Asking Price????

talullah

Hi, the boyfriend and myself are currently looking for our first home. I've found a house that would be perfect for us and the dogs but the only problem is the asking price. It's just on the outskirts of Cavan town four bed detached with middle sized garden , they're asking 210,000 for it which I guess isn't too bad but given the current market and the location I hope they would accept less. We wouldn't be able to get a mortgage to cover that so I was wondering what sort of offer we could put in for it without being laughed at. It's been on the market for about two years now if not a little more and I have to say I've fallen for it big time...it would be our perfect home!:rolleyes: The most we could afford would be around 160 maybe 170 but most houses in that range are in estates which we aren't too keen on living in.

SoupyNorman

Find a similar house in the locality that is for rent.

Take the rental per month figure,

• multiply that by 12 = one years rent
• then multiply that one years rent by 13.5
• offer the resulting figure.

On a side note, can I suggest a sticky for these: 'OMG HALP, how much should I pay for this house house!?!'

Merch

SoupyNorman wrote: »

Find a similar house in the locality that is for rent.

Take the rental per month figure,

• multiply that by 12 = one years rent
• then multiply that one years rent by 13.5
• offer the resulting figure.

On a side note, can I suggest a sticky for these: 'OMG HALP, how much should I pay for this house house!?!'

Just outta curiostiy, how do you come up with those figures?

TommyT

Merch wrote: »

Just outta curiostiy, how do you come up with those figures?

He pulled them out of his ar*e.

Merch

ha ha lol, I'm genuinely curious??

AARRRGH

Merch wrote: »

ha ha lol, I'm genuinely curious??

It is the system professional investors use when calculating the value of property.

In other words, it's the best system we have, and really shows how ridiculously overpriced property is in Ireland.

Blackjack

Using Rental Yield to evaluate the property is generally how Investors work it out. Should work the same for others, but if you think the location is better, has better facilities, and deservers a premium then you raise the factor from 13.5 to another number. Never greater than 20 (thats' boomtime in the most desirable locations).

For somewhere like Cavan, I wouldn't really go beyond 14.5, maybe 15 at a major stretch - if its the dream home perhaps.

SoupyNorman

Merch wrote: »

Just outta curiostiy, how do you come up with those figures?

My equation is loosely based on the Potential rental yield valuation. You basically say "How much rent would I get if I rented the house for between 13-15 years"

Here is an example, fleshed out somewhat.

TommyT wrote: »

He pulled them out of his ar*e.

Well no, see above.

I think house prices today are being pulled out of arses, EA's arses.

Merch

Fair enough, site looks like good info, well i'm glad i asked now, but does it not mean that a property might be worth more given that is based on rental over 15 years approx, given that you (as an owner occupier) have whatever the capital of it is after that anyway? if that makes sense

ArraMusha

talullah, you should ignore the asking price.
Its only worth what you or anyone else is willing to pay for it.

What do you think the site its built on is worth...say 50k maybe more/less?
What do you think it cost to build it .... 80k maybe less?

TommyT

SoupyNorman wrote: »

Well no, see above.

I think house prices today are being pulled out of arses, EA's arses.

We are currently renting, we sold our house nearly 2 years ago and have just got planning permission after a rather protracted planning process.
We live in a house that even in todays depressed market is conservatively worth €500000. Going by your calculations, the house that we currently occupy is only worth somewhere in the region of €140000, we pay €950 per month in rent. I would gladly pay double that for this house.

I will agree with you that EAs tend to pull prices from their arses. I have bought 2 sites this year in a pretty desireable area. I avoided the EAs in both cases and dealt directly with the owners. EAs will not inform vendors of offers that they think are too low. I have experience of this.

stepbar

There's a reason why the house is on sale for more than 2years. There are plenty of houses like this in Cavan that will never be sold unless prices fall significantly. I wouldn't bid much more than 150k tbh.

Colonel Sanders

Don't reference the asking price when assessing what you feel the property is worth. Many people seem to advertise their properties at what they are willing to sell at plus x to factor in people offering a certain % below asking. If your valuation & the vendor's vary wildly then there are plenty more houses out there (and IMO plenty more price drops to come)

Blackjack

Anyone currently in the Market for a house should read this.

