How to tell if a house is overpriced

One of the most stressful things about buying a home is deciding how much to offer. Are you paying too much for a house, overpaying and wasting thousands of pounds? Or have you underbid, making it likely you will be gazumped? And what if the property is downvalued by your lender?

Angela Kerr Director, Editor

To avoid overpaying for a house, it helps to research house prices in the area. Before making an offer and negotiating the price on a property, check out what sort of price range properties of the size and type you are looking to buy in your target area are selling for. So, you need to:

Research the local market inside out

To find out how much other houses in the same area or street have sold for in the past, you can use our free instant online valuation tool or the Land Registry will also give you an idea of sold prices in your area.

Find out how much comparable properties have sold for

To gauge whether a house is overpriced, try to compare prices for properties that are similar to the size and type of property you are looking to buy and in a similar condition. Use Land Registry to look at sold prices for the type of property (detached etc) and size (number of bedrooms). For more detail, type the address into Google. This should show you details from when that property was last listed. You can compare the floorplans of the property with the one you want to buy. Rightmove and Zoopla also have tools that show sold prices. You can see sales particulars including pictures of the sold properties.

Guesstimate the value of similar properties if necessary

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.

Keep your eye on the local market house price trends

Are prices falling, or rising – and how fast? See our House Price Watch report for the latest news on house prices. House prices are falling in some areas at the moment.

And, it is more of a buyers’ market than in recent years with Zoopla reporting that buyers are benefiting from 80% more homes for sale than two years ago and Rightmove reporting that the proportion of homes finding a buyer has dropped from eight in every ten (last year) to six in every ten — a 25% fall.

Find out as much as you can about the history of the property

Was the property 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 , they are more likely to accept a lower offer. See questions to ask the estate agent when buying a house.

Talk to rival estate agents

Other estate agents will often dish the dirt on a property, particularly if they have previously had it on their books and failed to sell it. Estate agents can be 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

Check the length of lease on leasehold properties

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? 

Factor in asking price wiggle room

Sellers often put a property on for anything up to 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 the asking price or you are in a high demand market/location.

Get a house survey

Once you have had an offer accepted, a house survey will tell you if the property is worth the price you have agreed to pay for it and whether you face any major repair bills when you take ownership.  Getting a survey is an important part of buying your new home and you should opt for a survey that includes a valuation (some just provide a condition report).  Find out more about the types and costs of surveys in our detailed guide – what sort of survey should I to have?

Be aware that a mortgage valuation is not a survey – it is just a cursory look at a property to assess how much the property is worth. It is required by your mortgage lender to ensure the property is sufficient security for the loan.

Instantly find and compare quotes from local qualified surveyors using our find a surveyor tool

Post-survey negotiations

If you have had a survey done and issues have been flagged, 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. See our guide on what to do after a bad survey report for more advice.

Challenging a down-valuation from your mortgage lender

Your mortgage lender will arrange to have a mortgage valuation survey. In some cases, your mortgage lender may not agree the property is worth what you are paying and will refuse your mortgage application. A down-valuation does happen and can be challenged. We would recommend speaking to your estate agent, the seller and your mortgage lender.

You will need to present strong evidence – three recent, comparable house prices that have sold at the same amount.

Our late consumer journalist, Christine Toner, successfully challenged her lenders valuation. Here’s how she did it:

“Our lender asked us to provide independent roofing and damp and timber reports. After doing so we were told the bank would be reducing our mortgage by almost £10,000 because of works needed to the property.”

Based on the reports, it was surprising how much the lender had downgraded the mortgage valuation by. The roofing report stated the roof might need work in 15 years at a cost of £3,800. Parts of the flat roof needed immediate work that would cost £550. Meanwhile the timber report said £558 of work was needed. At most, the bank should have changed its value by £1,000 to reflect the immediate work. “After countless hours on the phone, reading through the report and arguing the same points, our underwriter eventually agreed that there was no basis for £10,000 being retained and reduced the figure to £1,000.”

Finally, remember – all properties are different, and in the end, a property is only worth what someone is prepared to pay for it.

With each individual property different from any other and attracting relatively few interested buyers, it is difficult to generate a perfect “right” price for what an individual property is worth.

See our step-by-step guide to buying for advice on all the stages of buying your home

Making an offer: video