Rateable Values As A Guide To Fair Value

[maxdiver]

It always puzzles me when people write something like this.

There are plenty of people who have paid off mortgages / inherited property / wealth / investments. Given that school fees are negligible in NI, there're probably more middle class people with spare cash knocking around than in most regions of the UK.

If you inherit an estate worth £150k, and you have equity of £50k, then you can probably afford a £300k property even if you're earning only £35k (which would be a fairly modest joint income, even now). Lots of people have windfalls from relatives dying, etc - it is a lot more common than you'd think (!), just ask any lawyer who deals with probate.

You are making the assumption that people in this fortunate position will want to have all their money tied up in property.

Should people put all their eggs in bricks and mortar?

Also, these people who have money are not the ones who are buying and trading up is not much of an option for those in negative equity.

For the most part, the people buying are younger, poorer and earn less.

Think. Without the help of the BoM&D the average age of first time buyers is very high.

While there are some people who are earning well - two incomes, £XXk per year - and they have a magical inheritance of £150k and £50k of equity lying around - these people are in the minority.

For £300,000 in Belfast, I have not seen good value for money. To me, if I was on £35k - say £25k after tax - does working 12 years to pay for 4 bedrooms make sense?

[BelfastVI]

You are making the assumption that people in this fortunate position will want to have all their money tied up in property.

Should people put all their eggs in bricks and mortar?

Also, these people who have money are not the ones who are buying and trading up is not much of an option for those in negative equity.

For the most part, the people buying are younger, poorer and earn less.

Think. Without the help of the BoM&D the average age of first time buyers is very high.

While there are some people who are earning well - two incomes, £XXk per year - and they have a magical inheritance of £150k and £50k of equity lying around - these people are in the minority.

For £300,000 in Belfast, I have not seen good value for money. To me, if I was on £35k - say £25k after tax - does working 12 years to pay for 4 bedrooms make sense?

Someone on £35k will not be taking out a 100% mortgage to buy a £300k property. Thats 8.5 x their income. The average advance at the moment is about 3.3x income for First time buyers and less for movers. As BallyK explained houses at £300k are for movers with exuity.

[maxdiver]

Someone on £35k will not be taking out a 100% mortgage to buy a £300k property. Thats 8.5 x their income. The average advance at the moment is about 3.3x income for First time buyers and less for movers. As BallyK explained houses at £300k are for movers with exuity.

I have some people who were thinking of moving and now are sitting tight.

Especially, since setting up a chain in today's market is difficult.

[Ride_on]

Another point from the title of the thread; People do often talk about 'fair value', and I think they mean a price that both parties are comfortable with, but in reality there is no such thing. The market price is the market price, and is found by negotiation between buyer and seller.

Buyers have more power at the moment as there are few of them, you should therefore use your power to negotiate hard, otherwise you are distorting the market yourself.

[OptimusSubPrime]

Another point from the title of the thread; People do often talk about 'fair value', and I think they mean a price that both parties are comfortable with, but in reality there is no such thing. The market price is the market price, and is found by negotiation between buyer and seller.

Buyers have more power at the moment as there are few of them, you should therefore use your power to negotiate hard, otherwise you are distorting the market yourself.

i made a bid on a new build this very morning, which was swiftly rejected. And was told the builder isnt negotiating at all, that it is a fixed price blah blah blah. They even said that the price for that site in particular has now gone up by 5k!! In fairness, the suite in particluar is the best of the lot, but the more realistic/fair thing in my point would be to accept lower for the others!

Surely no builder at the minute fixes at a price that they have not built any room at all in for negotiating?

[2buyornot2buy]

i made a bid on a new build this very morning, which was swiftly rejected. And was told the builder isnt negotiating at all, that it is a fixed price blah blah blah. They even said that the price for that site in particular has now gone up by 5k!! In fairness, the suite in particluar is the best of the lot, but the more realistic/fair thing in my point would be to accept lower for the others!

Surely no builder at the minute fixes at a price that they have not built any room at all in for negotiating?

