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It doesn’t matter if you are looking to buy a home, or in the process of selling your property, you should always avoid buying or selling overpriced house. Buyers are constantly seeking the best deals, and sellers are always looking to maximise their return on investment.

The property transaction process is not without its challenges; estate agents play a pivotal role in the valuation process, but their motivations can sometimes be at odds with the goal of achieving a fair and accurate house valuation for yourself. 

In this article, we will explore the factors that can lead to overvaluation, including seller expectations and market conditions, and we will shed light on the impact of a lower offer on the selling process.

What is an overpriced house UK?

An overpriced house refers to a residential property that is listed for sale at a price that is significantly higher than its true market value. The buyers have set the asking price for the house too high, and the price does not accurately reflect its condition, location, size or the general market demand. 

How do you spot an overpriced house?

When people put their properties on the market, the first thing buyers will see is the price tag of the property, which is why recognising an overpriced house for sale in your area might be greatly beneficial. 

If you are able to place your property at a price that is reflective of its true value, and that undercuts the overpriced house, then you may be able to attract more buyers, faster.

Here are some of the best ways to recognise an overpriced house:
How long has it been on the market?

Usually, a property will experience its highest amount of interest within the first month. As the initial rush of interest subsides, and a property remains unsold for six months or more, it can lose its appeal. If a property has been on the market for more than a couple months, it could be a sign that the property is overpriced.

What condition is it in?

Over the lifespan of a household living within a property, the building will undergo a lot of changes, albeit good or for worse. The amount of investment a family can put into a property may not be reflected in the true value of the property, which is why some properties are overpriced. 

When a property is valued, they will take into account the monetary value of the property and not any emotional investment. So, if the property is in poor condition then the true house value will be significantly lower than the household expected.

Is it priced higher than similar neighbour properties?

The context in which a property is situated within its neighbourhood can offer valuable insights into its pricing. If a property finds itself surrounded by homes that consistently exhibit significantly lower house values, it raises a potential red flag regarding the property’s pricing. 

In this scenario it could indicate that the property is overpriced relative to the local market, as the surrounding properties serve as a benchmark for assessing its true worth.

Where is it?

Houses with a similar footprint in one postcode may have a drastically different asking price in another postcode. If a property is in an area with less demand than others but has a higher asking price, then this property may be overpriced.

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What happens if a house is overvalued?

If a house is overpriced, it can be potentially disastrous for both buyers and sellers alike. To avoid these challenges, it's crucial for both sellers and buyers to rely on accurate and up-to-date market data, consult with knowledgeable estate agents and conduct thorough research before listing or making an offer on a property. 

Selling overpriced house:

An overvalued house is less likely to attract potential buyers, as they may perceive the asking price as too high for the property’s actual worth. Overpriced homes tend to stay on the market for a longer duration because they don’t receive offers or generate interest from serious buyers.

Even if a seller does manage to attract a buyer, they may be forced to make significant price reductions during negotiations, ultimately selling the property for less than its initial overvalued listing price. 

While the house remains on the market, the seller may incur additional costs related to mortgage payments and utility bills, like council tax and electricity.

An overpriced house that has been on the market for an extended period may become stigmatised, making it even harder to sell in the future as potential buyers wonder why it hasn’t sold. 

Furthermore, if you are selling an overpriced house then when you do get some interest, many buyers will be making a low offer on an overpriced house. This means that you can expect to get 5% to 10% below your asking price.

Buying overpriced house:

Potential buyers may miss out on other suitable properties that are priced more reasonably while they wait for the overpriced house to come down in price. 

Purchasing an overvalued house can lead to financial strain, as the buyer may end up paying more than the property is worth. This may result in higher mortgage payments and a potential loss of equity if the market doesn’t appreciate. 

If the buyer requires a mortgage to purchase the property, the lender will typically require an appraisal. If the appraisal comes in lower than the agreed-upon purchase price, the buyer may need to make a larger down payment (deposit) or renegotiate the price with the seller.

When it’s time to sell the property in the future, the buyer may face difficulties if they try to sell the house at a price that reflects its true market value. This can result in a longer time on the market and potential financial loss due to the return on investment.

