Blind bidding when you are buying a house can be very hit and miss. Do you go a bundle over the asking price or just a little? If it is a seller’s market, how many houses will you have to chase before you are successful? These are questions clients frequently ask us. To be perfectly honest, there is no simple answer.
In a busy property market, it is not unusual for the selling agent to fix a closing date. That means they will set a date and invite all those who are interested to submit an offer to them by a particular time. We know how nerve racking this is for our clients because they are bidding against others who are just as keen on buying the house.
As a result of all of this, clients frequently ask us how much over the asking price they should offer. Regrettably, there is no simple answer to this question. But let us look at how this works and the things you need to consider.
How does the Offers Over system work?
When an estate agent brings a property to market, the aim is to attract many viewers, create a competitive situation and get the best possible sale price for the property.
When an estate agent visits a property before taking it to market, they will give the seller an indication of what they believe the house is worth and, importantly, what they believe they will sell it for in current market conditions. Any estate agent with good local knowledge will advise clients about what is happening in their patch.
They will always, however, defer to the valuation applied to the property by the Home Report. All residential properties placed on the market in Scotland must have their own Home Report. Part of the Home Report is a professional valuation assessed by a chartered surveyor.
Once the house is placed on the market, it will usually be marketed at “offers over” a particular price. This is designed to encourage interest in the property and to get viewers through the door. The asking price should bear some relationship to the Home Report and the seller must have some expectation as to what price they are looking to sell for.
The estate agent will encourage interested parties to view the property, will then follow up the viewers to establish their interest. They will also take any notes of interest the various viewers’ solicitors make and when they have what they consider a sufficient number, they will discuss a closing date with the seller.
Once the closing date has been agreed, the estate agent then tells the solicitors who have noted interest and they will then advise their clients about that. It is at this point the potential purchasers need to make a decision about how much to offer for the property.
So, how much should a buyer offer?
This is generally where buyers can run into problems. Whilst they might have a feeling for what the house might sell for, there is no scientific formula available to help work out how much the bid should be. It is very much a case of considering all the information available, checking out the state of the finances and then deciding how much to bid.
There are, however, some key things you should think about when considering how much to offer.
The first of these is the assessment of value the surveyor applied to the property in the Home Report. This is an opinion from a property professional and, if you are taking out a mortgage to buy the house, will be a key element in the lender’s decision on how much of a mortgage to lend to you.
The second thing to consider is the condition of the house. The Home Report will give you information on the condition or state of repair of many aspects of the house. That assessment will range from the condition being OK to requiring more or less immediate attention. You must factor in the condition of the property and the cost of any repairs to your deliberations.
The third thing you need to consider is your budget. How much can you afford to pay for the property? Clearly, you cannot pay more that you can afford so you should include potential repair costs and do not forget to factor in the cost of buying the house.
The fourth things you need to consider is, if you are selling a house, whether you have sold it or receive an offer on it. If you have sold or received an offer, then the risk is reduced and it will allow you to assess how much you have available to help in buying your new house.
There is no exact science to this. You simply have to work through all the permutations and once you have done that, our advice to you is to make the best offer you can comfortably afford.
Our solicitors look after clients who are buying and selling every day. We advise clients on all aspects of estate agency, house sale and purchase so if you have any questions at all, please contact us.