Formula For Calculating House Offers?

laser_jock99

Got my eye on house- unique so hard to put a price on it as there is much sales history data in the area. The house was valued at £250,000 in May/June- which for the purposes of this excerise we will assume was a true/fair valuation at the time.

If we take the national average rate of house price depreciation as 1.5% per month (actual figure for July was really 1.7% Halifax/Nationwide) then by the end of June the property is now only worth £246,250

By the end of July £242,556
By the end of August £238,917

I put in offer and it is accepted but two months (average completion time) the property wil be worth £231,304 at handover in October.

Also the property requires £11,500 remedial work which must be carried out in the next 12 months. This brings us down to £220,304.

So does my opening offer of £215,000 seem derisory based on my length of time on market x national average depreciation formula?


Two other ways you could arrive at my opening offer:

1) £250,000 -15% (standard opening offer figure apparently) = £212,500

2) Or (£250,000 - £11500 (remedial work) ) - 12% = £214,650

Any thoughts please?

misskool

It doesn't matter how you work it out, all that matters is what the vendors want/expect they can get for it

But if I had to choose, i'd go with 1) 250k-15% to start with

neilD

Why take the national rate, what was the local fall rate. You may be lucky and the local fall for the type of property maybe more.

Incisor

laser_jock99 wrote: »

Got my eye on house- unique so hard to put a price on it as there is much sales history data in the area. The house was valued at £250,000 in May/June- which for the purposes of this excerise we will assume was a true/fair valuation at the time. ...

That's where it all starts to go wrong. I wouldn't spend time on the rest of it, unless you are sure of that bit.

So who valued it? If it is an asking price, then So What - has it been marked up 25 % to allow a buyer to drop 20% and give the figure the agent first thought of? or is it being aggressively priced?

As for the work needing doing, the vendor may have factored it in or may not.

There is no formula, by the way.

laser_jock99

neilD wrote: »

Why take the national rate, what was the local fall rate. You may be lucky and the local fall for the type of property maybe more.

Sparsley populated area - so I can't find any specific data.

Maybe I should be looking at 20%........

http://www.mailonsunday.co.uk/news/article-1047426/House-buyers-demanding-20-discounts-homes-market-continues-sink.html

....according to the Daily Mail.

lincroft1710

Offer what you think it's worth bearing in mind cost of remedial works and what you can comfortably afford. Having had considerable experience of comparing house price indices with actual sales, the indices were on average 10% out on their figures.

lethal0r

how about you get your eye on several houses all with 20% below offers. if they say no then leave the offer on the table. someones gonna accept after a month or two.

thats my plan anyway. arent I amazing.

napoleon

laser_jock99 wrote: »

Got my eye on house- unique so hard to put a price on it as there is much sales history data in the area. The house was valued at £250,000 in May/June- which for the purposes of this excerise we will assume was a true/fair valuation at the time.

Why would you assume that? The average true worth at any given time is about 90% of the asking price. So your starting point should be about £225K. And only then start making the other deductions

donkeyman18

If the offer's not embarrassing it's too high.
Go in at £195k and tell them it'll be on the table for a month before you reduce it.

guppy

I think you are getting way too scientific about what is essentially an art.

The house is unique, your motivations for buying it are unique. Ditto for the seller's. The market in your area is also likely to vary.

All you can do is offer what you think it is worth to you. If you're worried about overpaying, simply offer less than what you think its worth. They can only say no.

Even the best valuers will be having difficulty in assessing value in the current market, where so little is actually changing hands, and sentiment is so negative. Valuers can only look backwards at what has sold already, where you need to be looking forwards.

Buyers and sellers determine the market, not valuers.

uncommonadvice

Hello, prev post is spot on. There is no scientific method. Negotiation is an art.