How do I know I’m not paying too much?
One of the most stressful things about buying a home is deciding how much to offer - and pay. Are you paying too much, and wasting thousands of pounds? Or have you underbid, making it likely you will be gazumped? When it comes to bidding, only you can look after your own interests – and you can only do that by doing your research beforehand
- Get to know the local market inside out: you need to develop a quick and accurate feel for how much a certain property should sell for. To find out how much other houses in the same area or street have sold for in the past, the best websites to look at are: land registry, nethouseprices, ourproperty, rightmove, zoopla, primelocation
- Find out how much comparator properties – those that are identical or very similar – have sold for recently, or are on the market for. This is usually easier in more modern areas, and for blocks of flats
- If you can only find properties that are different in size from yours that have sold recently, then make an adjustment for square footage. For example, if the property next door sold recently but is 30% bigger, it makes sense to scale down the value of the property you are interested in accordingly. But remember there are other factors too, such as the state of repair
- Remember, sellers often put a property on for 10% more than they would be prepared to accept. If you just offer the asking price, you are probably offering too much – unless they have already reduced it
- Keep your eye on the local market trends. Are prices falling, or rising – and how fast?
- Find out as much as you can about the history of the property. Was it on the market before with another agent? Has a previous sale fallen through? Has the asking price changed? If the seller has had trouble selling the property, they are more likely to accept a lower offer
- Talk to rival estate agents. They will often dish the dirt on a property, particularly if they have previously had it on their books and failed to sell it. They can be very frank in their assessment of the prices that other agents are putting properties on sale for. See How can I get estate agents on my side
- Consider reducing your offer to take into account any major alternations that need doing. If the surveyor notes that you will need to spend £20,000 re-roofing, take £20,000 off the offer – if you think you are in a strong enough position. Obviously, if you think that you already have a bargain and are worried the seller is about to put it back on the market, you may not want to reduce your offer
- If it is leasehold, make sure you adjust for the length of lease. If a lease falls below 80 years, how much you should pay begins to decline rapidly. If a lease is just 60 years, the property is worth more than 10% less than if it had a long lease – more than £40,000 pounds on a £400,000 property. See Leasehold v Freehold – what’s the difference?
- You must check there aren’t hidden nasties about the property that would affect its price. Talk to the neighbours, and even contact previous owners, who no longer have a vested interest in talking it up. See Top Tips: Clever questions to ask the estate agent, Top Tips: things not to forget when viewing a property, and Making an offer and haggling over the price
Finally, remember – all properties are different, and in the end a property is only worth what someone is prepared to pay for it. In the economic jargon, it is an illiquid market, with each individual property different from any other and attracting relatively few interested buyers. It is not like cars, where there are thousands of identical Vauxhall Zafiras for sale, and thousands of people interested in buying them, with sales taking place many times every day. That means that it is basically impossible to generate a perfect “right” price for what an individual property is worth.