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What are the negatives of high house prices?

In the worst case scenarios, high house prices can make it challenging for individuals and families, particularly those with lower incomes, to afford suitable housing. This can lead to overcrowding, longer commutes or even homelessness for some individuals.

Here are some of the other negative effects of high house prices:

Mortgage repayments

Buyers who stretch their budgets to purchase a home in a high-priced market may take on significant mortgage debt, leading to financial stress and reduced disposable income as they attempt to meet mortgage repayments.

When house prices are high, the amount borrowed for a mortgage is usually larger. As a result, borrowers face higher monthly mortgage repayments, which can strain their budgets. These higher monthly costs can reduce the disposal income and may limit the ability to save, invest or cover other expenses like holidays.

Buyers with high mortgage payments are more vulnerable to increases in interest rates. Even a modest rate hike can significantly increase the cost of their mortgage. 

Property ladders

High prices can be a barrier to homeownership, especially for first-time buyers. This can result in a generation of renters who struggle to accumulate wealth through homeownership. 

Those who already own property in high-priced markets may benefit from increasing property values, while those who don’t may find it increasingly difficult to join the property ladder.

Bidding wars

Although somewhat counterintuitive, bidding on a house that is overpriced do still occur in housing markets with overpriced house values. In areas with strong demand for housing, prospective buyers may be willing to compete for the limited available properties, even if they are overpriced. 

A shortage of available homes can intensify competition. In seller’s markets, where the number of buyers exceeds the number of properties for sale, even overpriced houses can attract multiple offers as buyers seek to secure a home. 

When buyers begin bidding on a house that is overpriced, they may later regret paying more than the property’s worth, this is called buyer’s remorse. 

This can be extremely damaging if the market doesn't appreciate as expected. Houses that are overpriced won’t sell easily in a market that doesn’t reflect the original price the buyer paid. Even if the property does sell, it may be significantly less than what the original investment was paid. 

Housing bubbles

A housing market characterised by consistently high prices can contribute to economic instability. It may lead to housing bubbles, which can burst and trigger economic downturns, like in the 2008 financial crisis.

Housing bubbles occur when house prices rise rapidly and significantly above their fundamental values. When these bubbles burst, it can lead to economic instability. The sudden decline in property values can result in reduced consumer spending, decreased consumer confidence and job losses. 

Homebuyers who purchase properties at inflated prices during a housing bubble may face substantial financial losses. When the bubble bursts, property values can plummet, and homeowners may owe more on their mortgages than their homes are worth and enter negative equity. 

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Are houses in UK overpriced?

We would argue that UK house prices are overpriced as the square footage of most residential properties in the UK has remained largely unchanged over the past century, but their price tags have experienced exponential growth.

According to a report by Schrodes, the soaring cost of housing in the UK has reached a historical peak, with the average house price now standing at approximately nine times the average UK salary. 

Remarkably, the last time such a stark affordability gap existed was a staggering 150 years ago, back in 1876. Across the decades, the physical dimensions of houses have seen minimal expansion. The layout and design of homes built a century ago resemble those constructed today. In essence, the British housing stock, in terms of square footage, has been consistent over time. 

The inflation in property prices, particularly in recent years, has reached unprecedented levels. Houses that were once considered affordable for the average UK resident have now become increasingly out of reach, largely due to overpriced housing.

There are several interwoven factors that contribute to UK houses being overpriced:

Supply and demand

Firstly, it's the equilibrium of supply and demand, or rather the imbalance thereof, that has significantly influenced the property market.

The demand for housing, driven by population growth and urbanisation, and changing lifestyle preferences, has consistently outstripped the supply of available homes. This has created a competitive environment, where buyers often find themselves over-paying for properties.

Currently, a demand-supply mismatch is exacerbating the upward trajectory of house prices. There are more prospective homebuyers in the market than there are available properties for sale. This heightened competition is driving up prices, making it increasingly difficult for individuals and families to enter the housing market at an affordable rate. 

Financial crisis recovery

The housing market still bears the scars of the global financial crisis of 2008. The era of lax mortgage lending standards and easy credit that preceded the crisis contributed to a housing bubble, which, when it burst, left lasting repercussions on the market. 

