First Time Buyer in London Asking vs Selling Price

pineneedles

Good luck! No advice from me but we are in the same boat ... trying to buy in SE London and finally in the position we were hoping to be, with a 30-40% deposit and very decent mortgage rates available, but have now twice lost in closed bids to offers way above asking price, most recently to a cash buyer. I'm itching to find out how much they paid, but Land Registry data comes through sooo slowly it's hard to have a proper evaluation of the current market.

What I wanted to ask is, if making offers above asking price, isn't there the danger that your lender's evaluation may be quite a bit less than the offer, in which case you may not be able to borrow as much as you thought. Wonder if this causes many sales to fall through?

browneyedbazzi

pineneedles wrote: »

What I wanted to ask is, if making offers above asking price, isn't there the danger that your lender's evaluation may be quite a bit less than the offer, in which case you may not be able to borrow as much as you thought. Wonder if this causes many sales to fall through?

There certainly is a risk that the property will be valued at less than you have offered for it. Just because it is valued under the offer doesn't necessarily mean the sale will fall through - there may be some room to renegotiate the price or if your deposit is big enough you may still be able to go ahead (if you think the house is worth what you've offered and are willing to take the gamble, or if you think it is worth paying over the odds).

If you're making offers at the limit of your budget it's much riskier than if you're well under.

Late_Newbie

Once again, thanks to everyone for all the advice.
we made a first offer at 2.5% over asking price and are now waiting. Re questions people are asking:

firsttimeforeverything: I agree, but it is not easy to know what the property is worth for us. let's say it is the best we have seen by a long shot, and much cheaper than many dumps (roughly in the same area). So it is definitely worth more than asking price by say 10%.

pineneedles: I have certainly heard this before, but properties are going way above current value anyway - e.g. I have looked at current values of properties. Typical finding: current value £270-280, asking price £330, selling price higher. But yes we do have a very good deposit and are trying to have as low a mortgage as possible in the circumstances.

mail2z: we stupidly waited after 2008 thinking there would be a big slump, and could even have bought something tiny back in 97 but didn't (too young, unstable income). I really dislike aiding and abetting this craze, but paying rent means throwing money away essentially - at much higher sums than a mortgage for an equivalent property

Mrs_Z

I keep my fingers crossed for you. Please give us an update how you got on. Pineneedles; we've been there too.... itching to find out how much (or little) we lost out on. And also hoping that the property would come back to the market for one reason or another so we could have another go!

bouicca21

Hoping it will come back on the market, eh, Mrs Z? Let us hope it's not the same property as I lost out on, cos I am thinking exactly the same thing!

Mrs_Z

bouicca21 wrote: »

Hoping it will come back on the market, eh, Mrs Z? Let us hope it's not the same property as I lost out on, cos I am thinking exactly the same thing!

Dare to tell me the postcode ??

Late_Newbie

Well our offer on the property was accepted at 14% over asking price, that is, at the upper limit of our budget but still within it. Of course, since this was a sealed bids affair we are well aware that the next bid could have been much lower.

I owe a lot of thanks and gratitude to you folks for your advice which was very useful when deciding our final offer. In the end we decided that the house is definitely worth this sum- unless of course the survey unearths major problems which we had not anticipated.

As for having possibly lost several thousand through overbidding: yes, this is true, but the property, in our view, is still superior to every other property we have seen online or in person with an asking price identical to our final offer. So in this sense: yes, we did pay what it was 'worth', except value is completely skewed and we still could easily get gazumped at any time.

We are very fortunate to have a large deposit. Right from the beginning, my number one rule has been to decide on a mortgage that we can afford even if interest rates go crazy and stick to that no matter what.

We are aware that what we did aids and abets the current market craze. I am not at all happy about that.

Many thanks again for your advice and kind words and good luck to everybody

Regards
Late Newbie

Mrs_Z

Well done and congratulations! Not easy to achieve in these market conditions.

MGCP

Congratulations and I hope all goes well with the sale process.

We've just exchanged contracts and paid about 10% over the OIEO price at which the property was marketed. The estate agent who marketed the property seems to have an (unusual?) habit of putting the sold prices on its website once contracts have been exchanged. It makes interesting reading as we can see a number of other properties in the area as well as ours, and sold prices seem to be consistently about 10% over.

We of course worried at the time about the valuation, but it was valued at what we are paying. Between offer and exchange we haven't seen anything else on the market we like as much that we could possibly have got for the same price, so feel very relieved. We will also be paying less on our morgage for a house than we were previously paying for a much smaller flat (albeit in a "trendier" area) so it feels like it was the right decision for us.

SecondTimeBuyer

I can't believe the bad advice on this thread! I bought 12 months ago and bought it at 7% under asking price. I would strongly suggest you should never over bid on an a property unless it has been completely under valued by the estate agent. You are also at a high risk of getting declined for a mortgage by the surveyor or entering negative equaty when interest rates rise.

Please undertake the following steps and make sure that you are not over paying for the property:
1. Hold off from appointing a solicitor or applying for a mortgage until you have completed step 2.
2. Check Zoopla, Mouseprice, and RightMove for actual sold prices for similar properties on your road, and adjacent roads. Ensure you are paying within the same price bracket.
3. If you are over paying withdraw your offer (you can withdraw or negotiate your offer up until exchange of contracts) and look to renegotiate.

Good luck!