ve moved into with our cash, but I think I’d rather believe scenario A for now, at least until further evidence arrives to the contrary
Probably the quickest flat sale in the history of the Universe?
We put the offer in on a Tuesday, to be told by the agents that we needed an offer in on the flat, with no further chain, by Saturday, yes that is 4 whole days people!!! Naturally we were hopeful yet not very confident, but ended up catching a bit of luck (or maybe it was our frantic hoovering and tidying up the night before all the viewings that did it!) and got an offer in on the lower end of our asking price on the Saturday. So we sold for £175k. Maybe we could have held out for £180k or even £185k, but the reasoning was that if this deal fell through and we ended up getting a similar house for £265k we’d be no better off, so we accepted. Done and dusted within 4 days, boom!
With the plethora of mortgage options out there it can be a right old minefield, so let’s quickly go over the figures we were working with:
Sold flat for: £175,000
£££ Left on mortgage: £106,000
Equity from sale: £69,000
Moving fees including stamp duty: £7,000
Deposit on new house (with a slight top up from our savings*): £62,500 = 25% deposit
Value of new house
*Note we are also paying the £5k for fixtures and fittings out of our savings as well as you can’t tack that onto the mortgage.
Having a 25% deposit, or 75% LTV, whatever way you want to look at it, seems to open up the door to some fairly decent rates. I even played around with the online comparison sites and put it down to 50% LTV and the rates did not really improve all that much, so I think 25% is the tipping point, so please note that down if any of you are thinking of remortgaging soon, try to get your LTV down to 75% before doing so if you can. Hopefully this will be easy enough with recent rises in value, unless you bought at the last peak (in which case, I feel for you! ).
So after a brief forray into looking at interest only mortgages and discovering you pretty much had to be a millionaire already to get one, we were back to the standard fixed rate repayment options of:
- 3 Year fix @ 2.39% – Monthly payment £830
- 5 Year fix @ 3.09% - Monthly payment £897
- 10 Year fix @ 4.14% - Monthly payment £1004
The balance to strike here is between the lower rate and the safety of the fix. The 10 year one is a serious contender in my view as interest rates can only go one way right now, and in 5 years time even that could look like a bargain – check out ermines article here if you are part of my generation that has never experienced an interest rate hike.
A chilling cautionary tale indeed! However, it is one I did not heed.
We reasoned the 5 year fix was just a half way house so decided to go with the lowest rate and payment for 3 years, which is a fair amount of time to continue saving up our nest egg and see where we are after that. Compared to the 10 year fix we can save an extra £174 a month, which works out as £6,264 over the 3 years, which we can use to pay off extra principle, put towards a Buy-To-Let property deposit, or put into an ISA. I think 3 years is not enough time for interest rates to sky rocket, so I am hoping we can reassess the mortgage market when the time comes without jumping onto a hugely higher fix. Then might be the time to lock in a 10 year fix (if they are even available!). If you are interested, all those mortgages are with Yorkshire Building Society (and I have no affiliation with them, in case you were interested in that as well).
One other thing you will have to weigh up… whether to use a Mortgage advisor or not, I don’t know what your thoughts are but at £200+ to effectively search the internet for me, I think I’ll pass. Anyone got any reasons why this is complete financial buffoonery?!
Solicitors – Online Cheapo’s or Expensive recommendation?
The final piece of the jigsaw before we can exchange contracts, in a couple of weeks hopefully, is getting a solicitor to do all the conveyancing work. We went with the online cheapo quote, but this is not just being tight. In my (very limited) experience, conveyancing solicitors are really quite slow at getting on with things, and getting back to your queries, so why would I want to pay £750 for that, when I can get someone who is just as slow and pay them £350? Again, comments welcome on my logic here.
The only thing I want to make sure I avoid is a complete scam company that could put the deal at jeopardy, so a bit of due diligence on the internet weedles those ones out easily. In the end we went with a recommendation from the Money Saving Expert forum – Don’t worry, it wasn’t from a first time poster with a name like “gba27891099″, it was a regular poster with over 1000 posts, so I assumed it was a geniune recommendation. Anyway the company was Gordon Brown Law Firm and the quote was cheap. Please do not take this as a personal recommendation from myself though as we have only just sent off all the paperwork! Do your own research as always!
So that’s it! We’re done and sorted in under 4 weeks! And I get my evenings back to write some more posts for you lovely people, until we move of course, then it gets really hectic!
Here are a few more pics of the new TFS Towers for you to envy over/laugh at (delete as appropriate depending on whether you live in bedsit crack den in London or a country mansion in the Cotswolds):