Paying above the market price

MarcusAurelius

Hi, what are the (less obvious) dangers of paying above the market price - when you definitely know this would easily be 7-10% above the market, e.g. when you judge by a price per sq ft.

In terms of budgeting, you probably have a pretty good idea about the max purchase price you can afford (e.g. assuming no renovations), but this hard limit may translate into a crazy amount to pay each month.

How do you know when to pull back and say danger zone, step back?

martan01

A house is on the market at 250k

You offer 260k

Your mortgage company values the property at 250k

You have to stump up the difference or lose out on the sale

MarcusAurelius

martan01 wrote: »

A house is on the market at 250k

You offer 260k

Your mortgage company values the property at 250k

You have to stump up the difference or lose out on the sale

I mean, that's obvious. Happy to oblige. But had the valuation been higher this 10k could have led to a lower LTV for instance.

When it comes to selling a few years down the line, how do I know the premium will hold?

pawpurrs

In short you don't, you also cant guarantee that house orices wont fall either, by the time you need or want to sell.
You can not value a house by the square m either, there is much more to it than that.
If your buying a character and unusual h they are much harder to value, and are worth what someone is prepared
to pay to a certain extent.

Annisele

I'd say the premium *won't* hold.

If you're paying above market price, the for the premium to hold you'd have to find somebody else also prepared to pay above market price.

eddddy

MarcusAurelius wrote: »

Hi, what are the (less obvious) dangers of paying above the market price - when you definitely know this would easily be 7-10% above the market, e.g. when you judge by a price per sq ft.

MarcusAurelius wrote: »

I mean, that's obvious. Happy to oblige. But had the valuation been higher this 10k could have led to a lower LTV for instance.

When it comes to selling a few years down the line, how do I know the premium will hold?

Hi Marcus

Your question is very hard to decipher, but I wonder if you are confusing two concepts: "The market value of a house" and "The average price per square meter for houses in an area".

More desirable houses will certainly be priced above "the average price per square meter for houses in an area". (But that does not mean the price is above their market value.)

On that basis, is your question: "Will more desirable houses maintain their premium price per square meter?"

Or do you mean something else?

Gwhiz

As edddy says.

The market price is whatever anyone is willing to pay. So if you pay £260K for the house, that's the market price.

Basically the house is worth whatever it is worth to you.

AlexMac

And I suspect that there's massive variation by area, or even within a street; we felt grumpy at being bounced into paying asking price on a really unique flat about 10 years ago, in a seller's market and because (according to the EA!) there were several offers coming in.

But, eight years later/2 years ago, we sold at way over our wildest expectations, despite the market being flat across most of the UK- but because it was bouyant in our micro-locality.

Whereas some people (like our cousins) took 2 years to sell then only did after a 30% drop in the asking.

So one can't generalise!