Is this the only site available on the development? I wouldnt be surprised if the developers reluctance to lower the price is because this would result in all other sites on the development being reduced on the balance sheet. I know around my way some developers have resorted to renting out finished sites instead of selling at a lower price. Some of these developments have been complete since 2008 with little or no downward price movement.

I suspect there's little pressure (yet) from the banks to actually sell this stock but think its inevitable that it will eventually come. I know around my ways there are plenty of what I would call ghost estates with finished developments but 90% unoccupied.

This is the ballymena/ antrim area where is imagine there's greater demand than in the west. Though I could be wrong.

[R + R]

i made a bid on a new build this very morning, which was swiftly rejected. And was told the builder isnt negotiating at all, that it is a fixed price blah blah blah. They even said that the price for that site in particular has now gone up by 5k!! In fairness, the suite in particluar is the best of the lot, but the more realistic/fair thing in my point would be to accept lower for the others!

Surely no builder at the minute fixes at a price that they have not built any room at all in for negotiating?

you are almost certainly not dealing with a builder

you are dealing with a bank

bankrolled by tax payers

rock on!

[morillo]

you are almost certainly not dealing with a builder

you are dealing with a bank

bankrolled by tax payers

rock on!

Might well be dealing with the builder seems like a quick response, I did the same - offered what I thought was a fair price on a new build that has been empty for >2 years. This was a bank repo.

Took over a week to get a decision from the bank and the offer was rejected.

Just say that you'll leave the offer on the table in case they change their minds before you find somewhere else. If they do contact you, which they may well do given current market conditions, tell them the offer is no longer valid and then bid them down!!! Buyers market

Edited January 6, 2011 by morillo

[OptimusSubPrime]

Might well be dealing with the builder seems like a quick response, I did the same - offered what I thought was a fair price on a new build that has been empty for >2 years. This was a bank repo.

Took over a week to get a decision from the bank and the offer was rejected.

Just say that you'll leave the offer on the table in case they change their minds before you find somewhere else. If they do contact you, which they may well do given current market conditions, tell them the offer is no longer valid and then bid them down!!! Buyers market

It is a builder, as the house(s) still being built at the minute, at the stage of putting the tiles on the roof today. I have been speaking to the builder previously, and he doesnt seem at all in any hurry to sell. He still has some of the 4bed houses in same development and hasnt dropped the price even. When i was speaking to him before he said itd be about 160k. Now that it seems any viewers are all interested in the same house, he has put the price up on that one to 165.

I would be happy to come back and offer around 155 (which is about the max im willing to go, very big maybe of 160 but i would rather wait it out a month or so than do that.) what could well happen in the meantime is though that someone else will come in and pay the £1k deposit to secure site. If you do that though you know the builder will hold out for his full 165, and i aint doing that!

[morillo]

It is a builder, as the house(s) still being built at the minute, at the stage of putting the tiles on the roof today. I have been speaking to the builder previously, and he doesnt seem at all in any hurry to sell. He still has some of the 4bed houses in same development and hasnt dropped the price even. When i was speaking to him before he said itd be about 160k. Now that it seems any viewers are all interested in the same house, he has put the price up on that one to 165.

I would be happy to come back and offer around 155 (which is about the max im willing to go, very big maybe of 160 but i would rather wait it out a month or so than do that.) what could well happen in the meantime is though that someone else will come in and pay the £1k deposit to secure site. If you do that though you know the builder will hold out for his full 165, and i aint doing that!

Just sit tight, I'm sure the EA will be on the phone to you the minute someone puts in a higher offer, at that point you can decide what your max bid will be. It really depends on how much you want the place.

You'll probably find the majority of the viewers are thinking the same as you - that the place is still overpriced - otherwise it would have been snapped up by now.

Surely placing the £1k deposit will tie you up to purchasing the property at £165k, if you don't want to lose the retainer?

[OptimusSubPrime]

Just sit tight, I'm sure the EA will be on the phone to you the minute someone puts in a higher offer, at that point you can decide what your max bid will be. It really depends on how much you want the place.

