Should we drop our offer on a house because of coronavirus?

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We are first-time buyers and had an offer accepted on a property just before coronavirus hit. 

We still want to go ahead with the purchase and exchange after lockdown, but we’re worried that the house will be worth less by then? 

We don’t want to gazunder the seller or mess them around, but also we don’t want to harm our own finances and pay over the odds, especially at a time of economic uncertainty. 

What is the best thing to do and how would we go about reducing our offer?

Buying agent Henry Pryor replies: My advice is to wait. This will be annoying for the estate agent, who hasn’t eaten for six weeks and needs to do a deal, but can we really be confident about what’s going to happen after what looks like the biggest global upset since the Second World War?

When the market wakes up and we walk blinking in to the sunshine I expect asking prices will be where they were in February. 

Estate agents are claiming there is pent up demand, that they have lots of buyers wanting to make offers on the basis of a Youtube video they knocked up and that there isn’t much stock available – so they will keep prices where they were. 

The initial buyers prepared to commit in June and July will, I expect, feel like they are taking a risk that house prices will fall between now and Christmas so they will want something for that risk they feel they are taking. 

They’d like a 20 per cent discount, but they will accept a 5 to 10 per cent discount, so the first house price reports post Covid-19 I think will be 5 to 10 per cent down.

Supply will be maintained by the three Ds – death, debt and divorce – all of which I’m afraid will be higher after this. 

By October, existing sellers will be joined by those wise enough to appreciate that while they are now being offered less than they might have got in January, what they want to buy is correspondingly cheaper too.

Most buyers won’t be back in the market before the New Year, worried about what might happen to prices, so my advice today to you is to wait until things are clearer – which may not be before next year.

Do not drop your offer, you will look like a chancer. 

Tell the seller that you have eaten into your capital during lockdown, that the mortgage you are being offered today isn’t as attractive as the one you had in January and so reluctantly you must stand aside and let them find someone else who will pay what you had agreed to. 

This next bit is important. 

Don’t try to offer less. No one likes to feel they are being taken advantage of and if I were the seller I would rather sell to someone else even if that were at a lower price rather than feel that I was being had.

Let them come back to you. The next thing they will ask is ‘well, what could you afford?’ and this is then the start of your renegotiation.

Will Kirkman of This is Money replies: The word ‘unprecedented’ has been used a lot recently but currently no word better describes the effect of coronavirus on the housing market. 

It must be an extremely frustrating time to be a buyer or a seller, and the inaction bought about by the lockdown is only made worse by how uncertain the next 12 months look economically.

To put this in context, Britain has seen 6.3million people furloughed from work, according to the ONS, and 2 million claiming unemployment benefits, while others have taken pay cuts or reduced hours and the self-employed are getting separate help. Meanwhile, banks face a wave of companies defaulting on loans. Money will be tighter for borrowers and lenders after this.

When the time comes to re-enter into negotiations with the seller, it’s vital you go in with a good understanding of how much the home is worth. But how do you plan for this, if you don’t know when you will be renegotiating and have no comparable sales data to go on?

Even many surveyors we have spoken to – the experts who do mortgage valuations for banks and building societies – have told us they couldn’t do a meaningful valuation right now.

As a first-time buyer, if you’re taking a mortgage you’re more likely to be buying with a small deposit. 

This means you’ll be more vulnerable to drops in house prices, making it doubly important that the price you pay is the correct one.

One thing you can do to help in the meantime is try to keep abreast of what is happening to house prices while the pandemic is ongoing.

If you didn’t do this alkready when you made your offer, check Rightmove Sold Prices and Zoopla Sold Prices data for similar properties that have sold nearby in recent years.

Zoopla also produces property price estimates but these can vary wildly at the best of times and with prices forecast to drop due to coronavirus, they may be far too high.

Watch the main house price indices and it will seem that prices go up and down – and there can be a mixed story being told. 

But there’s more than meets the eye to headlines touting average national figures.

In reality there’s no such thing as an ‘average house’. Instead, knowing what was happening to prices in the area you are buying in before lockdown – rather than nationally – can give you a better understanding of how much the property is worth. 

To get closer to the actual figure for your location, it’s best to look at the regional data found in the various different house price indices.

There are a few of these about, and they often say similar but slightly different things – so figuring out which one to trust can be tricky.

The most comprehensive data sets come from the Government. The Office for National Statistics publishes its House Price Index every month, using data from HM Land Registry.

This index covers all transactions – roughly 100,000 a month before the lockdown – and records data on completed registrations.

This means it’s the most comprehensive of the different indices, but it also means that it’s a few months out of date by the time it is published.

It is possible to drill down in the ONS figures into local authorities, giving a clear picture of the market near you.

Halifax and Nationwide also both publish their own indices each month.

Both of these data sets are based on far fewer transactions than the ONS’s – around 15,000 a month – and as they are based on their own mortgage lending, exclude cash purchases, making them less comprehensive.

They are, however, more up-to-date. Every three months, Nationwide puts out more detailed regional house price reports.

There’s also LSL Acadata, which also uses Land Registry data, but uses its own internal models to give more up to date predictions and forecasts.

Finally, there’s the Rightmove index, which publishes a monthly index based on the tens of thousands of property listings it hosts each month.

Although up-to-date and based on a large data set, this index is primarily based on asking prices newly-advertised on the company’s website – rather than the actual sale price the homes go for.

As the two are often quite different, it’s not the most accurate tool if you want to see what homes in an area are actually selling for, but it’s a good measure of confidence in the market.