Owner wanting over home report value

[holigogo]

I’m trying to buy in Scotland for the first time so the system is new to me. Is it normal for owners to want over home report value or have I been unlucky? Twice I’ve offered on property at home report value and twice the owner has refused the offer as they want more than home report? This baffles me. I have no idea what I should be offering, what price band to look for as it seems that property within my budget on paper isn’t necessarily within my budget. For a system that is supposed to be less complex this is stressful! Any basic rule I should work to? Thanks.

Totally normal, at least in Edinburgh. I paid £12k over valuation for my house. Initially offered £10k over but they refused so I had to go up.

In terms of guidelines, is your solicitor not advising you on offer amounts? Or you can look and see what similar houses have sold for in the past.

That's the Scottish system. Your solicitor should be able to advise on what to offer above in your area. Edinburgh is crazy- about 20% above for tenement flats near the centre.

yes your soliciter should advise and it’s very regional and varies over time

note that from memory the home report value is what a mortgage company will use so you need to have cash for anything over the home report and the 5 or 10% that your mortgage company wants

In our area of Glasgow things were going for between 10-20% above home report value when we bought our place. We got lucky and only paid 5% extra but on a higher value property so less competition from young families. It worked out needing less capital than the properties with lower home report values.

Sometimes you've got to get to grips with the market in the area you're looking and just get a good feel for it.

Easier to do when you can discuss with owners - it's annoying when it always goes to a closing date!

We couldn't afford to go over value as you can only get a mortgage up to the value so we focussed on areas that weren't as desirable and got our house (in the south of Edinburgh) just under value. The second time we bought we found a house that had been on the market for a year as it needed loads done to it. So you can get around some of this issue by being really flexible on location or buying something that's been on the market for a while.

Houses often go to fixed price if they are lingering around so that's a good option too. But again, relies on you being really flexible about location.

For high-value properties in Edinburgh it's definitely normal for it to go 20% over value. We sold our first house over-value which is how we could upsize.

Rough rule of thumb is 10% over, but does depend where you're trying to buy. Last house on my estate went for 25k over home report value.

Contrary to what others have said I don't think there is a rule of thumb or a blanket 10-20% at all and you could end up seriously over-paying if you follow this advice. It all depends on the level of interest and also how much you want the property. We have bought thrice and sold twice in Edinburgh. Our first flat we bought for the home report value, the flat had come back to the market after a sale fell through and the owner had already moved away and accepted our offer straight away. When we sold it three years later, there were two parties seriously interested and it went for 10% over home report valuation. You have to suss out the market, the competition, as well as the seller's expectations. If you really want somewhere you may be happy to go in with a good offer. If there's lots of other similar flats around and you're happy to be a bit strategic, you might get something for valuation or even less than. It really depends on many factors. We recently bought a 4 bed house in a desirable part of Edinburgh for 6% over valuation - the amount of cash you need for LBTT and to fund the bit over valuation at that price point is considerable which may have reduced the competition or we may have got a bit lucky, but we certainly didn't need to go 20% over which some people might have advised us we needed to!

It really depends on the area, my home report offer got accepted last year and we accepted a home report offer on our house. We could have gotten over HR but the commission percentage was higher for the estate agent over HR and the HR offerer was in a good position so we took that, it wasn't really worth any extra hassle.

Thanks for the perspectives everyone. It’s a learning curve on our part. I think on this one there are no other offers so maybe the seller is being a bit demanding but if we want it we’ll have to pay or just walk away and leave the sellers to it. I could totally understand if there was loads of interest but that’s not the case according to the agent.

I agree. Offer what the house is worth to you. That’s how the system works. The only time I’d think about what others might offer is if it goes to a closing date when there are a few bidders. It is far more straightforward than the English system, not complex at all.

I think it very much depends on the house and the region you live in.
My friend a cash buyer recently bought a 2 bed cottage and went 12% over the asking price but you literally could move into it, everything that could be done had been done and it was outside the price range of the average first time buyer.
In contrast my DS and his girlfriend (first time buyers) have just purchased a house and paid exactly the home report value. They were raising a mortgage for 90% of the house and could only offer the mortgageable value.
A house locally in a highly sought after village but it needs a lot of work on it has been reduced twice and is now 12% below the home report value and rumours are they cheerfully accept less just to get rid of it.
A friend has hers on for 5% over the home report value people have looked at it but no offers.
All these are rural/small towns but all close to the coast.

