We think we have overpaid on a house...what are our options?

[Willowwood45]

What do you do if you think you have overpaid on a house? The house we have offered on was on the market for 575. It had been on for about 6 weeks so we made an offer of 550 and got it. However, since we made our offer, it has come to light that a house that backs onto our house sold for 500 this summer. The houses are identical in layout but the one behind our house has a large extension so loads more living space. It's not a modern, wow factor extension at all but it certainly provides a lot more space. The condition of both houses, from the pictures on right move, seems similar. The only difference is that ours is on a cul de sac whereas the other one in on the road...it is a very quiet road that leads to country lanes so minimal traffic. We don't know what to do.

1. Stick with it. Accept the market pre covid and pre stamp duty was very different. Accept paying a premium for a house with no chain. There are no other options for us at the moment, the market is drying up and we have first time buyers who have been so patient with us and who offered asking price for ours.

1. Wait for the mortgage valuation and see what it says. If they agree that we have over paid, go back to the vendors and explain and try to renegotiate at a later stage of the process.

1. Is it worth having this conversation now? Speak to the estate agent and say it has come to our attention that this house sold for 50k than we have offered. We don't want to over pay. There is a very real chance the mortgage valuation will agree with us so can we renegotiate now rather than drag it out?

1. Can we speak to the mortgage valuation people before they go and visit the house? How do they do their valuation? Do they look at the right move sold pages so they can see what has sold recently or do they just look at a printed list of sales in the area without looking at how similar the houses actually are? Can we say we are concerned as we have found out about this sale since we made our offer and make them aware of this house and ask them to look at it?

I am struggling to see how the two houses have been valued so differently. The house behind sold for 500...75k less than ours was on the market for and 50 less than we got it for. This is such a big price difference. I also spoke to another estate agent who valued our house and they valued it at 525, 25 less than we have offered.

What would you do?

@Crimblecrumble1990

A house is worth what someone will pay for it. The survey will highlight if you are overpaying. They can't sell houses quick enough round where I live if they are the 'right' kind of house e.g family sized but not huge, garden, good transport links. I doubt an estate agent would put something on the market for 75k more than they should - they also want to sell it!

I viewed a house in February and asked the estate agent how they could justify the asking price. He looked a bit embarrassed and said the vendor had dictated the price. It’s still for sale now, at the same price, even though the area has had a massive boom post stamp duty “freebie”.

Stamp duty is a big factor. People look at the total price. Next door to us dropped theirs by 30k immediately to reflect the stamp duty difference (on the one they wanted to buy).

Whatever the valuation says, go back and reduce your offer. Nothing to lose if they say no. As other PPs have said, prices have been inflated due to lower stamp duty but that's not your problem. At this time of the year it is likely that they'll just want to get on and sell. You might save yourself 20K or so.

It's also possible that the sale price of these other houses changed due to movements in the chain. This has happened to us the last two times we've moved.

So, the price we agreed to sell for isn't the price shown on the LR records. First time the FTB at the top of the chain left it until the 11th hour and decided to drop their offer by £25k. To keep the chain in place everyone in the chain took a reduction of £5k. To the person at the bottom of the chain this looked like a £25k reduction on the sale price.

Second time was even higher and person at the bottom of the chain appeared to take a £75k hit on asking price where in reality it was only £15k. As a percentage of asking price though it didn't make much difference.

Wait and see what the mortgage valuation says, let them do it properly, you won’t talk them into going lower.

And what it sold for doesn’t indicate what the house you’re trying to buy is worth

Firstly it could have had issues you’re not aware of, or the vendor may have been in a hurry,

Our neighbour recently sold. He is elderly and his wife passed away, the house is worth well into seven figures, he sold it for 800 and walked. He is very wealthy and just wished out and just wanted what the first people through the door would pay, he didn’t even put a price, just positioned it.

This doesn’t mean that’s all it’s worth, although of course that’s it’s immediate value now.

