How to know if you are paying fair price or overpaying on property

Sarah1Mitty2

CSI_Yorkshire said:

Sarah1Mitty2 said:

LLM000 said:

Sarah1Mitty2 said:

Surveyors don`t value any more? You can be sure though that if a bank is lending you money to buy it they will be valuing it properly for the current economic climate, that is your price guide, and you probably shouldn`t be offering over an asking price any more IMO.

The bank valued the property on a 'drive by' basis - assuming only looked online as they did not visit the property at all. They have agreed our mortgage which gives me some reassurance but equally as they have not fully looked at the property, it does leave me feeling uncertain. 

Are you using PropertyLog to monitor asking prices in your area?

Asking price =/= property value to any individual other than the vendor.

It indicates sentiment which  = Very useful when negotiating a price, I might prefer one house over a neighbouring house, but the neighbouring house has accepted the market and has lowered their price, that is leverage to get the house you prefer (and who is mildly deluded) to also drop their price.

Linton

A house is worth what someone (for example you) is able and prepared to pay for it and the seller willing to accept.  There is no other meaningful measure. If you are prepared to pay more to get the house you want than other people are or more for the house you want than for a house you dont want that is fine.

I think some people, particularly first time buyers, make getting the "right" price too much of an issue. After buying 5 and selling 4 houses over the years I dont remember what I paid for the first 3. Once you have your house it doesnt really matter.  

peterhjohnson

What I have done in the past is to spend a fair amount of time monitoring my desired market including looking at recent sold prices at the Land Registry. After a few months. I'd see a new listing and look at the asking price and almost immediately get a feeling that the price was about right/too high/etc. Sometimes I had to read the particulars carefully and the "rightness" of the asking price would emerge - or sometimes not!  It got so that I was rarely surprised when a a house I thought overpriced, hung around for months. Or when a "cheap" house went rapidly.

I think anyone looking at a very small segment of the market can become as expert as a surveyor at prices. A real surveyor has to cover a much wider array of properties and might not be so good for that reason.

pseudodox

As already stated a house is worth what someone is prepared to pay.  Just depends how much you want it or whether there is another house equally appealing at a more acceptable price.  Just don't pay over the odds if you are not planning to live there long term.  I paid almost 10% over the odds 20 years ago after a bidding war, but knew I would be staying put & I really saw no other house like it.

Sure enough the "market value" slumped well below what I paid within a few years.  Now it has climbed again & had got to almost double what I paid.  Now dropped back again from the high by maybe 5%.  But I never regretted the price I paid & as neighbouring houses rarely come on the market I was right in spotting something not exactly unique but with added value for me that was worth every penny.

RelievedSheff

Every property is unique. No two properties are the same, even out of the box new builds of the same house type are never exactly the same. They have different orientation and position, different fixtures and fittings, different locations etc.

This is what makes valuing a property so very difficult. 

A property is worth what someone is willing to pay and what the vendor is willing to accept. 

Doesn't make deciding what a property is worth to you any easier.

If you find a property you like offer only what you are comfortable with. 

Sarah1Mitty2

pseudodox said:

As already stated a house is worth what someone is prepared to pay.  Just depends how much you want it or whether there is another house equally appealing at a more acceptable price.  Just don't pay over the odds if you are not planning to live there long term.  I paid almost 10% over the odds 20 years ago after a bidding war, but knew I would be staying put & I really saw no other house like it.

Sure enough the "market value" slumped well below what I paid within a few years.  Now it has climbed again & had got to almost double what I paid.  Now dropped back again from the high by maybe 5%.  But I never regretted the price I paid & as neighbouring houses rarely come on the market I was right in spotting something not exactly unique but with added value for me that was worth every penny.

If that was true there would be no such thing as a "down-valuation", a house is eventually worth what the banks and the prevailing sentiment say it is worth.

propertyrental

As already stated a house is worth what someone is prepared to pay. 

Sarah1Mitty2 said:

If that was true there would be no such thing as a "down-valuation", a house is eventually worth what the banks and the prevailing sentiment say it is worth.

All that proves is that a house is worth different values to different people. A buyer and their bank may value the property differently.

If the buyer ignores the bank's 'down-valuation' and borrows from family (either the full amount previously applied for from the bank, or the difference in the two values) and buys anyway, the the property is obviously worth that much, to that buyer.

He then gets to live where he wants, for X years, enjoying his purchase (that enjoyment has value to him but not the bank).

CSI_Yorkshire

There is no such thing as the absolute or correct value for a house, just like for almost everything else.

There is the value to a purchaser - above which they won't buy.
There is the value to a vendor - below which they won't sell.
There is the value to a mortgage company - which only needs to be enough to cover their capital.  Does that means a house on which you can't get a mortgage is actually worthless?  So should be traded for zero recompense?  Of course it doesn't.

I could buy a house for less than I think it is worth, but more than the vendor thinks it is worth.  Both would be pleased with that situation.  Does that mean that my value is wrong?  Or the seller's value is wrong?  Both? Neither?

Sarah1Mitty2

propertyrental said:

As already stated a house is worth what someone is prepared to pay. 

Sarah1Mitty2 said:

If that was true there would be no such thing as a "down-valuation", a house is eventually worth what the banks and the prevailing sentiment say it is worth.

All that proves is that a house is worth different values to different people. A buyer and their bank may value the property differently.

If the buyer ignores the bank's 'down-valuation' and borrows from family (either the full amount previously applied for from the bank, or the difference in the two values) and buys anyway, the the property is obviously worth that much, to that buyer.

He then gets to live where he wants, for X years, enjoying his purchase (that enjoyment has value to him but not the bank).

 Mortgage approvals would suggest that fewer and fewer people are following your advice, but it is an interesting hypothetical of how people get themselves into negative equity, many have done this and are now regretting it no doubt.

Sarah1Mitty2

CSI_Yorkshire said:

There is no such thing as the absolute or correct value for a house, just like for almost everything else.

There is the value to a purchaser - above which they won't buy.
There is the value to a vendor - below which they won't sell.
There is the value to a mortgage company - which only needs to be enough to cover their capital.  Does that means a house on which you can't get a mortgage is actually worthless?  So should be traded for zero recompense?  Of course it doesn't.

I could buy a house for less than I think it is worth, but more than the vendor thinks it is worth.  Both would be pleased with that situation.  Does that mean that my value is wrong?  Or the seller's value is wrong?  Both? Neither?

Unless a house is very unique they just tend to trade for the last sold price in the street/area, sellers who deny this market reality tend to end up in the hellish and very stressful predicament of "chasing the market down". We can repeat mantras about buying and selling over and over again but most people take their cues from the media and what the house next door sold for.