You'll probably find the majority of the viewers are thinking the same as you - that the place is still overpriced - otherwise it would have been snapped up by now.

Surely placing the £1k deposit will tie you up to purchasing the property at £165k, if you don't want to lose the retainer?

yeah if you pay the retainer youd be held to full asking price and i have no intention of doing that. i can only hope there are zero other offers forthcoming, and then they might be more willing to talk sense

[NuBrit]

In normal economic times we have the three Ds to correct any overvalued housing market. They are death, divorce and debt (I think we may also see downsizing as a force in the years to come as boomers retire).

Interesting you should say that. The wife was telling me about friends of her sister who have divorced. They now have the house on the market, but disappointed with the lack of interest, they've decided to rent it out as they can't sell for "less than what it is worth". Strangely enough, that it's worth is what's outstanding on the mortgage

You are correct on your other two points though. Other than competitively priced new builds, the vast majority of stuff that's actually shifting is either through executor sales, or reposessions. I would suggest that anyone interested in buying should keep an eye on auctions and any properties that look ridiculously dated or in need of modernisation (these are often executor sales). Also, don't be afraid of picking up the phone and just enquiring about the house. Sometimes the seller won't even entertain an offer, but at other times, they might tell you that the house has to sell and that your offer has to be paid heed.

[tinbin]

I have been told on good authority that one of our main local banks uses Rateable Value + 5% as a general guide for valuation.

Valuations by EA's and surveyors are still in excess of this. Surveyors rarely value a property at anything different than the purchase price - apart from the odd retention here and there for damp, damage etc.

Time for them too wise up too.

[TheBurn]

Im trying to view a house thats priced at ratable value. What % below should i offer as i feel its good value as it is but would like it for a bit less. Thanks

[MonkeyScrabble]

Hi, I only found this site last week and it is most interesting reading the views on here. So I have decided to join up and throw in my tuppence worth.

As I see it there are 3 ways to look at the cost of houses.

1 - Price.

This is the price that is actually paid when the building changes hands. This is a mysterious piece of knowledge and unless you are prepared to part with hard earned cash to acquire it, you will never know.

2 - Value.

As I see it this is the basic cost of the house. By that I mean this is the bottom line on the bill you would receive if you were to buy the piece of land the house sits on, build it to the same plans and then decorate it to it's current standard. This is the basic cost for new building what you want to buy.

3 - Worth.

This is the big one. This is what you are prepared to pay to get the keys to your dream home. This is a purely subjective number based on differing tastes and "want" lists.

A house I think is the dogs, may not be to someone elses taste and therefore if we were both asked to put a number on what it's worth you would get 2 very different answers.

The big thing here is, "a house is only worth what someone is prepared to pay", i.e. a house that has been sitting on the market for a year with no offers is effectively worthless since no-one is prepared to pay for it. However it still has an intrinsic value and ultimately a price (if someone does end up buying it).

Only you can decide what a house is "worth".

There are other factors based around how much it will cost to get the keys

An EA can make a valution (different from the value) on the house based on their personal (*cough* professional *cough*) opinion.

A vendor can make a decision about their definition of worth however that is usually an overblown figure based on what they paid for it or the asking price of the house they want to move to.

Ratable value is a blind guess on behalf of the council and really does not go beyond being a rough guide.

e.g. I saw a house with no central heating installed, the LPS website states in the RV that central heating on the house is "assumed" and therefore has an RV of 10k more than another house a few doors down the terrace that states it had no central heating at the time.

RV is based on assumptions since it is performed like a drive by shooting. Little attention to detail and little basis in fact upon which those assumptions are founded.

As far as using it a guide goes. It is only a rough guide. Better indicators are:

Asking price for other houses in the area.

What sort of area is it?

How much work is required?

How much are you willing/can you afford to pay based on the three items above?

Only you know your limits

As an aside I have seen here people posating to say they can't be bothered / don't feel comfortable putting low offers on houses because they think they will be laughed at or rejected out of hand.

