First-time buyers: four ways to capitalise on falling house prices Article:
While investors and buy-to-let landlords are bemoaning the decline of house prices, there is one group which will be rubbing their hands – first-time buyers.
Last week, figures from Rightmove, the online estate agent, revealed the average asking price for British properties has fallen for the first time since 2009, down 0.4pc in June. This meant annual growth rate slowed to 1.8pc.
While this may be good news for people trying to get on the housing ladder for the first time, new research has suggested first-time buyers’ lack of negotiating skills could be forcing them to pay over the odds for their dream home.
The data, from Barclays Mortgages, suggests 51pc of first-time buyers who bought for the first time in the past five years regret not negotiating prior to purchase. It also revealed that one in five paid over the asking price by an average of £8,000 – with that figure soaring to £13,000 in London.
Barclays said the findings suggest many feel pushed into making a quick deal by the lack of affordable homes available.
Craig Calder, a director at the company, said buyers are too often driven by “fear” of missing out.
But a few simple strategies and a bit of background research could save you thousands of pounds.
- Don't rush in
Lenders and brokers agree that the most important thing to remember when searching for your ideal first property is you can take your time. Rushing into an agreement and panic-buying is among the worst thing you can do.
David Hollingworth, a director at L&C Mortgages, recommended securing an “agreement in principle” with a lender before you put in an offer to boost a seller’s confidence in you.
“Most first-time buyers will have some sort of conversation around what they can borrow,” he explained.
“Certainly at least having a conversation is a good idea. An agreement in principle is effectively a very cheap application. It’s not doing lots of income checks, but you will be asked how much you earn and they will carry out a credit search.”
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He said getting one or two of these checks carried out is a good idea, but warned against going too far in the other direction, as too many “heavy footprints” – companies checking your credit history – could make it appear you are attempting to borrow multiple times.
- Check historic sale prices
Andrew Boast, a director at SAM Conveyencing, said doing your homework is all-important.
“First-time buyers often trust the sale price that the estate agent has set, focusing primarily on being able to afford to buy at that price rather than negotiating it downwards,” he said.
“What is important to remember though is that the seller instructs the estate agent to sell at a price which brings in the highest amount of money achievable rather than what the current market dictates.
“A first-time buyer should protect themselves against paying over the odds by doing their homework to ensure they are paying the current market price for the property taking into account its condition.”
Mr Hollingworth said researching the area you want to buy in and determining what similar properties go for is all important.
“Keeping an eye on the market even before you are planning to make a move will stand you in good stead,” he said.
“You will get an idea of what moves quickly and what stays on the market for a while.”
Mr Boast added: “There are free tools to use to check what price you should be paying. Rightmove and Zoopla both provide historical data for properties sold near yours.
“You should look for sold properties within the last 12 months. Under offer and not sold properties often show the asking price of the estate agent, not what it actually sold for.”
- Use an independent survey to negotiate a discount
Both brokers agreed that an independent survey, which is likely to cost a few hundred pounds, is a good idea to make sure the quoted price is fair.
“A first-time buyer should survey the property to find out if the property’s condition should command the full market value,” said Mr Boast.
“Defects such as damp, subsidence and dry rot will have a negative effect on the property as can certain structural changes. A RICS survey highlights property defects that, if present, reduce the current market price of the property.
“The final check for a first-time buyer is the mortgage valuation completed by their mortgage lender. A first-time buyer pays for this valuation which can cost anywhere from £300 to £600 and the report informs the mortgage lender of the property's value.
“If the estate agent has overvalued it, then the mortgage valuation report will come back stating the correct lower figure.”
- Exploit the fact you're not in a chain
It’s not all doom, gloom and hard work for first-time buyers. Mr Hollingworth said there are some factors which make them a very attractive proposition for sellers.
“They [first-time buyers] don’t have a long chain,” he explained.
“Someone looking to move quickly may be quite keen on a first-time buyer.”