So this week, Mortgage Solutions is asking: When proceeding with paused applications, are your clients sticking to the original agreed house price?
In the main, we have seen our clients stick to the agreed sale price. There have been a few exceptions, but overwhelmingly people have stuck to the original value.
Where people have renegotiated the price, it tends to be around the five per cent mark from what was agreed initially.
There are various reasons for that but mostly it is a hedge against any short-term dip in prices. I saw that in the April survey of its members, the Royal Institution of Chartered Surveyors stated that 40 per cent of its members expected prices to fall by four per cent.
As the people valuing the property that is a pretty good benchmark to go by.
However, whenever a client asks for advice in this area, I always point out two aspects; if it were you how would you feel? And what is your basis for doing this?
As I say, it is down to the individual to decide what is best for them, and moreover, the vendor does not have to entertain the lower figure anyway.
I have never entered into too much guidance on house prices to our clients. Partly as the property market is so large and varied there is no way I can know if it is a fair price or not.
But in a more philosophical sense, something is ultimately worth what someone is willing to pay for it – that is what the market is there for.
A couple of my clients had mortgage valuations done prior to lockdown and subsequently, homebuyers surveys done more recently on the same properties and valuations have come in lower by five or ten per cent.
It is not always clear whether this is due to the cost of repairs to the property, but I think surveyors are predicting market values will have fallen in light of Covid–19.
In one case the seller has accepted the price reduction and in another the seller is adamant that they will accept no reduction, so there have been mixed outcomes.
In a more extreme example I have a client who had a sale agreed pre–lockdown at £415,000 and a week into lockdown, the buyer asked for a 28 per cent reduction in price so the client was forced to put the property back on the market.
I think this is an example an of an investor taking advantage of the difficult and unusual circumstances and I think my client was right to re-market in this scenario.
We have certainly seen some evidence of people going back to renegotiate purchase price.
However, I think we are at the very early stages of that and people are still waiting to see the results of surveyor valuations.
Time will tell as we have got a backlog of valuations to get through still.
One surveyor who services a lot of buy-to-let lenders came back last week to a backlog of 6,000. They are one week into clearing that and they’ve probably got another three weeks to go.
I think it will be towards the end of June that we will see these results of valuations.
I suspect there will be some down valuations so the purchaser might use that to renegotiate from their original position.
This can be because they are aware of the general feeling around the economy. Especially where is a lot of talk of an impending recession and the effect that may have on the housing market.
We deal predominantly with landlords buying investments and whenever they can see an opportunity to improve their investment, they will do that.
They are businesspeople trying to improve their profit so it’s only natural that they will try to get the best possible deal. They don’t want to be buying something that will be valued at less than what they paid when they look to refinance.
Overall I have not seen any significant changes in price, just the odd £5,000 or £10,000 here and there, but it gives buyers an opportunity to renegotiate.