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How to Tell If a House is Overpriced

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Buying a house is a big financial decision, probably one of the biggest many people will make. The biggest issue for many buyers is getting a good value for the amount of money you spend. However, finding a property isn’t easy; the first port of call is usually browsing property listings online, where there can be vast differences in property prices. So, how can you tell if a house is overpriced? Well, you’re in the right place. 

In this article, we’ll be covering everything you need to know about property prices and how you can avoid overpaying. We’ve also previously talked about guide prices. Both of these blogs will especially come in use when it’s time to make offers and negotiate with sellers. 

Let’s get started. 

Start by researching the market

The very first stage of figuring out the true value of properties is taking an in-depth look at the area you’re looking to purchase a property. Property prices can change considerably based on the area alone. Some areas are more desirable than others, especially if there are better amenities; this results in higher property prices around that area. So, using a broad average property price of a city isn’t accurate enough when carrying out a property search. So, how do you get a more accurate property value?

Find out the selling price of similar properties 

Your starting point is to analyse the prices of comparable properties that have recently been sold in the same local area. Online platforms, local property listings, and property databases like the Land Registry are the best places to find this data. 

A word of caution: While looking at other properties, make sure you take into account the variations in property sizes, conditions, and specific features. A house with a bigger garden or recent renovations will generate a higher price. You can use these differences to compare with properties that you may be interested in later on. 

Make rough estimates on the value of similar properties

Once you have a good understanding of the selling prices of other properties, you can begin to make rough estimates of their true value. You’ll be able to use your knowledge of what the property’s size, condition, and unique features are actually worth. 

Keep up to date with how the local property market performs

The property market is constantly changing. There are many different factors that can affect the property price in a short amount of time. This means you need to keep tabs on the local market to stay up to date. So make sure you’re keeping up with the news within the local area, too. If there are new developments or an increase in demand, this will increase the prices of property. 

Find out the History of the Property

Digging into the history of a property can reveal useful insights that will help with determining the true value. Here’s how:

Check if the property has been on the market before, perhaps with a different estate agent. A history of unsuccessful listings should raise questions about why the property hasn’t sold yet. It could be due to pricing issues, market conditions, or underlying problems.

Additionally, investigate whether the asking price has changed during the current listing. If there have been frequent adjustments, this might indicate a seller struggling to find the right pricing or facing challenges in attracting offers.

A property with a history of price reductions can suggest a seller who is eager to sell. If they’ve faced difficulties in selling the property, they might be more receptive to reasonable offers. Even if they may not tell you directly, this information can help when it comes to negotiating. If a seller is looking to sell a house fast, they will definitely be more open to reasonable offers, especially if they haven’t received many since the property was listed. 

Explore Your Options

There are other options in working out the real property value than relying on similar properties alone. The more information you can gather, the easier it will be to make sure you don’t overpay for a property.

Tap into Industry Insights

Reach out to other estate agents who might have had similar properties on their listings or work in the area. Agents, even if you’re not working with them directly, can share insightful information about a property’s history, market performance, and potential challenges. Additionally, a rival agent with whom the property is listed may be more candid about the prices that have been quoted. This information can help ensure you make the right decision. 

Understand the length of the lease and its impact on leasehold properties 

For leasehold properties, the length of the lease impacts the overall value of the property. As a rule of thumb, the closer you get to the lease expiry, the more the property’s value will drop. For instance, a property that has 20 years more on its lease compared to another property will be worth 10% more. This is really important to ensure you don’t overpay and subsequently lose out on the value of the property. 

Recognising Seller Strategies

Sellers often set the initial asking price higher than what they actually believe it’s worth. This is a strategic tactic, so the offers they receive, even if below the asking price, will still match what they wanted all along. So, offering the asking price may not always be the best strategy. Unless the property has unique features or is in high demand, always try to negotiate below the asking price. This can save you money and ensure a fair deal. 

However, be realistic and take into account the demand for properties in the location. In high-demand markets, sellers might have less incentive to negotiate, but in areas with lower demand, there’s usually always more room for negotiation.

Get a House Survey

If your offer on a house has been accepted, but you really want to make sure that you’re not overpaying, a house survey is an absolute must. This step will confirm whether the agreed-upon price matches up with the property’s actual value. 

