Selling a house in a falling market

Things seem to be quiet on the news front at the moment, so I felt that I would inflict the thoughts that I have had about selling a property into a falling market on pinsters for their opinions. I am not an estate agent and have no VI except intellectual curiosity.

As with any market, the property market is divided into buyers and sellers. The bullshit that prevails in Ireland that ‘there is no market’ or that ‘the market is dead’ is rubbish. There is always a market if a seller wants to sell badly enough. When it comes to property in the Irish setting, there are usually a number of potential buyers, if the price is right.

Finding the level of that market is the difficult part. The seller wants to get as much from their property as they can and the buyer wants to pay as little as they can.

Time was the enemy of the buyer when the market was rising, it is their friend when the market is falling. However, if the price is low enough and there are a number of potential buyers, time may become their enemy as somebody may step in before them if the price is right.

It must also be remembered that there are a limited number of buyers in each price range with available cash or access to mortgages. (There aren’t too many people with 1million plus to spend on a house at present). This is important if a number of properties are coming onto the market in a defined area in a certain price range, as the first few onto the market at an appropriate price will sell to those with most money while those that are priced too high and those that come to the market late will languish as the pool of buyers at that price range dries up and the only way to sell is to move the property into a lower price range, where there may be buyers with the resources available.

So, how to develop a strategy?

It is irrelevant to the prospective buyer what you paid for your house, therefore you have to ignore this (the difficult bit). The fortune spent on ‘interior design’ is irrelevant as it is designed to your taste, not theirs.

The first thing would be to do some research on the properties for sale in your area, what has sold and for how much and when.

Try to work out why properties haven’t sold, poor condition, poor aspect, poor position and probably asking too much. Rate your property against them and then price it accordingly. When I mean price it accordingly, I mean price it eye catchingly lower than comparible properties. Pinsters are very good at defining what good value is for a buyer.

There are buyers out there in each price range but they are limited in number.

You may feel that this is a rubbish analysis, but I feel that it may be better to sell at what feels like a loss now than have your property on the market for years, trimming a couple of thou every few months and waiting for the bottom. It must be remembered that property value declined year on year in the UK for the first fifty years of the 20th century. I feel that there will be a huge number of houses coming on the market within the next few years and those that sell earlier, for what appears to be a knockdown price will be considered to be the canniest of the canny ones.

changes to stamp duty this budget have probably helped as investors now only have to pay 1k per 100,000 euro purchase price, hopefully that’ll help to make the market liquid. I don’t have any particular interest in making the market harder or softer, just more liquid.
transactional cost was always a big issue with the housing market.

I agree dipole that stamp duty changes may help the liquidity of the market, but it may also impede it.

First time buyer exemptions have gone and FTBs are extremely important at the lower end with respect to volume sales and getting the market moving. Interestingly, the 125,000 euro threshold is gone also as I suspect that the government feels that in the future, increasing numbers of transactions will occur below this threshold.

The major brake on the market, in my opinion, is the poor availability of credit to large numbers, the ‘revaluing of properties’ downwards by the banks for mortgage purposes and the uncertainty in the economy. But these factors still don’t mean that there aren’t buyers out there.

The latest IBF/PWC data is available → ibf.ie/gns/publications/rese … arket.aspx

Going by the mortgage data the market is down to between 4,000 & 5,000 transactions per quarter. (That’s down from just over 30,000 per quarter circa 2005)
No idea what cash buyers are like.
First time buyers are now almost 60% of the market for houses/apartments.
The average loan for the FTB in Q3 2010 was €188,680

If your intentions are to sell or ‘unload’ a house within the near future ( probably well advised) then I would definitley take all these factors into account and approach the situation in the most basic of market principles.
Get your valuation and compare it with your own research for the area, price your property well enough below that band to give the competitive edge to your listing, and sell quickly.
We are very much still in the midst of a tumultuous period and that isn’t going to change very soon.
If for example, you listed 15k below maket band, and sold quickly, you might find in 6 months that gap has closed and the discounted price you sold for is now within the band and would give absolutley no competitive edge.
I believe we are still a good way from bottom.
It’s only my opinion and of course, I could be wrong. “Up to you”.

Ther are times when there is no market - at any price.
Take properties in a ghost estate in Leitrim or Longford - commercial units or apartments in small country towns - these are unsaelable because no bank will lend to buy them and the person who has cash won’t touch them as there is better value on better propperties to come.
I know, I have in the past (90’s) sold bad property (as a vendor) and it is very hard work and I was being realistic - the price wasn’t putting people off, it was the location!
As the cattle farmers say; “The day you buy is the day you sell” .

As you said , forgetting about what you paid as being the absolute minimum as regards acceptable price at which to sell at , the reality is as follows:-

  1. You approach the EA for a valuation.

  2. The EA will offer 3 prices ie **Price **for advertising which is what is currently languishing on Daft and MyHome with no sale , **Price **for investment buyers which will be lower , **Price **for immediate sale ie. low price in comparison to similar properties in the area. The latter option is usually followed by the EA guaranteeing a sale at this price. This is entirely due to the fact that the EA has a personal contact who has the cash to buy and who will flip it to make a profit in the short term.