Subsequently, in an effort to stimulate economic recovery, central banks around the world, including the Bank of England, lowered interest rates to historic lows. The ultra-low interest rates made borrowing cheaper, thereby encouraging more people to enter the property market and stoking demand. 

North & South divide

The regional disparity in house prices across the UK is also an important factor to consider when thinking about if UK houses are overpriced. 

The South East of England, particularly due to its proximity to the financial hub of London, consistently records higher property prices compared to other regions. London’s gravitational pull has created overpriced housing in surrounding areas like Essex and Kent. 

In the North of England, house prices tend to be more affordable on average, with some local councils initiating innovative schemes to bolster housing affordability. These initiatives include low purchase price offers couples with contractual commitments to renovate properties which in turn makes homeownership more accessible. 

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Why are houses being overvalued?

One of the main drives for houses being overvalued is the persistent gap between the demand for housing and the available supply. The UK, particularly major cities like London, faces a housing shortage. When demand outpaces supply, competition among buyers escalates, pushing prices higher.

The UK property market attracts a lot of international investment, especially from foreign buyers seeking stable assets. This influx of foreign capital has lifted house prices higher than normal.

Rapidly changing market conditions, especially in seller’s markets, can lead to higher valuations. In highly competitive markets where demand exceeds supply, estate agents may adjust valuations to reflect the dynamic environment. 

Homes that are listed at a price significantly above their true market value often struggle to attract buyers, Prospective buyers will search within their budget constraints and rarely inquire about properties priced 20% or more above their budget. In such cases, the property might not even appear in the buyers search results.

By setting an excessively high asking price, you inadvertently place your property in competition with higher-value homes. This can make those more expensive properties seem like better value by comparison, diminishing the appeal of your own listing. 

Occasionally, sellers may have unrealistic expectations about the value of their property. Estate agents may suggest higher listing prices to secure a listing, even if these prices don’t align with the current market conditions. 

Over Reliance on estate agent’s valuations, without seeking independent assessments can contribute to overvaluation. It’s vital for buyers and sellers to consider obtaining multiple valuations from different sources to gauge a property’s true value. 

Do estate agents overvalue houses?

While the majority of estate agents uphold the ethical practice of accurately valuing properties, a fraction still resort to the dubious tactics of inflating property valuations to secure a seller’s business. 

It’s important to understand the underlying motivation: estate agents thrive on a steady influx of new property listings. Without a constant stream of fresh listings on their websites and property portals (Rightmove and Zoopla), their pool of potential buyers can quickly dry up. 

This predicament can result in them maintaining outdated lists of prospective buyers, many of whom may have already found a property elsewhere by the time a new listing is added. 

Overvaluing properties to expedite their entry into the market may be deemed a low-skill and unethical approach, yet it remains effective. This strategy preys on homeowners’ natural inclination to seek the highest possible price for their property, leading them to question and even become irked by more realistic and accurate valuations.

An inflated valuation can coax sellers into disregarding their reservations about an agent’s professionalism, marketing strategies, personality and overall service. If the quoted figure is enticingly high, it can create the impression that any potential drawbacks will be justified by the eventual financial gain. 

Regrettably, the outcome seldom aligns with these optimistic expectations. In most cases, misled sellers transition from a state of ease with ample time to move to one of desperation, racing against the clock to offload their property. This not only adds immense stress to the selling process but can also result in financial losses and dashed hopes for the seller.

How do you avoid estate agent overpricing?

If you want to avoid being overpriced by an estate agent, why not sell to us? We are a leading UK cash house buyer with over 50 years of combined experience in the industry. We can buy your house in as little as seven days, albeit for slightly below market value.

But, unlike selling your house to an estate agent, your house sale is guaranteed and you can move on from the property on a timescale that suits you. As a little thank you for using our service, we will also cover all your legal and survey expenses. 

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Tom Condon

Tom Condon, one of our content writers, has fascinating expertise in sustainability in the property industry. Tom thoroughly understands the market and has experience in both residential and commercial property. He enjoys attending conferences and staying current with the most recent property trends.