This "offers over" trend needs to stop

[itsacon]

Back in the day, the seller put a house on the market and stated the price they wanted for it. Usually, you would go and view it and either offer asking price if you loved it, or you might be cheeky and go a bit under. Then the buyer would come back and they'd meet you in the middle.

These days however, the practice of "offers over" is endemic. Estate agents put an offers over price that is somewhat lower, to tempt you in. Buyers then get stuck in bidding wars, you aren't allowed to know where your bid stands in relation to others, and houses are selling for prices wildly over the OO price.

For example - offers over £350k, house is eventually sold for £390k. Offers over £600k, house is sold for £710k. (Real, recent examples from my social circle)

I'd go so far as to say it's an unethical practice.

The next problem with it is at the mortgage valuation stage. These offers are being down valued. First time buyers don't stand a chance, as they don't have the wriggle room available to cover the shortfall. The seller doesn't care as they can just go back to another buyer who was offering a crazy price. The FTB then goes back into a bidding war on the next house.

I just think house buying in England is just an awful situation.

@Fritilleries
How prices are advertised are not related to final price. People will pay what they think a house is worth. It’s always been the case in the SE. No decent 3 bed houses near me under £650,000. It’s lack of supply that’s the issue.

Slightly off topic, but does anyone know if Rightmove have stopped putting sold prices on their website? Usually they are up within six months of completion and maybe they are just too inundated with work to update sold prices at the moment but they are a useful guide to buyers.

I agree with all this regarding lack of transparency but conversely its a sellers market so houses will sell for what people are prepared to pay. Recently I saw a house advertised at 950k on right move, I loved the look of it and so watched it even though its way out of my price range. I was curious about final selling price. That was 1.1 million.

This is why I am going for a newbuild.

@Somanyquestions1984
The builder will factor inflation in to maximise profits. You know what you are paying but house builders are not going to sell a house that’s undervalued. They don’t make money by doing that.

It's how it's always been done in Scotland and it's always worked just fine.

Offers over has always been standard practice in Scotland

We were lucky. Sellers wanted to be able to put an offer on a house so they wanted to move fast. We had a 5K offer accepted 4 days after theirs went on the market. I’m pretty sure they could’ve got more.

It seems to be changing here - have seen several houses stick for ages and then be reduced before eventually selling. And some that sold back in Dec/Jan have come back on as the sale must have fallen through.

We got our offer accepted at 0.9% over guide price but heavily emphasising our proceedability and local connections.

I can't agree with you OP.
Ultimately, each individual house is "worth" what a buyer will pay and a seller will agree to sell at. The EA's suggested price has ALWAYS been just that.

I mean, I do agree with this part of your opening post .

I just think house buying in England is just an awful situation. but not for reasons of settling on the price - that is the easy bit. It all goes wrong after that.

The Home Report Valuation is what helps the system work in Scotland though. It's great, but you do need to have a close eye on what your budget is so you don't go crazy!

@Kite22

I can't agree with you OP. Ultimately, each individual house is "worth" what a buyer will pay and a seller will agree to sell at. The EA's suggested price has ALWAYS been just that.

I mean, I do agree with this part of your opening post .

I just think house buying in England is just an awful situation. but not for reasons of settling on the price - that is the easy bit. It all goes wrong after that.

But a seller and buyer can agree (even if it is inflated) and then the banks are down valuing the agreed price! Which means calling the whole thing off!

But a seller and buyer can agree (even if it is inflated) and then the banks are down valuing the agreed price! Which means calling the whole thing off!

Not necessarily though.
It absolutely does happen, but equally, there are other people who are not relying on 90% of the price coming from the bank, so they make it work if they really really want that house or they go back and renegotiate.

This happened to someone I know recently.
House on for £X, friend put in offer over asking but was outbid by someone else (by some considerable amount.) Bank valuation came back as house being worth what the EA had said in first place and the high bidders couldn't do anything
Friend was then asked by the EA if they could meet £Y amount (still over the valuation, and also over their original offer. Friend agreed. Then friend's bank came in with same valuation and friend went back to renegotiate. By this time vendor realised the valuation was always going to be the same and agreed to compromise half way between the valuation and my friend's second offer.
Friend's finances meant they Could pay over the bank's valuation so a sale was agreed.

