My Dream Home: the story afterPosted: 2016-10-30
Readers earlier in the year will be aware that I found myself buying my Dream Home, on something of a whim, at very short notice in January. My plan had been to put the old house on the market last Easter. Things haven’t gone entirely to plan, as I’ll recount.
First off the old house needed a bit of TLC. Nothing major, but not something I have to bother with on my other valuable assets. This took a few weeks, and prevented me selling the house at the start of the year.
Secondly, I got quite a significant shock when I got the house valued. This being London, the first and almost only step required to value a house in a given postcode is to measure its square footage. Measuring is a very slick process these days involving lasers. But I couldn’t believe my eyes when I got the plans back : they were 500 sq ft short. Shurely shome mishtake? Alas not. I’ve been labouring under a misapprehension for about fifteen years about the size of my old house.
500 sq ft in North London is worth over half a million squids so this was quite a blow. In many ways I’m glad I hadn’t realised this when I was looking at new houses, but I’m certainly relieved I didn’t stretch myself to buy a more expensive Dream Home. Certainly it is a good reminder of one of life’s most important lessons: Check Your Assumptions.
In any case I then had a few of the local agents visit to tell me how wonderful my house is, how exorbitant expensive it will be and how rapidly they can sell it for me. My original strategy was to deploy two agents who between them covered all three of the UK’s large property portals but in the end I ended up with a ‘pile it high’ agent and a ‘classy one man band’ agent both of whom were on the same two portals (Zoopla/PrimeLocation being the one that matters in my market).
The pricing of a house to sell is a fascinating process.
If the actual value of the old house was X (around £two million), most of the agents told me it was worth between 1.05X and 1.15X. But one reputable agent said it was worth 0.90X. The difference between 0.90X and 1.15X is a big spread- amounting to a few hundred thousand pounds. My old house is an unusual property; it is definitively not a terraced house or a flat in a big apartment block, so there are no perfect comparables. Reasonable people can disagree about its price by quite a large margin. Never mind estate agents, or buyers and sellers.
It is worth noting the Stamp Duty angle here. The stamp duty on my place was likely to cost the buyer over £150k. A buy-to-let investor faced over £200k. These numbers are pretty scary but in point of fact are less than 10% of the purchase price; in this respect Stamp Duty has a much lower impact than the 10-14% it takes out of £5m-£10m houses in prime-ier bits of London. So while I think Stamp Duty has hit my local market, I don’t feel as hard done by as a friend trying to sell in K&C.
As well as price, you then get into the thicket of Asking Price, Guide Price, Offers In Excess Of, etc.
In the end I went for a Guide Price of 1.05X. I wanted to pitch lower than some suggested in order to stimulate interest, but not so low as to make me bridle at any negotiation on price. The property duly went on the market just before Easter.
I had kept the old house largely furnished and in fact was regularly back there for a variety of reasons, so the house was easy to market convincingly.
We had a whole bunch of interest in the property. I didn’t count the viewings exactly but I would say it was about twenty. Mostly from the mass market agent.
We had an offer, in May, via the mass market agent. At about .83X. I ignored it. It came back plus £100k and was apparently right on the bidder’s affordability limit. I said no thanks.
June approached. The referendum loomed. It became clear in early June that nobody was going to make a decision on buying a £2m+ house just before the referendum, no matter how much of a formality Remain looked at the time. I reconciled myself to not selling until July.
On Thursday 23 June, the Referendum happened. Gnashing of teeth, renting of clothes, wailing etc began that arguably still hasn’t finished.
Then, bizarrely enough an offer came through just after 9am that morning, via the ‘classy one man band’. By this point David Cameron had just resigned, a few minutes earlier, the pound had fallen, and Messrs Gove/Johnson/etc had not yet declared an interest in the leadership election.
The 9am offer on that fateful morning after (Friday 24 June) was from a local couple. For X less £100k. This was about 10% below my guide price but was certainly in a zone I was prepared to take seriously. Especially in my emotionally weakened state.
What would you have done in my position? Should I have taken this offer? If not, what should I have done? I’d be interested to see comments before I continue the story.