Still another 40% to go off current asking prices.

AARRRGH

TommyT wrote: »

We are currently renting, we sold our house nearly 2 years ago and have just got planning permission after a rather protracted planning process.
We live in a house that even in todays depressed market is conservatively worth €500000. Going by your calculations, the house that we currently occupy is only worth somewhere in the region of €140000, we pay €950 per month in rent. I would gladly pay double that for this house.

You're still not getting it.

You have been deluded into thinking the house you rent is "worth" 500k. But it's not. It's worth way less than that. The rent you pay proves that.

By all means try to prove to me it's worth 500k. But please don't use prices from the property bubble (or our current rip-off housing market) as your evidence.

mathie

TommyT wrote: »

We live in a house that even in todays depressed market is conservatively worth €500000. Going by your calculations, the house that we currently occupy is only worth somewhere in the region of €140000, we pay €950 per month in rent. I would gladly pay double that for this house.

The house I rent now was selling for 540K at the peak.
One sold a few weeks ago for 290K.
We pay 900 euro a month rent.

Very similar situation to yours but I still wouldn't buy it for 290K.

TommyT

AARRRGH wrote: »

You're still not getting it.

You have been deluded into thinking the house you rent is "worth" 500k. But it's not. It's worth way less than that. The rent you pay proves that.

By all means try to prove to me it's worth 500k. But please don't use prices from the property bubble (or our current rip-off housing market) as your evidence.

It doesnt really matter to me what this house is worth, it is not mine and it never will be. What bothers me is some idiot coming up with a mathematical equation and expecting everyone to take it as being correct.
I think the main probblem is how we see our homes. A home is a home, nothing more, nothing less. When we see them as anything other than that then we are losing the run of ourselves.

Treehouse72

TommyT wrote: »

It doesnt really matter to me what this house is worth, it is not mine and it never will be. What bothers me is some idiot coming up with a mathematical equation and expecting everyone to take it as being correct.
I think the main probblem is how we see our homes. A home is a home, nothing more, nothing less. When we see them as anything other than that then we are losing the run of ourselves.

You are displaying ignorance is all its senses: ignorance in terms of being rude to someone who is 100% correct when you are 100% wrong, and ignorance in terms of an utter lack of understanding of how these things work. Ignorance piled on top of ignorance. Typical of this country at the moment I'm afraid.

SoupyNorman

TommyT wrote: »

It doesnt really matter to me what this house is worth, it is not mine and it never will be. What bothers me is some idiot coming up with a mathematical equation and expecting everyone to take it as being correct.
I think the main probblem is how we see our homes. A home is a home, nothing more, nothing less. When we see them as anything other than that then we are losing the run of ourselves.

I must be that idiot.

Either way, I did not claim the method used to determine the price to be 'correct', it is only a rational to be applied to the valuation. You show me the rational behind pricing houses at €750k in Delgany just before the bubble burst...a couple of months later the remainder of the houses were going for €250k less then what the majority of the residents would have paid (off the plans presumably) in one of the first much publicised cases of negative equity.

The rental valuation model is widely accepted by experts and economists as the most accurate way to determine value.

You're not really posting a very cohesive statement here at all, did you not watch the Ghostland documentary on RTE? The Belmayne couple who have a €350k mortgage openly admitted that they loved their house and it is a lovely house but it's not a home, a home does not keep you awake with worry at night like the women stated, that particular home is a financial prison sentence, and it's a portrait of many other households across the country.

stepbar

Yield is a fairly straight forward concept in fairness.

TommyT

Treehouse72 wrote: »

You are displaying ignorance is all its senses: ignorance in terms of being rude to someone who is 100% correct when you are 100% wrong, and ignorance in terms of an utter lack of understanding of how these things work. Ignorance piled on top of ignorance. Typical of this country at the moment I'm afraid.

