High asking prices

LookingForLondon

I’ve been looking for a property in London for a while now and have recently spotted multiple properties with asking prices that make little sense when considered alongside recently sold prices or recent asking prices in the area.

In one area where the terraced houses are all uniform and similar in size, I’ve found two listed at £1.3m, despite equivalent properties having sold earlier in the year for £1m and £1.1m. These sold properties were also in reasonable condition whereas the properties for sale need total renovation that I estimate would be well into 6 figures.

It makes it very difficult to put in a realistic offer for the properties because it seems obvious they would be rejected - once you’ve factored in the actual market value for the property and the cost to renovate to get to that market value you’re looking at about 30% off asking without any Covid-19 discount being factored in. When I suggested to the estate agents the asking prices were very high they seemed surprised and confident that they were the right price.

Has anybody had much luck in the past securing a sensible price on a property that is listed far above that price? Or in these cases is it not even worth bothering with an offer?

And have people found much of a price reduction due to the condition of a property meaning significant work is required?

stevieboy308

I'd say prices are higher around me in the north.

Same house as mine but had new kitchen and bathroom was asking 35k more than mine was on for at the back end of last year and took a few months to sell, this one was sold within a week

numbercruncher8

That isn't too egregious really. People or agents see a price, invariably think their house is better than what sold before and so think it's worth a little more, and price it ahead of that with them receiving an offer in that price region.

Better to price it too high and reduce it if it doesn't get a sale, rather than price it too low, sell it immediately and wonder if you could have squeezed a little more out of it.

Quite often this effect will be most pronounced where there are blocks of flats with few sales or uniform streets, someone else nearby had some success asking for (and getting) an inflated price, and then everyone else wants that. In some cases asking extra to reflect that it's been a year or two since the last sale and house prices only go up! But you can't really blame them, that is the game. Short of getting someone desperate the market will correct it and with price cuts all across London people are getting more and more options.

This came up today in my search:
https://www.rightmove.co.uk/property-for-sale/property-80965655.html
It's surprisingly old fashioned inside. And there are other flats of similar size and of similar river views in the £600-625k region that are a little more modern, so this should be priced among them.

Yet it started out last year asking £900k.

princeofpounds

Those are not particularly different prices in relative terms, even though the amounts are large. The margin for error on valuing properties can easily be 15-20%, particularly when it's not low value identikit housing. 

They also reflect differing objectives of vendors. Some may be priced for a quick sale. Others may be much less motivated to leave but would take a great offer if one came along, and price accordingly. Some like the idea of 'kite flying' at high prices but would take a lower offer if one came. 

Then there can be non-obvious aspects to value. Things like the length of lease, for example. Or a busy bus stop outside that's not shown in the EA photos. Or a halfway house next door. Or whatever. 

EAs will generally express universal confidence in pricing, at least initially. But they will often give a sense to viewers if there is flexibility in pricing to encourage them to consider an offer that otherwise wouldn't be made. They also are usually fine with lower offers being floated as long as they are made respectfully.

I have a handful of acquaintances who have managed to get surprisingly large discounts on London properties over the years (15-20% on a couple of occasions), but that tends to be in situations where the marketing price was higher than it probably should have been. Newbuilds flat in central London are notorious for this - I never considered one due to the astronomical prices they market at, but a couple of colleagues have bought and both negotiated down materially from the list price. 

trex227

Could be sellers not motivated to sell e.g relationship split where one party will only sell for a certain amount or seller that needs to sell for a certain amount to cover existing debts and make a move viable

OldMusicGuy

Just make an offer and see what happens. You offer what you think it's worth, if the buyer doesn't agree they won't accept it. Generally EAs will value on the higher end and most sellers want to try to get the most they can. We did when we sold last year and ended up selling well below our initial asking price (which we knew was optimistic, but we wanted to try to get the most we could). A lot depends on how proceedable you are and how desperate the seller is to sell.  

[Deleted User]

Good properties in zone 1 and 2 in the sub-£1m market sell straight away.   If you're looking at listings that have been up for months or years without selling, those are just the wrong'uns!

Crashy_Time

Just use PropertyLog and have a good laugh.

LookingForLondon

The key is probably to avoid being anchored by the asking price. I guess if we put in the offers they will be there if/when the asking price comes down!

The thing that really perplexes me is that the condition doesn’t seem to affect the asking price. I suspect there are plenty of people who would underestimate refurb costs so maybe the sellers will get lucky!

OrlaJ

I've noticed the same, the issue tends to be particularly pronounced in London and around the slightly higher end of the market. There's been quite a bit of analysis done on the difference between asking vs sales prices. In London the average is sales prices of 7 - 8% below, whereas across the rest of the country 4% below tends to be the norm (this was according to one source at least).
However, when looking for estate agents many were claiming to achieve 97 - 100% of the asking price. How can this be? Would be interested to hear any insights.