How do I know if a property is overpriced or not?

[Propertyprice]

I'm considering buying a house that is on the market at £675,000.

5 years ago the owners bought the house for £500,000 (don't you just love the power of the internet nowadays for providing this information?)

Now that's an average yearly increase of 6.2% this seems very high to me.

To clarify the only "work" that has been done on the property is decorating, and replacement kitchen. Bathrooms are as was when moved in, features were all ready all there, double glazing was all in etc.

It's between South East and South West (depending where cut off is, as it's South), so looking at these 2 areas for average house prices courtesy of Halifax as that is what is always quoted in the news, doing the % increases and decreases that have taken place every quarter between 2006-2011. Gives us a figure of £600,000 if SE or £550,000 if SW.

This is an odd house to value as other houses in immediate area are a lot smaller and on at under £400,000 or a lot bigger and on at over £700,000.

I think this house is worth £600,000 based on % this seems fair price.

What do you think the response I would get from the agent would be if I contacted them and inquired how they came about at valuing at £675,000?

Could it be vendor has said we'll only sell at £675,000?

Any advice, or insight would be really appreciated.

[LynetteScavo]

No, don't ask how they achieved the figure. They will witter on about market comparables, blah, blah, etc. There is no way they will say well, "We overvalued it to make sure the vendors used us to market the property.....as they are greedy so and so's...... and they may well realise it's not worth that much in a few months, and the price will be dropped."
A house is only worth as much as some one is prepared to pay for it. To you, the house is worth £600,000, so that is what you should offer. Bear in mind the offer may well be turned down, especially if they are not desperate to sell.

[BettyBathroom]

I agree with Lynette, offer what you think the house is worth - if they decline your offer, then you both walk away...no harm done. I think it's pointless to try to work out what houses are worth exactly on the basis of websites.

A house up the road from us was put on at what we thought was a hugely inflated price a few months back, £100k over the top price for the street - they got 5 asking price offers, the property went for £25k over asking price and that's in the middle of a supposedly tough market. Who knows?

[minipie]

Ok this is trite, but a house's true value is what someone will pay for it.

Therefore, if you will only pay £600k, and no-one else will pay more, then that's what it's worth. You can judge on similar prices around at the moment - i.e. the competition. If there is something on at less money which you would buy instead, then that suggests the house is overpriced... If not, that suggests it's not...

I don't think you can judge on what it was worth X years ago and average ups and downs in the area - there are mini pockets with their own movements.

[Propertyprice]

So it really is a finger in the air pricing system with houses.

Thanks for the info.

I like hard facts, it's very difficult dealing with house purchasing.

[minipie]

Have you done a spreadsheet ? that's what my DH did...

[myron]

Personally, I would agree with you BUT....if the house hasn't been on the market for long, they are unlikely to accept £600K. If the location is prime and houses don't come on the market very often, they won't take a low offer. Saying all that, if you don't ask, you won't get....so, good luck!

[bluetoad]

If you think that it is overpriced, then if you pay more for it than you think you should be you will always have that at the back of your mind. Our current house was purchased 5 years ago, we fell in love with it and paid more than we wanted to for it. Now we are trying to sell it and we are selling it for less than what we have invested. We are relocating so have to move, otherwise we would stay put and ride out this decline in the Market.

[Funk]

OP I think they are chancing it. I've seen properties coming on to Rightmove recently, clearly overpriced, and watched them come down by up to 20% (Surrey). Get Property Bee installed (Firefox). The days of people using their homes as ATMs have gone.

[Shanghai]

any house is only worth what someone will pay for it (and what the vendor is willing to let it go at). We've just agreed on a house at £150,000. Was marketed at 180 but had been marketed at 280 last year...... even 150 i feel is a little on the high side..... but we'll see what the mortgage valuation says.
Don't feel worried about putting in a low offer (we started at 120 so basically met in the middle) but I would decide now what you are actually prepared to go to as it gets more complicated when numbers start flying around. When we bought our other house it was on the market at 450k and we offered 380 - ended up paying 400k so a low offer is not always going to be rejected. good luck.

[Propertyprice]

I may have done a spreadsheet I'm an accountant I am really that sad

Thanks for the tip re property bee I've just installed it, what a fantastic tool that is.

Yet another number cruncher for me to play with.

The house has been on the market a lot longer than the agent told me. EA lying you'd never believe it would you?!?

[Georgimama]

Good old Phil and Kirsty say you should be so embarrassed by your first offer you barely dare to make it. If you think it is worth £600K that's what you offer. Any material good is only worth what a purchaser will pay.

[minipie]

I knew it!

[LtEveDallas]

5 years ago was the top of the market. We are now in a recession and its going to get worse before it gets better. Personally I wouldn't even offer £600K - If they've done nothing to it less live in it (and with that comes 6 years of wear and tear) why should they get so much more than they paid for it? I'd take at least £100K off the asking price.