Sales price doesn’t tell you much. In fact it tells you very little.

OP, I have bought and sold a lot of properties, and I think it would be fair to say that you always, always think you have overpaid.

The questions are: do you love it? Do you need to move? If both of those things are a 'yes', then sometimes you have to pay more than seems reasonable.

The only thing I'd beware of, slightly, is buying a house that's the same as all the others in the road. They do have a market value, and when it comes to sell, you're tied to the prices that similar properties are asking.

If you're buying something that's a one-off (or something that has been massively changed, or that you would change significantly yourself), this isn't really an issue.

Random musings over!

I'm in a similar situation. We are in the process of buying a house, but I know we are over-paying. The estate agent agrees with us.

The owners would not budge on price. In the area very few houses come onto the market and when they do they sell pretty quickly generally. So in the back of our heads we were frightened of losing it.

However, we know that this is going to be our forever home - it's got all the space we need. It's down the road from our kids' primary school. Whenever we buy houses, we always over-pay the mortgage, which in the long-run saves you loads of interest, so I'm not overly worried.

It depends how much you want the house and how long you will live there. If you try to renegotiate the price there is a risk that the seller will pull out. You could try it - if you are happy that it may fall through. People do renegotiate prices.

If you negotiate the price then you are taking a risk as you may end up losing the house. It depends how much you love the house. If you are planning on living there for at least 5 to 10 years then the value of the house will increase and you will not lose out.

I lost my dream house because I tried to negotiate a £2000 reduction in price and lost it to someone else. I had to settle for the house we finally purchased which is not my dream house. For a few years I was so upset and I still regret my stupidity.

I was wondering about the garden too. ON a property at that sort of budget I’d happily pay a premium of £30k for a south facing garden. Maybe more.

Our mortgage valuation came back with a £30k difference than what we offered on our soon-to-be home. We settled on a £15k difference from either side and I think everyone was happy with the revised price. I’d always thought it was about £15k over budget!
Hopefully your mortgage valuation will do the same. I think banks are being much more cautious with their lending in the current climate. If they don’t think the house is worth £575k then they won’t give you the money.

You haven't overpaid yet as you haven't paid.
You now think you have offered too much. You can wait for results of a full structural survey and a mortgage valuation. While you are doing that you could do some more research about other properties in the area.
Depending on the results of the survey etc. you could reduce your offer at that stage.
But you don't know why the other house sold for less - the cul de sac compared to a through road will make a difference. Aspect of the house. Work that might be needed - eg. the property might look in a similar condition to yours on the pictures but it might imminently need a new heating system. There can be lots of reasons. Yours might be within the catchment area of a sought after school whereas the other one is just outside.

OP your mortgage lender won't rely on freely available rightmove data, they will use professional valuation tooling such as this one www.hometrack.com/uk/products/valuations/automated-valuation-model/

Affordability is a key question - can you afford repayments into the future on this new house, and have you factored in risks to your employment status (e.g. due to the global pandemic). I wouldn't worry too much about the other house at 50k less, I certainly would pay a premium to be on a cul de sac and I'm not alone. If this is the right house for you, and you can afford it, and you have contingency plans for the future (or you are at low risk of being long term unemployed), then these are the points that you should focus on. You're buying a family home, not a speculative investment product.

The thing is, if I were the vendor, and you came back to me now to say you think the price is too much I'd make you wait for the valuation. Then I'd decide if I was prepared to take a lower offer.

That all depends on what their plans are. If they have a house in mind then that difference in price could cause the whole chain to collapse.

If it's being sold because of a split or death in the family, the vendors may have enough wiggle room just to be done with the sale. Or not.

If they're renting, again it may depend on what they're doing from there. If they're moving to a cheaper part of the country they may be able to cover the loss, again, just to keep things moving. Not having the stress of putting a house back on the market can be a driver if they don't need every pound of cash for their future.

