As anyone keeping an eye on the Edinburgh property market will know, competition among buyers has been fierce throughout 2017. One of the most common questions that we are asked by potential buyers is how much they should bid over the asking price when a property is marketed at Offers Over.
On the face of it, the answer might appear to be pretty simple. We can review our sales data so far this year and see that Warners has achieved an average of 11.6% over and above the asking price on properties that are marketed at Offers Over.
In practise though, knowing this average figure is of limited value. There is significant variance around this figure. If you were simply to offer 11.6% over the asking price on a given property you could end up being outbid by a wide margin, or paying way more than you needed to.
Fortunately there are a number of factors that we can take into account which allow you to make a more informed offer on any properties that you are interested in.
Home Report Valuation
Perhaps the most obvious thing to look at is the Home Report valuation. These days, properties will generally be marketed at Offers Over a price that is a few thousand pounds below the Home Report valuation. A property that is valued at £140,000 is likely to be marketed at Offers Over £135,000, or a figure close to that level.
In some cases though, the seller and selling agent might agree to set an even lower asking price in the hope of attracting more buyers, thus creating more competition.
Conversely, some sellers are reluctant to set their asking price below the valuation figure and will market their property at Offers Over whatever the valuation is.
As a buyer, the important thing is not to be too swayed purely by the asking price. For Offers Over properties, the valuation figure will typically give you a better steer on how much the property is likely to sell for.
How Long Has The Property Spent on the Market?
The first two or three weeks that a property spends on the market are crucial. During that time, the property is sent out in email alerts from the major websites and is seen at the top of search results when buyers are sorting their online search results by the date on which a property is added.
If a property attracts a lot of interest quickly it will allow the seller to set an early closing date. At that stage, any interested buyers will be motivated to submit their best offer if they want to secure the property.
The longer a property spends on the market, the less likely it is to attract a large amount of competition among buyers, and as a result the less it is likely to achieve over and above it’s asking price.
This isn’t true in every case of course. Sometimes sellers who are under no pressure to move are happy to wait until the right offer comes in. By and large though, the longer a property spends on the market the less likely it is to attract a significant premium. The really large premiums of 20% or more above the asking price are generally achieved during the first few weeks on the market.
Location, Location, Location
It probably goes without saying that the location of a property is a key factor in determining the sort of premium that it will achieve. For example in Hillside demand has been particularly high this year and as a result properties are achieving much higher premiums over their asking price – often in the region of 20% above the asking price.
In an area like Gilmerton, on the other hand, where the balance between supply and demand has been more even, properties have been achieving more modest premiums in the region of 3 to 5%.
When discussing how much you are looking to offer, your solicitor estate agent should be able to advise you on demand in the areas that you’re interested in.
How Much Other Interest is There In the Property?
Perhaps the single most important factor in determining the price that a property will achieve, is how much interest it has attracted. Fortunately in Scotland we have the system of notes of interest which will help you to get a strong indication of the demand for a given property.
If you are thinking of submitting an offer for a property, your solicitor will be able to find out how many notes of interest there are already so you know how much competition you are likely to be facing. This is especially useful information if you are bidding at a closing date.
It’s worth pointing out that notes of interest are not obligated to submit an offer – and equally that somebody can make an offer without previously noting interest – but it’s still invaluable information to have. If there are no notes of interest on a property you will have a clear run to submit a much lower offer, at or around the asking price. Even if your first offer is rejected it’s likely that it will still form a starting point for negotiations with the seller.
So, How Much Should You Bid?
There is no one-size-fits-all answer to this question, but you should consider all of these factors when discussing with your solicitor how much to offer on a given property.
You also should not lose sight of how important your own circumstances are when deciding what to bid. If you aren’t under significant pressure to move in a short timeframe and you are looking in an area where properties are regularly coming onto the market, you can probably get away with a more conservative bidding strategy.
On the other hand if you need to move quickly, perhaps to ensure that you have moved before the new school term starts, then you may have to be more aggressive and submit slightly higher offers than would otherwise be the case.
If you’re thinking of buying a property and need advice or guidance on how much to bid, or have questions about any other aspect of the buying or selling process, feel free to contact us today on 0131 667 0232, or by emailing email@example.com and one of our friendly team will be delighted to help.