One of the main reasons for a survey is to identify any hidden repair needs. This includes major structural issues and other plumbing and electrical concerns. These repair costs can add up and can mean that the price you pay for the property will continue to add up. 

Choosing the Right Type of Survey

Choosing a survey that includes a valuation is really important to ensure you get an impartial assessment of the price you’re paying. This information will help when it comes to negotiating or confirming the fairness of the agreed-upon price.

It’s important to note that a mortgage valuation is not a substitute for a comprehensive house survey. A mortgage valuation is an assessment conducted by your lender to determine if the property is sufficient security for the loan. It doesn’t go into the additional details that a survey covers.

What’s Included in a House Survey?

Structural integrity 

Surveyors inspect the structural integrity of the property, identifying any issues that may not be apparent. This includes examining the building structure, like the foundation, walls, and roof. 

Pipes and wires 

Additionally, the survey will inspect the plumbing, heating, and other electrical components within the building. This helps to identify potential risks or areas that require attention.

Damp and moisture

Another hidden issue that can affect a property’s value is dampness and moisture. A comprehensive survey includes checks for this and ensures our new home is free from such issues.

Post-Survey Negotiations

If the survey reveals significant issues that were not previously disclosed, you will have grounds for negotiation. This means you can request that the sale price be adjusted, or the repairs are carried out at the seller’s cost. Ensuring that you won’t have any further costs to account for. 

So how can you avoid overpaying for a house?

Here are five questions to ask yourself when viewing properties:

Does the price stand out compared with similar listings in the area?

If you want to make sure that a property is actually worth it, compare its price with similar listings in the local area. You can either ask an estate agent to verify this or visit an online property portal. If the price of the property is significantly higher than others, then this is a sign that it is higher. At this point, you can dig deeper to find out why it is so much higher. However, if there are no noticeable unique features that warrant a higher asking price, then the likelihood is that it is an overpriced property. 

Has it been on the market for a long time?

Properties that have been on the market for a long time can indicate there’s something wrong. This can include the price itself or other hidden issues that are not clear from the listing alone. However, you may be wondering how long is too long? In some areas, it’s perfectly normal for a property to remain on the market for six months or more before it is sold. While in other areas, it’s possible to sell a house fast, maybe within weeks or months. So, to find out, you will need to speak to an estate agent or research online for the average length of time a property stays on the market in the local area. 

Does the list price seem unusual compared to the actual home condition?

During property viewings, pay close attention to the condition of the home compared to its list price. If you’ve visited the property and felt like it just wasn’t worth it, then there’s your answer. Of course, this assumption needs to be made based on real issues within the property, like its being in poor condition. 

Do your own calculations suggest the price doesn’t make sense?

Trust your instincts and run your own calculations. Inspect the local market and figure out how much the property is worth, especially in regards to its features such as property size and condition. If you feel like the listed price still doesn’t make sense, then trust your gut and either look for other properties or request to negotiate for a more suitable price. 

Has the home not gained much attention despite being on the market?

The level of interest a property attracts is a good indicator of the market sentiment. If a home has been on the market for a while without gaining much attention, it can show that there are fewer interested buyers. There may be hidden reasons for this, but the more common reason would be the inflated listed price holding buyers back.  

FAQs

How do you know if your house is overvalued?

A house can be overvalued if its asking price significantly exceeds the prices of comparable properties in the area, especially considering its condition and history.

What happens if a house is overvalued?

If a house is overvalued, it may struggle to attract buyers, leading to extended time on the market. Sellers may need to adjust the price to align with market expectations. However, if you buy an overvalued house, then you may struggle to sell it at a similar price in the future. 

Should I pay more than market value for a house?

Paying more than market value for a house is generally not advisable. However, if you feel like the area is likely to become more in demand, and the property compares well to other similar available ones, then it may be okay.

Do estate agents undervalue properties?

While some may argue that estate agents undervalue properties to facilitate quicker sales, it’s not always the case. Most estate agents will try to value a property at or above market value to ensure the best final sale price. 

Is 10% over asking price a good offer?

Offering 10% over the asking price is definitely a good offer in a competitive market. It’s guaranteed to get the attention of the seller. However, for the buyer they must be comfortable and willing to purchase a property above its actual value. 

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