But in all of those I wouldn't expect a full £50K off. Negotiating is just that - a compromise everyone can live with. So you may need to think of your 'walk away' price if the vendors can't drop by £50K.

This has probably already been stated (sorry if I’m repeating posts), but (especially where I am) house prices shot up after lockdown like crazy. Houses on the same street that we’ve purchased property have been selling at 40/50k more (and most are smaller).
Hope it goes well, whatever you decide

Wait for the valuation.

We sold our house for about 5% less than we should have done really in order to enable a quick sale, I've often wondered how that will impact the similar house that's on the market now. As much as it's important to compare, one sale isn't enough, there are lots of reasons one sale is significantly less than it "should" be, id only worry if there were multiple houses, not one. Plus there's so much more at play you won't know about, results of the survey etc.

Prices and the market when nits when lockdown eased. That's it really. Plus the other one will presumably face the other way.

I think you need to be careful that you don't appear flaky or the type who will wait until the 11th hour to renegotiate (I'm not saying this is the case, bit it is every seller's dread). Agree with others that you do your careful thinking and research before the offer. Don't forget that just because your offer has been accepted someone else can still nip in a similar or better offer - if a seller has the slightest doubt about commitment of the original buyer then you could loose the house.

*nuts, obviously

I sold my house this year and if the buyer had started this kind of thing before even getting the valuation and survey done I'd have dropped them like a hot stone.

Wait for the mortgage val - yes, they will compare your agreed price with previous recent sold prices in the area!

OP, I can give an example like this easily. The house behind ours, the road seems identical, houses almost the same, same expensive area, but houses on my road sell for £50k more, I paid 50k more. I didn't overpay. My road is just more sought after. Now I live here I can tell why, but isn't something I could figure out before.

I doubt an estate agent would put something on the market for 75k more than they should - they also want to sell it!

Estate agents routinely over-value because a lot of people will go with the EA who tells them their house is worth the most. When we sold our house recently it was valued at £290, £310 and £325 - we knew that anything over £300k was unrealistic (it would have made it the most expensive house on sale in our entire area, and it wasn't the biggest or nicest and it had a crap parking situation which we knew would put a lot of people off) and went with the ones who had valued at £310k but saying we wanted to put it on for £290k, which they seemed very pleased about. It went for £283k to a cash buyer. Every house I've ever seen marketed by the EA who said £325k has been reduced before it's sold, but people love hearing that their house is worth more than they thought so they go with them and then get disappointed later.

Houses on cul de sacs are often worth c 20% + than those on roads.

@Stircrazyschoolmum has got it spot on

Also, the stamp duty holiday as mentioned means there were more people looking in price brackets otherwise not available to them so more competition for limited supply = pushes prices up. On that note, as working from home for many looks like it is here to stay - a side effect if covid - people can look in areas they would never have considered before = more competition for limited number of houses = pushes prices up

So what happened at another period of time does not apply now for pricing

The valuation survey, as mentioned, is what you need to wait for. That will let you know if the house is overpriced. By the way, you’ve not paid more for the house as you e not bought it yet.

Lastly, as first time buyers you’ll be looking at this very different from seasoned buyers. I’d strongly suggest you look towards your solicitor and estate agent for various advice as many a first time buyer is not aware that you’re not buying a new house, there will be things in the survey but are not deal breakers. You’ll need to know the process takes time and you need to be patient. Average times to complete a sale is 8 to 12 weeks without covid. Not sure if searches will take longer and then add in a 4 week lock down.

When we bought our first house the valuation by mortgage company picked it up and we got letter stating valuation was only X. We showed it to estate agent who in turn went back to vender and they reduced price to valuation made by mortgage company so the system does work. I would wait for valuation from mortgage company person. House prices are going up monthly where I live (West Midlands) due to stamp duty holiday. People are willing to pay more to buy in time for savings. Prices are higher.noe than in summer.