"Ceiling" price for a house?

AllesAusLiebe

Hi everyone,
Please could anyone shed any light on how an estate agent arrives at this figure? Is it just simply by looking at neighbouring sold prices? What if very little has sold in the area recently?

For context, I'm looking at putting an offer in on a property which could do with some updating. I'd like to build a small extension at the rear, however, we were trapped in negative equity a few years back and I'm nervous about spending too much money on renovations in case when we come to eventually sell, we get stuck again! I've asked the agent but they haven't responded.
Thanks in advance.

Cakeguts

They guess based on which way they want to think the market is going.  It is up to the buyer to work out what the property is worth to them and then make an offer based on that.

Octothorpe

Personally i think it often depends on the house type and area, so is it a very small terrace more suitable to FTBs? Is it in a less desirable area?

As an example, there's a house that's a semi on for sale that's at the end of a t road full of tiny ftb/btl terraces in a more 'lower class' area. It's on for 450k as has 6 bedrooms and extended.

If someone had 450k to spend on a house they could get a semi or detached in a lovely area for that money!!

Scotbot

The ceiling price is the highest price paid to date for the same sized property on the street or in the same postcode. Size is usually determined by number of bedrooms. If not much has sold recently then it's  not a reliable measure. The property that has achieved the ceiling price is likely to have been renovated or built to a high standard with a plot on a good position. 

It is just a guide. Helpful for people refurbishing, if when you have finished the total spend is more than the ceiling price from a recent sale you have probably over invested. 

Angela_D_3

It also depends what the person wants the house for.  Ive managed to buy a three bedroom house for not much more than 2 beds in the area are selling for. 

However those 2 beds have been made into lovely family homes in an area thats full of buy to lets.  Spent a lot of money on them too by the looks of it.   You wouldn’t really want to live there yourself.  

Landlords dont care about the farrow and ball decor theyll work out how much rent per bedroom they can get.  

seradane

Difficult if not much has sold recently! But you will want to try and look at what a buyer will get for the same money and whether those other properties are likely to be more desirable.

So for example, if I bought a 3-bed, in need of modernisation, for £200k, and there was a similar 4-bed, done up, maybe a bit generically but shiny new kitchen/bathrooms/floorings/etc, that sold for £250k, I would consider that if I spent £50k on my property, I would be as expensive as a 4-bed, but only have 3 beds, so as nice as mine might be, it'd be unlikely to sell for the same. So I would probably only want to put max £20-£30k into it. 

So for you, I'd take the price of the property you want, add double the price you think it will cost to renovate/extend (unless you are an experienced renovator, building works cost way more than you think, plus gives a bit for contingencies and buffers), and then take that budget and look at what else is for sale nearby. Will your property be better or comparable to those available? If so, then all good!

If not, then you will either want to look at a smaller renovation, buying a different place, or going, you know what, we're happy to spend the money to make it the place we want to live in, and just have to accept we won't get all of that back when we come to sell.