I personally do not see the reason to not put a low offer in because it will be rejected. You put a low offer in to set the base line for any future negotiation.

Remember my statement above "a house is only worth what someone is prepared to pay".

The more people who put low offers in on houses, the sooner EAs and vendors will get the message that they do not set the rules of the game anymore. The buyers do and we will not accept over inflated prices because the vendor bought at the wrong time or the EA want a new Mini Cooper.

Throw the low offers in, thick and fast. Only after a few months of getting offered 100 - 110k on an asking price of 150k will they realise they aren't in Kansas anymore and Toto won't be getting that diamond collar for Christmas.

Thank you for listening and Good night!

Any spelling mistakes are the result of my fat fingers and bad co-ordination for which I apologise.

[BelfastVI]

Good first post, and welcome to the forum.

That is an interesting approach - to view price, value and worth. You are right and people will place different measures on each. What we are looking for is the correct price.

I wouldn't agree that value = cost to build. Quite often, in today's market you can buy a completed house for less than it would cost you to build. Then again whilst house prices, in general go up and down they don't, unlike a car, deprecate too much with age. Therefore you can have the situation that a 80 year old house, with all its poor insulation and drafts, never mind maintenance costs at a comparable price to a nearly new one. However, if they did deprecate, compared to newer stock, no-one would take out a 20 year mortgage. You have also included the price of land in the value of the property. Quite often when you buy a house you are paying a 'build cost' for the bricks and mortar and a speculative price for the land. With all speculative items, they can, as we have seen become well overpriced as a result of speculation.

What is a valuation - the red book tells you it is the price likely to be achieved between a willing seller and a willing buyer on any given day with the free availably of credit. The word free is incorrect (cant remember the proper word). During the boom we had an over supply of credit. No valuers took this into account and simply valued properties at the price they were being sold at. They didn't consider that prices would not have reached that level if the availability of credit was at a normal level. Equally now. One could argue that values would be higher if credit availability was at normal levels. I think few intact would argue with that.

Most EA, that I speak to say that there greatest frustration is getting their clients to either lower their values or to accept lower valuations. Estate Agents did try to 'hold the line' for 6 or 12 months back in 07/08. But they quickly realised that to earn a fee they had to close the deal. If they are showing you a house they are hardly going to tell you that the price should be lower and you couldn't expect them to. There is an estate agent who comments in here REA and he comments on this quite often. Other EA's, closer to Belfast who are selling 100+ houses per month will tell you the majority of their prices are correctly priced and its hard to argue with that. Others further out, like REA, have bigger issues with their prices.

In my experience, Ratable value at the time, was as much as 30% plus or minus. You cannot take it as a reflection of value even if you think that prices at that time are close to what you think they should be now. Just because a house is advertised at close to Ratable value that RV may have been 30% overvalued at the time as the house is a tip or has other legal restrictions. Equally a house advertises at RV + 20% may prove to be excellent value as the RV valuer didn't see the extension, of the large back garden, views or notice the fact that this street attracted a completely different valuation to the adjoining one.

I work for a developer and have an obvious VI in all this. I am interesting in building houses and moving stock. Increasing prices would help our balance sheet but its not something I am either expecting or actually looking for. That will come later. Volume is more important although as they say turnover is vanity, profit is fact. To continue long term it must be profitable.

This week we sold 6 houses (Actually Tuesday and Wednesday). The planets must have aligned. Does that mean they are correctly priced. I would argue yes but four of these houses have been sitting unsold from before Christmas, so others could argue they weren't correctly priced then.

What I have learnt over the last few years is that value, costs & worth all play second fiddle to a new word; sentiment. In the boom sentiment was fuelled with a mixture of fear and greed. Fear of missing out and greed to make a profit. It infiltrated the buyers mind and the provider of the necessary credit. Greed is not always bad. Any recovery will be fuelled by its different incarnations. Sentiment is the greatest of all the factors and it feeds and multiplies off itself. If fewer people apply for mortgages the banks sentiment falls and they want to lend less money. They will only do this by raising the bar. They raise the bar fewer people take out mortgages and the sentiment falls again. The opposite happened on the way up (after the shackles were removed).

