Price adjustment for smaller homes

jake_jones99

gwynlas said:

Did you view the larger house or just the smaller?
Even in areas that use price per square foot/metre there is still variance
Both are 3 bed 2 bath houses built at the same time what was original price difference?
Take any EA statement with a pinch of salt they talk up the market when it suits them, are they responsible for both sales?
It is your decision but if you would harbour resentment that you overpaid then perhaps you should withdraw

This comment actually inspired me to look at the originally sold prices. Thanks for the suggestion. 

jake_jones99

gwynlas said:

Did you view the larger house or just the smaller?
Even in areas that use price per square foot/metre there is still variance
Both are 3 bed 2 bath houses built at the same time what was original price difference?
Take any EA statement with a pinch of salt they talk up the market when it suits them, are they responsible for both sales?
It is your decision but if you would harbour resentment that you overpaid then perhaps you should withdraw

What do you mean by "areas that use price per sqm difference"? Does this tend generally to apply to isolated regions? And are they characterised by anything in particular?

Tabieth

jake_jones99 said:

jimbog said:

What have you decided to do?

As noted in a previous message I found out that, when it was first built, this house sold in the same month as one next to it. It was 20% smaller and 9% cheaper at that time (early 2000's). My offer is 8.8% cheaper than another nearby property whose sale just completed days ago, and is 23% smaller. It is close enough for housing market standards, so I'll dismiss the difference. 

I have also seen other houses in the same cul de sac sold at just 25% discount to larger ones, while being 50% smaller and having one fewer bedrooms. So it seems that this is the type of adjustments being done in this area. At least that's what they were around 15 years back when they were all built, so I'll assume the same ratio is maintained. 

So I'll go ahead with it, but not because "there's no objective price, the price is only what you want to pay",  "don't dare upset the seller" and other silly reasons invoked. But because I found some data that shows I'm not the town's biggest idiot if I proceed. 

I didn’t see any “silly reasons” invoked. You don’t like the replies - fine.  You asked for advice and you received it. I hope it was helpful. 

jake_jones99

Sorry didn't mean to sound bold was just saying that it helps a buyer to find some logic for what they're paying despite the market showing some randomness. 

silvercar

jake_jones99 said:

gwynlas said:

Did you view the larger house or just the smaller?
Even in areas that use price per square foot/metre there is still variance
Both are 3 bed 2 bath houses built at the same time what was original price difference?
Take any EA statement with a pinch of salt they talk up the market when it suits them, are they responsible for both sales?
It is your decision but if you would harbour resentment that you overpaid then perhaps you should withdraw

What do you mean by "areas that use price per sqm difference"? Does this tend generally to apply to isolated regions? And are they characterised by anything in particular?

In the sort of ares where houses are individual and buyers often knock out the interiors and refurbish completely, it is harder to value individual properties, particularly if there are not many on the market at any one time. So it is difficult to distinguish between general house price inflation for the area and the perceived value of a particular property. Price per square meter is a leveller. In areas where extending properties is popular, the land may have a higher perceived value.

GDB2222

jake_jones99 said:

Sorry didn't mean to sound bold was just saying that it helps a buyer to find some logic for what they're paying despite the market showing some randomness. 

You have not found any logic for anything, I’m afraid. You have found a precedent, but you don’t know the reason for that precedent. For example, when these houses were originally built, there may have been a government incentive scheme that favoured houses up to a certain price point.

Smaller houses are more expensive to build per square foot than larger ones, for example because there’s more foundations per square foot. But with a size difference of only 20% that would not make 10-15% difference. 

One explanation may simply be that there is more demand at the lower price point, but I don’t think that makes the smaller houses better value for money. 

jake_jones99

GDB2222 said:

jake_jones99 said:

Sorry didn't mean to sound bold was just saying that it helps a buyer to find some logic for what they're paying despite the market showing some randomness. 

You have not found any logic for anything, I’m afraid. You have found a precedent, but you don’t know the reason for that precedent. For example, when these houses were originally built, there may have been a government incentive scheme that favoured houses up to a certain price point.

Smaller houses are more expensive to build per square foot than larger ones, for example because there’s more foundations per square foot. But with a size difference of only 20% that would not make 10-15% difference. 

One explanation may simply be that there is more demand at the lower price point, but I don’t think that makes the smaller houses better value for money. 

A government incentive in 2010 that sets a purchasing threshold precisely between £220k and £240k. It would also need to be significant enough to allow a buyer to proceed with it when it was unable without. May be, but as I am unable to find it, I cannot judge based on a hypothetical incentive, but rather on the data I know it's true. 

For example, I found the FirstBuy scheme around that time which had a cap of £280k on the price of the house. Also a stamp duty relief for properties under £250k. The relief would be of ~£2k.

Are you aware of any relevant incentive lower than £240k?

GDB2222

You are taking my hypothetical example rather literally. Good luck with your purchase. 

jake_jones99

GDB2222 said:

You are taking my hypothetical example rather literally. Good luck with your purchase. 

Well I had to, just in case there was some truth behind. I can speak to local agents anyway to find out if there were any incentives that influenced those prices. 

swingaloo

I don't think I have ever read a thread on the house buying forum where someone has been so analytical about the purchase of a home. 
Do you actually like the house, does it feel like home to you, will you actually enjoy living there? I paid almost 15.000 more for my house than the house directly across the road from me which is identical to mine and was sold 2 weeks before I bought mine.
Do I care? not a jot, there is a lovely willow tree in the garden and I love to sit under it with a book and coffee. Im in heaven. That's what house buying should be about, how you feel not percentages.

I sit back and wait now for the follow up thread when you eventually meet a partner and want to live together. It will be an eye opener I'm sure when you start work out what percentage they should be paying to ensure absolute fairness!