I have just sold my house in Glasgow for 12% over home report value. The house is very well kept and have got very good feedback from those who viewed it. The area has good connection links, but no good school and is not considered to be very good neighbourhood. So it was a pleasant surprise for me, estate agent said that my area is 10% over HR on average now. I bought it 10 years ago 5k under HR
The new house I bought was over 16% over HR and it took me 6 offers in total to understand how much over HR I need to offer in a different area.
Important to remember that everything that you offer over HR would need to be covered by savings or equity as mortgage only covers HR value

Anything is worth exactly what someone will pay for it, a paper valuation is merely a guide price.

If the properties that you offered on have not gone to closing date, it means that the sellers might still be holding out for better offers. In our case our original offer was rejected (was under HR), but we were later contract by the sellers solicitors and encouraged to make a bid as the sellers had found something and wanted to move. We got our current place at HR value.

So what I’m trying to say is the sellers might still be probing the market and not in a rush and you could well be able to get the place if you wait a month or so. You should have a local solicitor to give you advice. If yours is not helpful try finding one who knows the area.

Definitely depends on the region. And the current market. Cities like Glasgow and Edinburgh as others have said will often be over home report value.

Where I live rurally it is not usual, although we sold in 2022 at a busy market time and got 18% over for our house, when the standard at the time was more like 5-10%.

If there are no other offers I say you hold tight. Their estate agent should be advising them of the current market, and what they might get.

I agree with this. I'm North East. My first property bought in 2007 was 20% over asking. The market was more buoyant then but it was also deliberately priced low to get people through the doors as it was a very unassuming and not particularly attractive flat but with spectacular views.

Second house in 2013 bang on valuation.

Now most would go for on or slightly under here but there's the odd exception to that.

Type of property, local market and amount of interest are key. There's no hard and fast rule and what applies in one area won't in another.

Your solicitor will know all this and should be able to offer advice.

OP, treat everything you hear from estate agents with a healthy dose of scepticism.

I work in conveyancing, due to the amount of purchases I help with I would say that I have a fairly good understanding of the market.

Most of our work is centred around South Glasgow, East Ren and South Lanarkshire.

Contrary to popular belief not everything in East Ren achieves over HR, it is more likely to achieve silly amounts than other areas but many go for either on or around the HR value.

Most other areas are a lottery, it really depends on how many people want the house.

You need to remember EA’s and owners have an interest in perpetuating local myths about offers over value, it’s not always the case.

To give an example, I dealt with a house last year where a sale was agreed at HR in a desirable area. It fell through due to the buyer pulling out.

The house went back on and the next buyer offered 12% over straight away as they thought it was necessary for the area, no competition, no closing date and a house which needed a lot of work.

The reality is that the seller was desperate to offload it and would have accepted £50k lower than they paid.

There’s no magic solution, every situation is different, but don’t jump in without testing the water first.

Do you have a solicitor or are you just listening to estate agents? Had the houses gone to closing date or were you just making an offer direct to the seller?

Take advice from a local solicitor
Properties in popular areas are going at 10/20 % over closing
We were top of 8 offers,at least we know we will always be able to sell it

Your solicitor should be able to tell you what’s usual in the area you’re buying. We just had an offer accepted on a flat for 10% over which is usual for the area (West End) but places with private gardens are going for mad money, like 20% over as they come up relatively infrequently

A house locally in a highly sought after village but it needs a lot of work on it has been reduced twice and is now 12% below the home report value and rumours are they cheerfully accept less just to get rid of it.

That suggests the home report value was too high. The home report value should reflect the condition of the house as well.

We have a property on the market at the moment. Marketed at HR value and would accept this or even slightly lower. But my experience of getting the HR done has left me rather disillusioned with it as it seems to be very arbitrary.

The HR is not the true value of the house, the true value is whatever someone is willing to pay for it.

The HR is (allegedly) an estimation of how much it would be safe to loan someone using the property as security.

In reality there is far too much collusion between EA’s and Surveyors in setting values, it is in their interests to keep each other happy.

Thank you everyone that replied. We have had an offer agreed at about 4% over hr in a village south of Glasgow. In the grand scheme of it, itcould have been 10-20% I’m feeling pretty positive about this and really like the house. 🤞🤞 we love it when we’re there and the moving process goes smoothly.

@holigogo

Congratulations, hope you’re very happy there!