Buyer happy to get the house they wanted in a fast moving market
Seller chuffed to get over what they had originally been told their house was worth
EA chuffed to make a sale over asking price.

People who went wild in the first place perhaps learned a lesson about how it works.

But rather a rambling post to say you can't generalise.
Lots of buyers are people who aren't struggling to raise a deposit and a mortgage for their first home.

Because it inflates house prices and means there's a complete lack of transparency

The mortgage lender has always been able to have a view on value. Its not new to see them devalue houses. It’s their money isn’t it?! This rarely happens where buyers have a large deposit. If buyers are at the max, then the lender will be more cautious. They were always cautious about doer uppers and very high salary multiples.

It does suck because the market won’t always be this mad and there’s an increased chance of being in negative equity later on.

It’s no different from an auction really. And frustrating as it is, in a seller’s market, you need to be looking at houses below your budget so you can increase it by the 10-15% decent stuff is going for. Or wait it out and hope things calm down (which they may do eventually but no guarantees).

I think 'overs over' is poor taste, but even worse when it comes to 'offers over' for rental properties. An agent tried to lure me into a bidding war when the 2 bed i was looking at was all ready way more rent than my friend's mortgage on her 4 bed house around the corner.

@Playgrind
It really does depend on what others are prepared to pay. They won’t know about your friend’s mortgage and it has no bearing on rental values. In our nearest bigger town, an ok 2 bed will be £1000 pm at least. The problem is that if you cannot buy, it makes no difference what anyone else pays for a mortgage. Well done you for not being lured though!

If you were selling, why would you not wish to maximise the price? Who can afford to be generous?

The banks are changing their lending criteria to reflect the cost of living crisis. Santander did it last week, others to follow. Mortgage companies aren't valuing at current bonkers levels, so people don't get the lending they think they will. This will feed through quite fast. I feel very sorry for people being swept into mad bidding wars at precisely this point.

@LoopyGremlin - offers over is standard in Scotland but I think the difference is that in Scotland we know the value when the property is marketed and have a copy of the survey.

So if the property is advertised as offers over £295k and the home report valuation is £300k, say the HR says windows need replacing but roof is fine - it's much easier to decide on how much over £295k that is worth to you. In England you are making that offer not knowing anything about the condition of the property except what you can see as the surveyor hasn't visited yet.

@ScaffoldingEndlessly

The Home Report Valuation is what helps the system work in Scotland though. It's great, but you do need to have a close eye on what your budget is so you don't go crazy!

The home report valuation is almost redundant in some areas- sellers use it to see how much over they can get- Edinburgh expects 20% over.

Having to have this much in savings, on top of deposit and then extortionate stamp duty for over 325k means that lots of people are totally unable to buy in desired locations. Where I live, you need to pay about 15% over and so lots of people can’t afford this.

I have a friend who has a 6 figure stamp duty bill on a house they paid 180k over home report for, that needs renovated..
needing this much capital means buying in these areas is totally out of reach for lots of people. New build around me are starting at 600k and people are willing to go for it because they can use full capital towards mortgage.
The banks will also only mortgage up to home report so all this extra money almost disappears when you buy, which is v depressing too!

It's so difficult right now. We're in a hot sellers market area and things are going way way over asking, it's just unattainable. Everything has been 'offers over' and then going to best and final. People saying you should be looking at properties under budget by 20% to allow scope to go up, just shows how overpriced houses are right now. Houses for 20% less mean one less bedroom or much less space. It's depressing. We're also being kicked out of our rental as the landlords want to make use of the hot sellers market. Perhaps understandably for them but sadly for us. Really hope it settles down, but who knows.

It won't be like this forever my not so hot town had offers over on every property last year. Fast forward to now only a handful of estate agents are trying the same marketing strategy and they are having to reduce. It won't be forever if you aren't in a hot area especially with the cost of living squeeze coming.

It's a sellers' market, but the majority of those sellers will also be buyers, the majority of whom will be buying a bigger house. So it just puts their onward purchase even further out of reach. Ultimately nobody really benefits other than those downsizing. Who are likely to be the wealthier baby boomers who bought cheaply in the first place (albeit with much higher interest rates). Certainly not FTBs, who now have to save for longer, unless they are the children of those wealthy downsizing baby boomers. It's madness, but it's propping the economy up.