  3. As a parting shot , the smiling EA will request at least €2,000 up front to cover advertising , photos , incidentals etc ad nausea… 8-

Basis in a falling market is to low ball the price to an irresistible level. Remember , there are plenty of people advertising today at prices which they would have sold last year XD

Ah, the old conspiracy theory. Sorry, don’t buy it. In general, I believe prices are way still to high for cash buyers. But there are some buyers (unrelated/not friends to EA’s) there, and if you price low enough may bite. However, an EA guaranteeing a sale is like a Salesman guaranteeing his car is the best priced around, when you know from a quick browse of carzone that this is complete bullshit.

I can see a TV program for unemployed TV property pimps in this falling market thing .

’ I have been conned , get me out of here ’

I have a strong inclination all this bullshit will be a thing of the past soon, perhaps I am wrong. But i have a very very strong inclination. :laughing: :angry:

All conspiracies have some basis in fact in some way and my statement comes from a real story relating to an associate of mine who’s house was valued in 2006 @ €1.2m on which he was allowed by the banks to leverage against the purchase of multiple " investment properties " Said property loans are IO and now the captial sums are due for repayment. The guy , desperate for cashflow , called back the same EA who valued his house at €1.2M and asked for a new valuation. He duly valued as follows :-

Advertising for Sale = €900k
Advertising for Investment = €700k
Guaranteed to be sold at = €500k

He took the latter. Don’t know who bought it , whether the buyer was the EA himself or related party. If this was indeed the case there should be no surprises as such practices used by EA are well known.

No conspiracies just the reality in this case 8)

As someone who has three kids and is a long-time renter, I would possibly be interested in buying a house should the price be right. However, I calculate the right price by multiplying our family income by 2.5 or 3 times. My husband currently earns about 60,000 a year and I earn about 12,000. However, my work is casual so I ignore that. I figure my husband’s salary will be cut again. Therefore, I assume our family income going forward will be 50,000 a year, which means the most I would ever consider borrowing would be 125,000 or 150,000. Given the scale of our financial crash, I see no reason why I shouldn’t get away with borrowing far less. In the meantime, the houses I would consider buying are lanquishing forever at 400,000 or so. So, no deal ever, as far as I’m concerned. I’ll go on renting a similar house, for 750 a month. I don’t know why prices are still so detached from earnings amid a supposed property crash, but that’s the case. I don’t know if prices will ever come back in line. The end result is that a possible buyer is out of the market.

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Houses in ghost estates and apartments in small country towns will definitely sell if they are priced realistically. Almost any property is worth something. If houses on ghost estates were offered for sale at 20,000 euro each, there would be queues of people to buy them. Most could probably be sold for a multiple of this price. The problem with houses and apartments on ghost estates is not that they are unsalable. It is that they are unsalable at today’s wildly inflated prices.

BG.

You think so? I’d say the first tens of thousand might shift, so you really think there’s 250K net buyers at any significant price (who aren’t just freeing up another property somewhere else)?

No infrastructure, no local demand, no international demand - they’d just sit there empty either way. I doubt the land is worth the cost of demolishing them.

Speaking as a potential cash buyer… the price dictates what I can afford…
If I do not have to borrow… then I can afford say 50k… factor in borrowing or inability to borrow… and I’m still at 50k.

It then occurs that when a house hits my target price of 50k… I’m interested… no matter where it is.

If a ghost estate in Leitrim came up at 5x10k… then I might be all 5… they are not worthless.
What is the case is that they will not be sold for less than they are perieved to be worth… and as a result will remain unsold.

As regards dodgy EAs… I know one guy who was tipped off by a solicitor about an executor sale. The EA got it on his books and subsequently arranged a sale to the solicitor for peanuts. It does go on… but to say it is widespread would be an exageration IMO.

@ onthefence

You are quite right to look at your own situation with respect to financing a house purchase. I think that you may be a bit pessimistic with respect to what is affordable in your circumstances. The historical ‘affordability criteria’ with respect to getting a mortgage was 4 times main salary earner’s wage or 3.5 times joint salary. On top of that, you had to have 20% down payment and the repayment period should not exceed 25 years.

On these criteria, your family situation suggests that a 200,000 euro mortgage would be affordable in the long run, with 40,000 euro deposit, would suggest that a house costing 240,000 is the highest that you should go (assuming that you have saved 40,000 euro).

The question is, what sort of house would you get for that money? , Keeping your powder dry until something suitable comes up is a very sensible option.

Disclaimer:- I am not a financial advisor, nor am I Brendan Burgess after a Pauline conversion. Please consider your own financial situation and get professional advice if you think that it is appropriate.