If I can sell houses for A, build it for B, take a profit of C and am left with a figure of D. If there are 100 houses on the scheme the land (ignoring stamp etc) is worth 100D. However, because of the almost total absence of credit for land purchase the actual OMV of the land will be 30% of D. So what is the true value of the land. If I am the owner I will not sell for OMV and I know its worth more. If I am a buyer why would I pay more as I know no one will pay more than 30%D. A valuer, using Red book cannot value it at 30%D as he has to accept that the non availability of credit is the only reason why the land is at that value. In accounting terms the long established rule of marking to market is now excepted as a nonsense. I know as a developer I can deliver a return of D, after I take a profit so why should I mark to 30% of D. This is especially important if I purchased at D + 20%. So the notion of true value or correct price is a very relevant one and the obvious answer is perhaps not the correct one.

To me the true value, today of that land is D (or 100x D for the whole land). However I know I cant sell it for anything like that. So thankfully I can build.

[tinbin]

The big thing here is, "a house is only worth what someone is prepared to pay", i.e. a house that has been sitting on the market for a year with no offers is effectively worthless

Maybe EA's should start using this quote to their vendors. Or start by telling them straight ... U'RE HOUSE WILL NOT SELL.

An EA can make a valution (different from the value) on the house based on their personal (*cough* professional *cough*) opinion.

A vendor can make a decision about their definition of worth however that is usually an overblown figure based on what they paid for it or the asking price of the house they want to move to.

Yes ... they base it on property news!

the house down the street has been valued at Half a Million so ours is worth that ... and not a penny less I tell you!!

Only you know your limits

Unfortunately I am not so sure that ppl do know their limits ... if credit was still available at hugely unaffordable levels ppl would still be stupid enough to take it

Remember my statement above "a house is only worth what someone is prepared to pay".

Agreed ... which is why virtually nothing is selling .. the general sentiment is that houses are still overvalued

Thank you for listening and Good night!

I enjoyed reading your post ... welcome along to the House Price Crash party.

Edited April 7, 2011 by tinbin

[tinbin]

Other EA's, closer to Belfast who are selling 100+ houses per month will tell you the majority of their prices are correctly priced and its hard to argue with that. Others further out, like REA, have bigger issues with their prices.

Really?? 100+ houses per month?

Where I work in Belfast 3 EA's have been replaced with coffee shops in the past 2 yrs .... and I am sure there are more that have went due to virtually no trade.

[2buyornot2buy]

Really?? 100+ houses per month?

Where I work in Belfast 3 EA's have been replaced with coffee shops in the past 2 yrs .... and I am sure there are more that have went due to virtually no trade.

I have to agree who are these Belfast EAs selling 100s of houses a month?

[2buyornot2buy]

Also these EAs were telling us that their houses were "correctly priced' from 2003-2007. Look how that's worked out for us. Just because an EA has sales does not by any means mean the market is functioning as it should. Look at the historical high sales in the boom period.

[Ride_on]

Hi, I only found this site last week and it is most interesting reading the views on here. So I have decided to join up and throw in my tuppence worth.

Hi and welcome, good post, you seem to have gotten the general idea.

A few comments from me

The real benefit from the DCV is that is from a period that has had much less ridiculous HPI built in. I do not agree asking prices are a better guide. This is where the variation creeps in and asking prices vary hugely depending on the attitude of the seller and EA, comparing prices using DCV filters this out in the main, and we are talking more than £10K differences. Sure it is only a guide and there are mistakes, lack of updates on extensions etc, but a much better one than asking prices.

Putting in super low offers- I can only guess you have not tried to do this, but my experience (and seems to be agreed with by those who have also tried) is that sellers mostly will not sell much more than 10% below asking. When you put an offer on a house it is an emotional investment and liking a house enough to put in an offer is a quite difficult to detach from, and when you do this multiple times it becomes very tiring. I'm not saying don't do it, and it is good for sellers mindsets but its not a very successful strategy. Many sellers assume the min 'value' of their house is the amount they have outstanding on their mortgage, so won't change it until they are facing bankruptcy or repossession.

