Homebuyers can now afford to drive harder bargains
It's the website from every vendor's nightmares. Under the sly slogan " the opposite of property ladder", Propertysnake.co.uk lists details of UK homes that have had their prices slashed.
The homepage names and shames those properties whose asking price has plummeted the most. "Down 44 per cent from 349,950 to 195,250: A two-bedroom house in Hillingdon. Down 37 per cent from 399,995 to 249,950: A five-bedroom house in Preston, Paignton."
If you click in these homes, it's easy to trace the tracks of the vendor's tears. The house in Hillingdon, west London, was listed on 8 July at 399, 950. Six days later the asking price was reduced to 375,950. On the 23rd it slithered down to 299,995, and finally slipped to 249,950 on the 7 September. This massive price drop is unusual, even in the context of Property Snake. But there are plenty of homes on the site whose asking prices have dropped by around a fifth. Is this a sure sign of a property slump? Or a chance for bargain-hunters to find the few folk who are willing to take less for a quick sale?
Chris Wood, vice-president of the National Association of Estate Agents, says it's more likely evidence of "the large minority of bad estate agents who over-value property to ensure they get the instruction to sell. These guys will probably value the property at around 10-15 per cent above the figures suggested by more honest agents. People will allow their greed to lead them into signing with that agent, who will then wait until the vendor is thoroughly cheesed off normally around three months after they took the house onto their books and then drop the price to probably the same amount suggested by the other agents." Wood says that the Naea itself uses the website to figure out who these bad estate agents the real property snakes are.
But, like other agents, Wood admits that we are clearly now moving into a cautious market. "A few months ago we'd see the average buyer offering roughly 5 per cent below the asking price and settling somewhere around 3 per cent below the asking price. In a cautious market it would be common to see buyers offering 10 per cent below the asking price and maybe settling at 5 per cent," he explains.
Of course, this varies across the country. But the trend seems to be nationwide. Estate agency Knight Frank has observed a growing mismatch between asking prices and sale prices especially in London. In June, properties marketed by the company changed hands at an average 5 per cent above the asking price. Now Knight Frank says they are for 3 per cent below, which is the lowest level for 18 months.
According to the latest report from Richard Donnell, director of research for Hometrack, house prices fell by 0.1 per cent in October, the first price fall for two years.
He added: "This follows two months of zero growth with the annual rate of growth falling back to 4.4 per cent. Average prices were down between 0.1 per cent and 0.2 per cent across all regions, except for the West Midlands, where values remained unchanged. Above average prices falls of between 0.3 per cent and 0.5 per cent were largely concentrated in the higher value areas of London and the South East, such as central London and the City (0.5 per cent), South West (0.4 per cent), Hampshire (-0.4 per cent), Cambridgeshire (-0.3 per cent) and Oxfordshire (-0.3 per cent). These are all areas that have registered strong price growth over the past two years, and since they started at such a high base, these are the most sensitive to the current weakening in demand."
Donnell's report also states that the number of buyers has fallen by 17 per cent in the last four months. In October alone, agents reported a 6.4 per cent slump in potential buyers registering. The weakness in demand and market activity means that the average length of time it takes to sell a property is rising from a recent low of 5.8 weeks in May 2007 to the current 7.4 weeks in October.
All of which means we're seeing the beginning of a return to a buyer's market. Nationally, agents are reporting that buyers are achieving 94.3 per cent of the asking price, down from 94.8 per cent last month.
And this means British buyers are now going to have to involve themselves in a famously un-British pastime: haggling. Like most of my friends who bought property in the South East over the past few years, I didn't dare try it. I'll spend 20 minutes trying to knock a pound of the price of a teapot at a car-boot sale. But when it comes to a purchase as important as a house and with the amounts in question, so out of the range of my experience I panicked and offered the same figure I'd seen printed in the local newspaper. I wonder if I should kick myself, but Wood tells me: "If you bought in the first half of 2007 you were probably right to do that. But people today are not offering as much."
So it's time for buyers to start making those famous cheeky offers? Stuart Thomas, who has been an estate agent in Essex since 1979 and moved house himself an exhausting 22 times, says there has always been a place for the cheeky offer. "I did it myself 12 years ago when I offered 70,000 for a two-bedroom seafront place in Leigh-on-Sea in Essex. It was on the market for 95,000. My offer was accepted on the proviso that I completed within four weeks the vendor didn't think I could do it, but I did. Some people will accept a significant reduction in price for a quick sale.
But buyers also need to be aware that the whole process is emotional. If you make an insulting offer you can easily upset a vendor. I haven't seen silly prices being offered for a while now. If clients of mine really need a quick sale for personal reasons if they are taking a job abroad, for example then I might advise dropping the price by 10 per cent at the most, but in the present market, no more than that."
Thomas also says different parts of the market are behaving differently. The homes worth millions suffer (or benefit) from the same "unique buyer" syndrome as ever if the buyer wants it enough then the cash is probably there, so the vendor may hold on for a price that's right.
"And those homes worth upwards of 500,000 are doing alright," says Thomas. "Their buyers still have the cash. But houses valued at around 260,000-270,000 are difficult because stamp duty kicks in at 250,000 and buyers at that level aren't happy about paying the extra 5,000. " This, he thinks, explains Property Snake's Preston home dropping to 249, 950.
"And houses around the 300,000 -400,000 bracket are also suffering, " adds Thomas. "We're talking small four-bedroom family detached places. The vendors are probably retiring. The buyers probably have a young family, but they're not super-wealthy. That's a lot of money to them it's a stretch. They're the people who can probably make the cheeky offer, because the vendors want the cash to go on a cruise or whatever, and house-wise they're probably downsizing."
Tips for haggling
* The secret to good haggling is information. Visit www.houseprices.co.uk where you can search the UK Land Registry database of houses sold in England and Wales since 2000. If you're after 1 Acacia Avenue (on the market at 300,000) and you see 14 Acacia Avenue sold a month ago for 200,000, you'll get a good sense that the valuation of No.1 is too high. It's still worth seeing No.14 to assess if the the two properties are comparable.
* Armed with all the information, the next part is all about psychology. If you meet the vendors during viewings, try to establish their situation via a little friendly conversational probing do they have personal or financial reasons that might make them receptive to a lower offer for a quick sale?
Perhaps one of them has a job starting overseas. Or maybe they've found a house they love and are keen not to break the chain. Or maybe it's a long-distance move and the school year is about to start.
* Remember that an "asking price" is just that. You have the right to make an offer.
* Don't worry about insulting a vendor, but be realistic and polite at all times. And be prepared to raise your offer.
* Never underestimate the appeal of a cash offer, if you're in a position to so.
* Finally, remember that the vendor's estate agent is on commission. They want to get the highest possible price for the property and they're well skilled in tricks for negotiating their favourite being murky hints of the hoards of other buyers. Try and catch them out by asking the vendor if should you meet them to discuss the exhausting viewings they've been taking.
* Don't be flustered by the long telephone silences. Don't panic and raise your offer before they speak. Keep your cool.
A selection of the discounted deals on Propertysnake.co.uk