House prices: Expert discusses ‘interesting’ pricing differences
It’s a seller’s market at the moment and the average UK house was priced at £277,000 in February, up from £27,000 last year. Homebuyers may find themselves in a position where they can afford to offer above the asking price, especially when there are several bids on the table for one property. But is it the right thing to do?
Offering above the asking price can cause problems for people buying a house and can even cause a deal to fall through.
There’s nothing worse than spending months negotiating the price, working with the bank, lawyers and surveyors, only for the agreement to collapse at a late stage.
But when there are several offers on a property, offering above and beyond the asking price is sometimes the only way to get past the bidding stage.
The estate agents that Express.co.uk spoke to generally agreed that paying more than a property is worth is risky – but sometimes it can be worth the trouble.
House prices are rising and many people are bidding above asking price to secure their home
House prices: Experts say paying over the asking price is a risk for buyers
Jeremy Leaf, an estate agent in north London and former RICS residential chairman, said that buyers should do their own research to work out what the real value of a property is – even if this is different from the price of estate agents.
He said: “It’s all about preparation, going in with your eyes open and going in with what you think is a fair price.
“I can tell you that people do pay over the asking price, but it might be that the asking price has been set over the value.
“I think it is very dangerous to pay over the asking price, you have to find out whether the asking price is realistic or not.”
House prices: A deal can fall through if a property is down valued too much
Sometimes, a house may be valued much lower than it is actually worth, and in these instances, Mr Leaf explained it would be worth putting in a higher bid to try and grab a bargain.
He also explained that some houses are worth more to individual buyers because they are near to a good school or are in an area near to their place of work.
Ultimately, he said, the onus is on buyers to do their homework and decide how much they are willing to pay with all factors considered.
He added: “If you have been looking for a while, you should know if the price is about right.”
Ian Wood, Director at Ian Wood Real Estate, agreed and said: “Over bidding is a big decision, never one to be attempted just to push a sale through.”
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Matt Baker, co-founder of Scott Baker Properties and The HMO Platform, has seen how many houses are going for above the asking price right now, sometimes by up to 20 percent more.
He explained that buyers should consider whether the house is their long-term option when deciding on how much to bid as the market may be kind to them in the future.
Mr Baker said: “Someone buying a house should always buy within their means, so in this very buoyant market means that you want to look at properties which are being marketed lower than your budget to give you the option to bid higher.
“The buying decision will come down to how much someone wants the house – if it’s in the perfect location for them for personal reasons – schools, job etc, then people are going above and beyond and are happy to pay the premium, especially if it’s their long-term option where the market will be kind to them even if houses prices drop in the coming years.”
He added that house prices are expected to stay high in the next few months and buyers need to work out if they can afford to buy a house that is down valued by five percent or more.
Ultimately, deciding whether to overpay is the choice of the buyer who needs to weigh up the extra cost against the reason for bidding higher, and whether they can comfortably afford to pay extra.
And as Jaison Vyas, Sales Manager at Hunters Estate Agents, explained: “Purchasers should worry less about down valuation and tackle it if and when this may arise.”
He added: “My general advice to buyers is to know your criteria, place a value on your individual markers and see how many of those are ticked off. That should allow you to value the property based on its merits and how closely it aligns with your needs.”
The UK housing market is changing quickly right now and the cost of living crisis can make paying back expensive mortgages really difficult in the long term.
But it’s also worth remembering that properties are not just an investment or pile of cash, they are homes designed to be lived in and enjoyed.
And if a house has a number of key things which would make it perfect for a buyer, then it is sometimes worth paying extra.