Am I mad to buy a house just 6% under the asking price?

Hi all,

I recently paid a deposit to buy a mid Terraced House house in Raheny. This house is close to the Dart station. The agreed price is 6% off under the asking price. It is low end of house in Raheny. The asking price is 450.
Based on my research, there are very few houses in this area for sale and it should hold its value duo to its location. But yesterday I read a report from Davy says the house price will drop about 18% to the end of 2009. This really scared me. Should I just cancel the purchase? Any comments are welcomed. Thanks.

Yes you are mad, especially if you plan to borrow money to fund the purchase.
Going ahead with this purchase now, unless you can offer a VERY SPECIAL reason why you have to buy this particular house at this particular time, is (IMHO) INSANE.

Inis Man, I know we all know the reasons for your opinion but the OP may not…

For me, there are two important questions.

  1. Would you be happy to live in Raheny, in this house, if you fell into negative equity?
  2. Could you afford the mortgage payments if interest rates went up by 2%?

If the answer to either question is no, then you should not be buying.

To question 1, I will happy to live in this house if the price drop 10% to 2010 becuase I will send this kind money to the rent anyway. We are going to have our first baby in Aug, that why I need a house.

To question 2, yes

Inis Man, that was a little dramatic without knowing the personal circumstances of the OP, and specific details of the property.

Interyu, although it can be difficult in this country due to lack of transparency, if at all possible try to obtain information about general price history in this area - e.g. 2006, 2003, 2001. If you’re paying anywhere close to 2006 prices, than this should raise some serious alarm bells. Also, if for instance you had to sell at 2003 levels, how would that leave you fixed financially?

Also from friends who have lived in the area, I have heard that there is quite a discrepancy between different parts of Raheny. You may want to consider whether it might be worth holding out for a nicer property in the general area, although I understand that this is not easy given your personal circumstances. In the end you can only keep informed and make a decision for yourself. Best of luck with whatever you decide.

It’s impossible to say, but it’s likely that you are going to see yourself in negative equity. Whether it’s 10% or 30%, who’s to say? Like I said, the important thing is that you’re living in a house you like, the area you’ll be happy with and that you can actually afford it.

Suggestion - open up a separate forum for people seeking advice?

Thanks

I would have thought the mortgage payments would be equivalent to the rent you would have spent and the 45,000 capital loss would be additional

OP, given that the first few years mortgage is mostly interest payments I’d be very hesitant.

Then again an Irish landlord can toss you out on your arse with no problem (tenancy legislation here is very heavily weighted in the landlords favour), not a good thing if the missus is expecting.

As others have said, if you are happy with the gaff and the area, given your circumstances I’d probably go for it.

If you were single I’d tell you that you’re nuts.

A 92% mortgage on 450k @ Bank of Ireland’s standard variable rate of 5.6% will cost €2376.69 monthly, €1,920 of which is interest.

Take a look at daft and see what you can rent in Raheny for €1900 a month (remember also that you won’t have to pay for maintenance, or for furniture/appliances). I had a quick look and there are 3-bed houses in Raheny renting for €1400+, but I don’t know how these compare to the place you’re considering buying.

I really can’t see how this transaction makes financial sense for you…

Your question “Am I mad to buy a house just 6% under the asking price?” is a bit hard to answer without knowledge of the asking price relative to other asking prices for similar properties.

If the seller has priced it very competitively and provides a good bargain then maybe paying the asking price in this case makes sense.

On the other hand, if the seller is in denial and has priced the house ridiculously high, then you should be looking for more than a 6% discount.

Some sellers have realized that the market has dropped and have priced their properties to sell. Others (and probably the majority) have not.

You need a house but not to own one. Loads to rent and more to come.
Think long term with this nipper on the way, IMO let prices continue to drop…

I got 2 kids and we rent. Question the LL before you accept the rental property to ensure you won’t be chucked out at random.
We are saving lots of money while renting. I have a few of those high interest accounts for 7% interest. I put the money I would normally pay on a mortgage into these accounts. In about 6 to 10 years we can buy a house outright. We will not need a mortgage.
We will not wait all that time. We will buy when house prices stabilise and the mortgage is less than our rent. In this way we will buy a house once. We will not step onto any ladder(with intention of buying again in a few years). We will not pay stamp duty and we will pay house buying expenses once and once only.
We pay 1575 per month. If we were to get a mortgage it would cost us 3000 or so. If we took up the mortgage we would pay the majority of the 3000 in interest payments. This bullshit about rent being dead money couldn’t be further from the truth.
I don’t care what price you agreed to buy for it is way too high. Sellers are in denial. Prices will not drop for quite a while yet.
Don’t buy rent.

You’re only seeing the loss in value of the house as dead money, and that’s why you’re comparing that with the money you would have spent on rent.

As others have said, You need to compare the interest you’ll pay PLUS the fall in value. Interest is dead money too, and don’t let anyone tell you otherwise.

These answers are based on purely financial factors. You are almost certainly doing the wrong thing mathematically speaking, but you don’t live in a maths book.

Unfortunately nobody here can help you with the non maths stuff. If oyu like the house, are ok with it falling in value, are ok with paying more in interest than you would in rent…then go for it.

Make your own decision and don’t listen to anyone who tells you afterwards that you made a good or a bad choice.

Personally, based on the comparison with renting, I wouldn’t buy. But I don’t have the same considerations that you do.

-Rd

“Interest is dead money too, and don’t let anyone tell you otherwise.”

brilliant summation. brilliant brilliant brilliant. most people dont want to think for themselves. thank you.

if the interest is more than rent, then rent: interest money being deader than rent money! if it’s purely emotion writing the checks then tell me,what is the weather like on your planet?

I would love to know how one could find out this information. Knowledge is king and I think this is vital information to anyone thinking of buying or selling property. Any ideas would be greatly appreciated, Thanks

Obviously not a native English speaker. Please rephrase and try again.

8DD