I am not being rude to you, I am being honest. How are you 100% correct? Your equation simply does not add up for all cases. It may stand up for a bedsit in Tallaght, but not for a house in the country.
I am in the early stages of building a house, so I have a fair idea what things cost these days. If I was to use your formula it would not make sense for me to build as my house would never meet your valuation.
During the boom, some of us acted sensibly. We did not spend what we hadnt got, we did not borrow, as we realised that with every boom comes a bust. Those of us that were sensible can now get great value in the housing market, be that in houses, land or even in construction. People like your good self will always stand on the sidelines telling everyone how wrong they are, all the time.
The boom could not last forever and in turn the collapse of the housing market will not last forever either. You can sit with your calculator and tell everyone how wrong they are, now run along and play, mammy will soon have your tea ready.

AARRRGH

TommyT wrote: »

I am not being rude to you, I am being honest. How are you 100% correct? Your equation simply does not add up for all cases. It may stand up for a bedsit in Tallaght, but not for a house in the country.
I am in the early stages of building a house, so I have a fair idea what things cost these days. If I was to use your formula it would not make sense for me to build as my house would never meet your valuation.
During the boom, some of us acted sensibly. We did not spend what we hadnt got, we did not borrow, as we realised that with every boom comes a bust. Those of us that were sensible can now get great value in the housing market, be that in houses, land or even in construction. People like your good self will always stand on the sidelines telling everyone how wrong they are, all the time.
The boom could not last forever and in turn the collapse of the housing market will not last forever either. You can sit with your calculator and tell everyone how wrong they are, now run along and play, mammy will soon have your tea ready.

What a reply. I'm just going to comment on two parts of your post.

Those of us that were sensible can now get great value in the housing market

Are you an EA by any chance? I am yet to see great value in our housing market. Everything is still way overpriced, perhaps 50% too expensive.

The boom could not last forever and in turn the collapse of the housing market will not last forever either.

Personally I would use bubble instead of boom, and correction instead of collapse.

What we are seeing now is a return to reality. I understand you recently bought and are in the process of building so obviously are feeling a bit emotional that you may have overpaid, but that doesn't mean we are wrong.

I've been warning people about our housing market for about 5 years. Many people like you have insulted me. Every single one of them has turned out to be completely wrong.

TommyT

I am not insulting you, I am merely pointing out that your "equation" cannot cover every type of property.
If that equation was correct then the hosue I am renting is worth less than 140k. You could not build the house for 140k, never mind buy it. If you want to keep living in a dream world of yields and equations then continue to do so, the rest of us still need to buy and build homes. While youa re doing your sums and saving for a deposit, some of us will be doing other things. Like living in the real world.

johndaman66

TommyT wrote: »

It doesnt really matter to me what this house is worth, it is not mine and it never will be. What bothers me is some idiot coming up with a mathematical equation and expecting everyone to take it as being correct.
I think the main probblem is how we see our homes. A home is a home, nothing more, nothing less. When we see them as anything other than that then we are losing the run of ourselves.

I appreciate your point of view TommyT but would not agree with it. A home is a home or a family unit if you like, fair enough and I do distinguish between a home and a house but it is a consideration thats of little relevance when we are talking about house prices. You do need to apply some financial common sense when buying a house for investment purposes such as in the case of which your landlord should most certainly have done when buying for example. Granted a mathematical equation will never be absolutely bulletproof in providing house values but think that such as the rent multiplier is a generally good guide when you take booms and busts out of the equation. Not only from an Irish perspective but worldwide if you like. An attempt is made to determine when you could have made the same money back in interest as you would have from rent yields if you had left your money on deposit. Relative risk is factored into the equation (or the rent multiplier equation will signify that boom prices are overinflated if you wish to look at it that way). Although one may not like the thought of applying such an equation to a family home I for one think its financially prudent and sensible to do so. If you seen the Aftershock series (or still available to watch on Rte media player I believe) you will see the turmoil of many families who bought at overinflated prices (even though some of them would have thought they were getting a baragin at the time). I think many of these people are regretting not applying financial commnsense and prudence to their purchase and if this financail prudence were to take the form of a mathematical equation (at least as a general guideline) then so be it.