Last Sep we put an offer in on a house that the owners bought 2 years before for £160K, but asked for £260K. We offered £180. EA told us there was NO WAY they would accept such an INSULTING offer - we shrugged our shoulders, said whatever, and walked away. The house stayed on the market for a while.

Last month we noticed it was back on Right Move - now with new planning permission for a 2 bed extension - for ....£200K!

Property Bee, MousePrice, Zoopla and Tepilo are ace for seeing exactly what is going on in the market. And I make sure that the EA knows whenever I 'catch them out' so to speak (like the one who said "Well it's had subsidence, yes, but dont worry, it wont happen again" - the whole flamin street is built over a stream and they hadn't even had a Surveyor out)

[pommedechocolat]

We bought last year. The house had been purchased nine months before at £470 and they had put it on the market for £525!! They were in a real hurry to sell and we had no chain.

We offered £477 (they had extended the garage and had got a good deal themseleves as family living there before had had their business go bust) and walked away when they said no. They rang back two weeks to accept the offer.

Be prepared to offer what you want to pay and then walk away. When we made the offer we also explained why it was so much lower than the asking price - because we'd done our research!!

[Thromdimbulator]

Agree that Property Bee is a fantastic tool. Have you also had a good play around on the "Price Comparison Report" section of Rightmove? It's under the House Prices tab at the top of the page. If you tweak the radius - i.e. this area only, 1/4 mile, 1 mile etc you'll get more info. Property Bee can be 'fooled' by swapping agents or taking the house off the market for a period of time - this will often reveal these aborted sale attempts as well as linking completions through to Land Registry so that you can see how near to asking price was actually achieved.

Oh, and you can often see planning decisions through the planning portal section of the district council/LAs website. Can show if (and when) significant value may have been added by a big extension for example.

[minipie]

"5 years ago was the top of the market. "

Depends entirely where you are. In my area of SW London, prices are now well above where they were 5 years ago. Madness perhaps, given the overall economic climate, but true. And properties are selling for those prices.

[CleanSheetsAndSmoothLegs]

Also

"We are now in a recession"

Not for the past two years. We came out of recession in autumn 2009.

[lalalonglegs]

Divide the price by the square metre-age/footage, then compare it per sq unit with the other houses on the market in the area which are larger and more expensive and see if it still seems reasonable or unreasonable.

Personally, I don't think it is worth getting worked up about what people paid in the past - they got a bargain, perhaps, there's nothing you can do about that. It's only worth looking at if the person paid too much and is now trying to recoup their money - there is a psychological barrier in selling below what you paid for.

[Georgimama]

CleanSheetsAndSmoothLegs Fri 12-Aug-11 16:03:17
Also

"We are now in a recession"

Not for the past two years. We came out of recession in autumn 2009.


Sure. On paper.

[LtEveDallas]

Ok, 'economic downturn' if it makes you feel better, but as our growth was a meagre 0.2 in the second qtr of this year I'd suggest a 'double-dip' was a real possibility.

To expect a profit of over 6% per year over the last 5 years during a Global recession, UK recession, and otherwise screwed economy. Where millions are newly unemployed, or working longer hours for less pay and job security is at it's weakest is ridiculous and greedy. If everyones wages had increased by 6% per year it could be justified, but that's not the case.

One of the things delaying this country getting back on it's feet is ridiculous house prices and Estate Agents pushing higher and higher prices just to get their cut.

[LtEveDallas]

I also don't think that London is a very good example for the rest of the country. I agree with you minipie, and can quite believe that house prices still go up there, but it's London. You will always have your rich Arabs/ popstars / footballers / bankers etc who don't want to live anywhere else and will pay whatever it costs, that in turn raises the costs of all the other London homes.

I feel very sorry for anyone needing to buy in London, house prices are just so bloody ridiculous!

[owlets]

I completely agree with lala. THe previous sold price is an indication of what was considered an acceptable price in 2006 between the parties involved at that time. They may have overpaid, or they may have got a bargin. Likewise, the work they've done to it may have been what was needed to finish modernising the property, or might just have been putting their own mark on it.
Forgetting about what you've found out on the web, what do you think it is worth?
Compare with other houses as much as possible by using the square footage and also any other known desirable features such as garden size, view, etc.
Its ok to offer a lot less than asking price, but I think you're more likely to get accepted if you back it up with facts about todays market in the local area rather than generic sums.
Good luck!

[CristinaTheAstonishing]

We're buying a house where the owners will 'make' £130K in just 2 years. They're downsizing and will be mortgage free. It should grate but we're just happy to have found a nice house in a good area as the turnover is very small there.

[mylovelymonster]

£130k is a very generous gift to complete strangers. Kind of you to fund their new lifestyle. Madness.

[CristinaTheAstonishing]

MLM - no need to be sarcastic, it's one thing to type thoughts of how people ought to be tough and another thing when you're forced into moving (for DS's new school) and have to buy into whatever the local market dictates.