What is Buying at a Discount?

publication date: Jan 22, 2010
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
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What is Buying at a Discount?

Lets face it, we all want to buy at a discount, but the problem is few people want to sell a property for less than it’s worth!
 
Buying a Property at a Discount
The first thing to understand about buying at a discount is what a property’s ‘real value’ actually means. It’s important to know first what a ‘discount’ isn’t. It is NOT the amount you pay versus the marketing price ie the price advertised on the internet/via the estate agent.

Working out a Property’s True Value
A property is initially worth what a buyer is willing to offer and seller willing to accept, however as people tend to need a mortgage to purchase a property, professionals get involved and the property’s value can then be reduced based on the information experts such as the mortgage lender and surveyor believe the home is worth. Finally the final value comes back to a renegotiated price.

Example of a Property’s True Value
If a property was advertised at: £150,000, here is how the property’s true value could be arrived at:-

Buyer offers:£140,000, but it’s rejected by the seller
Buyer makes a new offer of:£145,000, which is accepted by the seller
Buyer applies for a mortgage:      Property is valued at £142,500 as they find evidence of damp
Independent Surveyor:Property valued at £140,000 as they find evidence of damp and some
structural work is required
Buyer revises offer: £138,000, in view of the work required, but the seller rejects this offer
Buyer finally offers:£140,000, as they really want the home and the seller accepts

So in this case the property was advertised at £150,000, but the final agreed ‘true value’ was £140,000.

To secure a discount on a property you would need to make an offer BELOW £140,000, not the £150,000 it was advertised for as this is typically a ‘marketing price’ not necessarily the true value of a property.

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