Originally Posted by Lorrainbo
Hi all, my husband and I are looking to buy a house, which over the last 2 years has fallen from €375,000 to €265,000. We're hoping to be in a position to make an offer this October. With today's property market the way it is what would you think is a reasonable offer for a house at this price? It's a 5 bedroom house and never been lived in.
By reasonable offer- I assume you're wondering how low an offer you can make that stands a chance of being accepted? If so- it all depends on how desperate the seller is to sell- if the property has been on the market for a considerable amount of time (like the 2 year time frame you've mentioned for example)- then its probable that the current asking price (regardless of how much its fallen) is too high to elicit interest from a small pool of possibly interested buyers- with an even smaller pool of those capable of sourcing the finances.
I don't know what the peak price of a property like this would have been- given the location I imagine around the 400k mark- allowing for a 50% depreciation from peak prices (which is a reasonable rule of thumb for a house- and possibly 70 to 80% for an apartment depending on location)- would indicate that somewhere in the 200k region might be considered reasonable value.
There are different ways of trying to value property- in the current market- possibly using an ROI model (where the price paid for a property would have to generate a net return on investment of say 7 to 8% per annum would be normal). So- assuming this house could rent for 1,000 a month (perhaps not valid given the location)- the annual rent would be 12k, which would indicate a fair market price of about 170k (at 7% ROI) or 150k (at 8% ROI). Investors wouldn't buy at under 7%- as it wouldn't cover the cost of the investment, plus a risk premia- so all things else being equal- if this property would cost 1,000 a month to rent- it might have a max realisable market value of about 170k........
Some people will always attach a higher value to a property (for whatever reason)- it could be close to family or friends, work or whatever........ So- the 170k price would probably be incremented by a premium that people are willing to attach to the property- in the current climate- this might be a 10 to 20% premium- possibly bringing you up to 200-210k..........
Personally- I think the asking price is purely aspirational at the moment- I'd offer possibly 180k, with a view to paying a max of 210- and if it went 1c over 210k- I'd walk, and not look back.
Once you become emotionally attached in a purchase or sale- you're screwed- and you will wrung for every penny a seller can extract from you.......