First Time Buyer - How to Value a Property?

LdnFtB

Hi everyone,

I'm looking for some guidance as to how to value a property in order to make an offer. The methods I'm using seem to result in a big difference (sometimes up to 20-30%) between the value I see and the asking price. Am I being too precise or are the sellers this deluded in what they're looking for?!

The estate agents generally try to justify the asking price using properties with a similar description (I.e. 2 bed ex council) but when the actual sizes of the flats can vary as much as 15-20m2 and sales were as long as a year ago I'm loath to use such a broad brush measure.

For background, I'm looking for a flat in London, Islington.

The first method I'm using is quite crude - I find the last flat that sold in the same block and increase that amount by the local house price inflation as measured by the Land Registry. This has left me with 10% differences between value and asking price.

I use the land Registry rather than the Nationwide or Halifax indexes as it allows you to sort by local authority and includes all sales, not just mortgages.


The second way I look at value is to look at similar sales in the area and figure out the price / m2 paid for those properties and apply that to properties that I'm looking at. I think this is more accurate than simply going with the broad description. This also results in about 10% difference between apparent value and asking price.

The final method I'm using is to track the actual flat I'm looking at against the Land Registry index for the area. Say for example the flat I'm looking at was bought in Sep 2008 for £230,000. The Land Registry House Price Index for Islington Flats and Maisonettes was at 63.8 at that point. It's now at 100.2 - which implies that the value now ought to be ~£360,000. This valuation is 20% off the asking price!

Am I being too pernickity, or am I reading the local market right and it's the sellers who are being a bit silly (some asking prices are 15% higher than they were last year :shocked::shocked::shocked:)

Caz3121

Are you a cash buyer or looking to buy with a mortgage? If the latter, ultimately your lender will want a survey completed with a surveyors valuation which they will use to work out what they would lend on the property. If you want to pay more for the property than the valuation then you would need to find that extra yourself, some people will do this depending on how much they want the specific property
Sellers will often list at a price as advised by their estate agent, offers may come in below that price or there may be no offers and they ultimately drop the price. Some sellers may have a minimum they need to achieve to be able to move on
Ultimately a property is 'worth' what someone is prepared to pay for it

Slithery

As always, the only true value of a property is what someone is prepared to pay for it. Anything else is just guesswork.

bobobski

You should use whatever method works for you, but I think you've missed the point of what you're looking for. The value of a house (or any other commodity) is the price at which someone else will buy it. There is no magic formula.

Cakeguts

To get close you have to use actual sold prices for a similar flat in the very close same area. Then you have to decide what it is worth to you.

hazyjo

You're trying to value it mathematically like Zoopla and the like would. You can stand there quoting these valuations/your reasoning at sellers/EAs, but be prepared for someone else to whizz past you and offer another figure.

You can't say that the area has gone up say 30% in 3 years so add that to what they paid 3 years ago. There is no science behind it.

As above, it's worth what someone will pay.

Jx

steampowered

For a 2-bed flat in central London like the Op is looking for, I'd have thought sales of very similar properties must be happening all the time, giving a very clear local market.

Sellers can't charge much more than the market rate if there are lots of other similar properties nearby.

I recently bought a 2-bed flat in London too. By using Zoopla's actual sale prices it was easy to see what very similar flats had sold for over the past year or so. The sale prices were all very similar.

LdnFtB

Yeah I think that's what I'm struggling with - there's nothing of a similar description that's sold within the last twelve months. Lots of the properties that we noted at the beginning of our search six months ago are still on the market but haven't had any reductions so there's nothing we can use as a sounding board.

I guess going on the above comments if they're still on the market at that price then that means no one thinks they're worth that much?

Crashy_Time

LdnFtB wrote: »

Yeah I think that's what I'm struggling with - there's nothing of a similar description that's sold within the last twelve months. Lots of the properties that we noted at the beginning of our search six months ago are still on the market but haven't had any reductions so there's nothing we can use as a sounding board.

I guess going on the above comments if they're still on the market at that price then that means no one thinks they're worth that much?

Yep, that`s correct.

hazyjo

LdnFtB wrote: »

I guess going on the above comments if they're still on the market at that price then that means no one thinks they're worth that much?

Generally yes, although in certain areas there is a massive shortage of buyers at the moment. My local EAs are saying there are a quarter/third of usual buyers/sales. I expect it'll pick up slightly after the election. People don't like a deadline so will be hanging on until after...

Of course, that may bring prices down - but I've found cheaper properties don't always mean more buyers. If anything, if the market drops, it can scare them away even quicker as they panic they're buying at the peak.

Funny ol' game this property malarkey.

Jx

Ogriv

I think that just considering metres squared like in your second method won't work. Because a lot of what drives perceived value is sentiment rather than complete rationality. So there could be the same size properties near each other, but one has a few more trees nearby so is more highly valued.
Your first method probably works better.