Also if you reckon the house you are living in is worth 500k then it is well and truly unaffordable to someone on the average industrial wage. Someone on the average industrial wage would need to be working well over 70 years in order to pay off the mortgage (at historical interest rates) which is an absolute non runner, they just wouldn't be entertained in any bank unless they had considerable savings. Now looking through Daft of Myhome there are a considerable number of houses asking in the region of 500k and over and many of whcih are by no means knock out houses considering the prices. Now are there that many company directors and barristers out there competing for such houses? I think not somehow. You may argue dual income but I think such is a non runner in real terms....people tend to have families which puts a dampener on that one.

Just my thoughts or take on it.

TommyT

If we all had the same opinions boards.ie would be a pretty boring place.

I bought my first house in the late 80s for £4500. I still own it today. I know very little about yields or mathematic equations, but I can count. It has paid for itself many times over, though at the time I did not see it as an investment. The bank would not lend me the money, but my boss could see it was a good idea. I paid him back within a year.
The problem with todays society in my opinion is that people believe what they see on TV and read in the papers. They take it as gospel. None of us know what is going to happen in the future, prices may fall for a while yet, but I think they will come back. We will never see the madness of 2005 to 2007/8 again, but in the long term prices will rise. (eventually)
The people who are telling us that the market has a long way to fall are the same people who were telling us that rent was dead money a few years ago. They get their opinions from the media and take everything they hear from Eddie Hobbs or David McWilliams as gospel. If we had less sheep and more individuals we would not be in such deep sh*t as a nation.

Treehouse72

TommyT wrote: »

I am not insulting you

Really?

TommyT wrote: »

What bothers me is some idiot coming up with a mathematical equation and expecting everyone to take it as being correct.

If you are going to talk nonsense that's your business, but could you at least keep your manners in check while doing it? Thanks.

TommyT wrote: »

I am in the early stages of building a house, so I have a fair idea what things cost these days. If I was to use your formula it would not make sense for me to build as my house would never meet your valuation.

I will bet you anything you like this is not true, unless you are not paying market rate for the build. The yield calculation will almost perfectly value your house in line with the cost of that build + a premium for the added value of labour, time, opportunity cost and whatnot (what a builder would call profit). Furthermore, it will rent for an amount that the yield calc suggests it should.

If this were not true, then every moron **cough** would be building gaffs and selling them for a profit. Or, they would be building them and renting them out as an alternative to holding cash. Wouldn't they?

You'll be hoisted on your own petard here I'll wager.

TommyT

Treehouse can I ask what you do for a living?

RATM

TommyT wrote: »

I am not insulting you, I am merely pointing out that your "equation" cannot cover every type of property.
If that equation was correct then the hosue I am renting is worth less than 140k. You could not build the house for 140k, never mind buy it. If you want to keep living in a dream world of yields and equations then continue to do so, the rest of us still need to buy and build homes. While youa re doing your sums and saving for a deposit, some of us will be doing other things. Like living in the real world.

dude that's a weak line of argument- we all live in the real world when it comes to property- be it by renting or buying.

The formula given is not 100% accurate in all cases for sure but you'll tend to find that it won't be too far off. It is a simple way for investors to calculate whether a property will give a yield above inflation and the cost of borrowing. It's a cold hearted calculation that has been in use for a long time to assess profitability for the professional investor. But you're building a house as a home where you are settling down so that's a different matter altogether - you'll automatically value it at a higher price because you have an emotional attachment to the place.

TommyT

RATM wrote: »

you'll automatically value it at a higher price because you have an emotional attachment to the place.

Its only land, no one should be emotionally attached to it. Like anything else it can be bought cheaply and sold on.

Treehouse72

TommyT wrote: »

Treehouse can I ask what you do for a living?

No, I don't want to share personal information with you.

TommyT

Treehouse72 wrote: »

No, I don't want to share personal information with you.

So you want to fob us off with a one fit all meaningless equation, but you wont tell us what line of work you do or if you are in any way qualified to tell us that your opinion is fact and everyone else is wrong.