[Realistic NI EA]

BelfastVI, I have my finger on the pulse and can see how various EAs are doing across the province and have not see anything like 100s of sales from any EA in Belfast each month. Even if you take the combined total from one of the big chains like TR, UPS or BTWCairns they still would not be into the 100s every month purely on Belfast based sales.

Outside the big smoke I would guess that the average is around 4 sales per month with some agents struggling to get off the mark each month and some bigger offices just about hitting double figures some months. We are medium sized business in our area and we are always around the average that I stated above with a bumper month being 6-7. Those figures do not point towards a normal market or anywhere close. Thankfully we have a number of strings to our bow including rentals and management, mortgage advice, surveying etc so we make a living from various property related services. I pity the ones who simply rely on houses selling as they might aswell give up the ghost rather than wait for the market to pick up.

[MonkeyScrabble]

Hi and welcome, good post, you seem to have gotten the general idea.

A few comments from me

The real benefit from the DCV is that is from a period that has had much less ridiculous HPI built in. I do not agree asking prices are a better guide. This is where the variation creeps in and asking prices vary hugely depending on the attitude of the seller and EA, comparing prices using DCV filters this out in the main, and we are talking more than £10K differences. Sure it is only a guide and there are mistakes, lack of updates on extensions etc, but a much better one than asking prices.

Putting in super low offers- I can only guess you have not tried to do this, but my experience (and seems to be agreed with by those who have also tried) is that sellers mostly will not sell much more than 10% below asking. When you put an offer on a house it is an emotional investment and liking a house enough to put in an offer is a quite difficult to detach from, and when you do this multiple times it becomes very tiring. I'm not saying don't do it, and it is good for sellers mindsets but its not a very successful strategy. Many sellers assume the min 'value' of their house is the amount they have outstanding on their mortgage, so won't change it until they are facing bankruptcy or repossession.

Hello again, thank you all for the welcome.

I just wanted to reply to this. I agree that there are huge differences in asking prices as compared to RV but I feel it is a better guide as to how the vendors/EAs are thinking.

Yes there will be wild differences based on greed, denial, blind stupidity etc however I find it gives a good grasp of the attitude coming from the other side of the fence.

You can see the asking price of the stuff that doesn't sell and the asking price of the stuff that does. It is just my personal opinion but it gives me a guage as to what prices should be since very little sells for asking price these days.

As far as low offers go, I am known around the EAs in my neck of the woods for cheeky / super-cheeky / insulting offers.

To me a house is four walls and a roof that keeps the rain off my stuff. Nothing more and as long as the house is:

1 - in an area I like

2 - has the amount of inside space I'm looking for

3 - isn't a dump needing 30k of work just to move into

then I'll put an offer on. Anything extra (garden, garage etc is a bonus)

I understand that not everyone views things in such a dispassionate way but it is simply how I see the whole merry-go-round of house buying. If the boxes are ticked an offer goes on.

I've been putting low offers on houses for 6-12 months, all were rejected out of hand BUT every single one of the houses I offered on is still on the market and therefore costing the vendor more and more money to have lying idle. I have on occassion been known to use this phrase when the EA tells me the vendor will not accept anything below X thousand. "I'm sure some fool will pay that price, but it won't be me."

I agree that until there is a sea-change in the attitude from EAs and vendors nothing will happen but low offers are my way of telling them that buyers are in control. If they listen then great, if not then I have lost nothing except a small amount of my time.

They will see the light eventually, but it will be probably too late to save them from bankrupcy.

[2buyornot2buy]

Hello again, thank you all for the welcome.

I just wanted to reply to this. I agree that there are huge differences in asking prices as compared to RV but I feel it is a better guide as to how the vendors/EAs are thinking.

Yes there will be wild differences based on greed, denial, blind stupidity etc however I find it gives a good grasp of the attitude coming from the other side of the fence.

