Buying and selling before a house price crash

Whilst the media love to throw around dramatic wording, I’m not convinced this crash will be what they are expecting. Prices have risen significantly over the past few years, meaning it has been a sellers' market with bidding wars everywhere you looked. This has made it harder and harder for people to get their foot firmly on the ladder, without having to fight to get there by potentially going over their initial budget. I believe the housing market is going through a period of correction after the cocktail of chaos it has served up over the past few years. While we may see house prices reduce further, I don’t believe we will see more than a 15% reduction. We ensure all of our buyers are prepped with what to offer, how to put it forward in the best light and make sure they know what they feel comfortable going up to. I, for one, am enjoying seeing buyers having the time to breathe, make smart decisions and actually have a choice of properties; and a price reduction will only support those buyers that have struggled with getting outbid in busier periods.

Will there be a reduction in house prices over the next 12 -24 months? Most probably. Will it be 20%+? Probably not. The reality, nobody actually knows, but people's opinions are easily influenced by what they read. What they read tends to be in the media. What the media tends to be exaggerated as it makes good headlines. Even if there was a 15% reduction in house prices, it would only see us where we were 2 years ago. That's really not a negative for the housing market. If you're moving home it's all relative. If you plan on staying in the property for more than a couple of years, I also wouldn't be concerned. If you're a first time buyer or a property investor, or looking to flip a property in the next couple of years then you may choose to hold out. This may or may not benefit you. Whether or not it will, will ultimately depend on how many people choose to take this approach as decision in the masses have an impact on demand.

A good rule of thumb though is to offer 5% to 10% lower than the asking price. Usually, sellers often take this into account and deliberately put their house on the market for more than they expect or would accept. There is always valuation and possibility to renegotiate purchase price. In the current climate, it is crucial to speak with a mortgage adviser first and go through the cost of sale/purchase and mortgage affordability before you speak with estate agent and make any decisions. You will then be far better placed to set a realistic and attainable plan for selling and/or buying home. Most importantly you need to stay confident. The property market will always fluctuate. As much as it is essential to remain in touch with its movements and constantly adapt as the climate shifts, it is equally important that you remain confident in your property, all it could offer someone and make sure new mortgage payments are affordable when it comes to new property.

It can be tense, negotiating a house purchase or sale, whether you pay £255000 or £260000 can feel like the be all and end all, but it isn't. In fact, when I speak to clients as little as two years later, they can rarely remember the exact price they paid for the house and given the average UK family stay in a property for 10 year or more, a few thousand on the price either way is not actually going to make a huge difference to your world. So be careful; whilst no one likes to think they got a bad deal, the feeling of losing the perfect property over a few thousand pounds is much worse.

Is there really going to be a crash? I'm not sure there is. Nor are the experts. The reality seems to be a pretty modest adjustment by less than the monster price increases of the last 2 years, i.e. it'll still probably be worth more than what you paid for it so you've still probably made money. Then there has been a load of bumph around 'A third of vendors having to reduce asking prices.' The reality is that in a normal market those sorts of numbers had to anyway pre Covid. You'd list it for over what you were happy to sell it for to squeeze out every pound possible. So the simple answer is that everyone needs to stop mucking about. Buyers, it ain't 2008 where every vendor was desperate, sellers it ain't 2021 when you'd list a house and had 5 offers on Monday morning all over the asking price. What we're seeing is a return to a normal market, cancelling out some of the sheer lunacy of the last 2 1/2 years.

Understand mortgage processing delays, as some lenders are taking up to a month to process. When a change in the market happens, this can mean even longer processing times. Make sure the seller knows about the current mortgage market and don't be pressured into anything. This week, one of my clients was told that, if they do not use the in-house broker, their mortgage application would be too slow and not with a preferred lender, so their offer would be rejected. These in-house brokers have access to the same, or usually less of a lender spread, than independent or networked ones do. Pressure from any end of the chain or those involved within it, is simply not acceptable. When expectations are managed properly along the chain, everything should move smoothly. Use a proactive broker as well as a good legal team. That extra £200 you spend on better legal representtation can be worth every penny. If you are contracted, find a contracting specialist. Self employed? Find a specialist in that field too. This will all help to minimise delays as well as disappointment of a lower loan acceptance.

If I was a buyer right now, I'd be working on the assumption house prices will be at least 10% lower in a year's time, possibly more. Even with a large deposit and therefore no risk of negative equity, work out the maximum you're prepared to pay and offer accordingly. Make it clear you won't be paying over the odds and you are prepared to walk away if the vendor holds out for more. Buyers should try to find out the vendor's reason for selling. Are they moving? Is it a probate sale? Are they a forced seller because they can't afford the mortgage payment? How long has the property been on the market? Have they reduced the price already? What have similar properties sold for in the same location? Have any offers been made? If a vendor needs to sell fast, find a good agent and ask them what's a realistic price to get a quick sale. The last thing you want is to be chasing the market down. Better to accept £10,000 less now by pricing competitively than £40,000 less in six months' time.

He/she who dares wins. Play to your strengths. First-time buyers and those with nothing to sell will be the winners as ultimately buyers want a quick sale. Make sure you have a mortgage in principle before you embark on your property search, as this will likely lead estate agents and sellers to take you more seriously. In this current climate, I would say to start at around 15% below the asking price.

Crash? What crash would this be? Any historic crash in house prices has been accompanied by one other factor, an unemployment rate of 10%+. We are nowhere near that level at the moment and most respected sources are predicting an adjustment of circa 9% in the coming 18 months before house prices stabilise and move forward once more. This 9% is a national figure and within this there will be regional variations and postcodes where the demand for property keeps prices more stable, for example around the catchment area of popular schools. A good estate agent will factor this into their market appraisal and therefore the asking price should reflect any adjustments in the market. However there is always room for negotiation. My top tips for this would be as follows: 1. Do your research. Zoopla and Mouseprice are great tools for clients to find out about sold and completed prices and make sure they are not paying over the odds and above the market. 2. Consider the potential growth. Is there room to extend and improve the property to add value? If not, does it have room to go up in value and increase your equity for your next purchase? 3. The worst property in the best road is always a sound investment and purchase. Location is king if you are looking to make money in the short, medium or long term.

Patience and negotiation are key. Once you have your price in mind, you need the seller to give an acceptable price and offer low enough from your price, so the seller says, "Okay, let's meet in the middle". It is as simple as it sounds. There won't be a crash, however there will be opportunities. Now is the time to make the most of these opportunities.

I think 10% is a good reduction to ask for and it's not offensive to the seller but is a big saving for you. All a seller can say no but If you don’t ask you don’t get. But if you smell desperation, feel free to be cheeky. We had a client once ask for a 50% reduction and amazingly it was accepted as the vendor wanted a fast sale. There is no amount in particular that sellers have to reduce their price by, however there are times they may reduce the price for the right buyer for example those that can ensure a quick sale (buyer purchasing with cash or a bridging loan) which will dramatically reduce completion times. My top tip for buyers is to find out exactly how much you can borrow before making an offer and have all your documents at the ready for your mortgage broker so your offer is issued quickly to avoid the seller pulling out based on time delays (and to provide you with the confidence that you can actually proceed if the offer is accepted).