You can see the asking price of the stuff that doesn't sell and the asking price of the stuff that does. It is just my personal opinion but it gives me a guage as to what prices should be since very little sells for asking price these days.

As far as low offers go, I am known around the EAs in my neck of the woods for cheeky / super-cheeky / insulting offers.

To me a house is four walls and a roof that keeps the rain off my stuff. Nothing more and as long as the house is:

1 - in an area I like

2 - has the amount of inside space I'm looking for

3 - isn't a dump needing 30k of work just to move into

then I'll put an offer on. Anything extra (garden, garage etc is a bonus)

I understand that not everyone views things in such a dispassionate way but it is simply how I see the whole merry-go-round of house buying. If the boxes are ticked an offer goes on.

I've been putting low offers on houses for 6-12 months, all were rejected out of hand BUT every single one of the houses I offered on is still on the market and therefore costing the vendor more and more money to have lying idle. I have on occassion been known to use this phrase when the EA tells me the vendor will not accept anything below X thousand. "I'm sure some fool will pay that price, but it won't be me."

I agree that until there is a sea-change in the attitude from EAs and vendors nothing will happen but low offers are my way of telling them that buyers are in control. If they listen then great, if not then I have lost nothing except a small amount of my time.

They will see the light eventually, but it will be probably too late to save them from bankrupcy.

One point whilst yes we can see the asking price of stuff that does not sell it really doesn't matter what the asking price of something that does sell was at. This is asking price and in the current market probably bears little resemblance to the actual selling price. This apply to new and resell houses.

Welcome to the forum by the way.

[MonkeyScrabble]

One point whilst yes we can see the asking price of stuff that does not sell it really doesn't matter what the asking price of something that does sell was at. This is asking price and in the current market probably bears little resemblance to the actual selling price. This apply to new and resell houses.

Welcome to the forum by the way.

Oh yes I agree, but in the areas I'm looking, the houses that sell usually have an asking price of 10-20k less than the asking price of the houses that sit.

It's a guide that if you want to offer on a house then a realistic value is somewhere around the the asking price for the house that moved.

This means that if e.g. 2 similar houses (in my area of interest 4 bed terraces) are on for 150K and 130k respectively and the 130k house sold in a few months but the 150k house has been sitting, then a reasonable place to start for determining an offer on the 150k house is around 130k.

Whether you go up or down from this figure is up to your own circumstances, guess work about whether houses are going for under or over asking in the area and an estimation of how much the house is worth.

In this example, yes an offer of 130k is already 20k under asking price but all you have to do is point out the fact that the house with the lower asking price moved a lot quicker than the 150k model.

The vendor may reject it out of hand but at the same time it is better to throw the offer in to see if they bite, rather than stick rigidly to 5-10% above or below asking or RV because you don't want to have your offer rejected. This ususally leads to people ending up with a much larger mortgage than they really need to.

A real world example is of 2 terraces in the same street.

1 a repo, 4 bed, 2 reception, 2 bath needing 20k of work. - asking price well under 100k (an offer was placed on this within days of it coming on the market of 5k under asking)

1 a private seller, 5 bed, 2 reception, 1 bath needing 20k of work. - asking price 40k over the house above.

Both houses are the same dimensions, same internal space, same street, only real difference is that the 2 bath house has a bathroom where the 5th bed is in the other. 1 needs rewired, the other needs central heating installed. Both need new bathrooms & new kitchens.

This is a perfect example. Since the houses are to all intents and purposes identical then the asking price for the first is a good place to start for valuing the second. The only reason there is a 40k difference is the outlook of the vendor. The bank wants rid of a liability from the repo and the private seller wants as much money a possible.

Both seller positions are valid however the private seller (and possibly their EA) will lose out on a sale due to the fact that someone can have a house that is the same as the one they are selling for a significant amount less than they are asking.

As I say all these views are my own and while I am not going to try to fleece anyone, I will only offer what I feel is a reasonable amount of money on a house based on my opinion and the other options available to me in the local area.