Offers Over Home Report

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Offers Over Home Report

Carolyn Dunion is here to explain how buying property works with Offers Over the Home Report’s value.

What does ‘Offers Over’ mean? What is the home report?

This is important because it can make quite a difference to people’s budgets. When you see properties advertised in Scotland, they will be advertised at ‘Offers Over’ a certain price. That Offers Over price is aimed at getting you into the right ballpark.

So, crudely, if something’s Offers Over £225,000 then it might be that the actual home report value is £250,000.

The home report is a document with over 50 pages of information about the property. In Scotland, the seller provides that for the buyer, and it grades each element of the property as one, two or three.

One means it’s all in perfectly good order. Two means there’s some maintenance on the horizon, and three means there’s something that needs doing imminently. None of those things are an issue if the buyer is okay with them.

If the property is a three, you would want to find out what maintenance or repair might be needed, and whether you’re happy to take on the responsibility for that. You tend to find that the older the property, the more twos and threes there are – that’s just a fact of life.

But it’s useful information about the condition of the property that you’re interested in buying.
It will also give you the market valuation for the property, according to a surveyor. Usually you’ll find it’s just a little bit higher than the Offers Over price.

How does it work when you pay above the home report’s value?

Ideally, as a buyer, you would like to pay the home report value – or indeed below if you can get away with it.

In a buoyant market, and certainly on popular properties, it’s normal to sell over the home report value.

It’s important to note that anything you bid over the home report value will not be considered as part of your deposit by the lender. You need to have that in cash over and above the deposit.

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How much should I pay above Offers Over?

This is the million dollar question and I get asked this all the time. But nobody can tell you for a fact what you need to bid over. There’s a great deal of mystique around it.

First of all, you tend only to bid over the valuation if it’s popular and you’ve got some competition. People will tell you that you need to pay 10% or even up to 20% over if it’s an extremely popular property. But the reality is that we just never know what something’s going to sell for.

The best thing to do is try to get a feel for how long the property’s been on the market. Has there been a lot of interest in it? If it’s just you and one other person, you might not need to go over the home report value much at all.

If you and 10,000 others are interested, you’re going to have to bid as much as you can afford, and that you feel the property is worth. But always exercise a bit of caution, because everything you’re bidding over the valuation is effectively lost money – because you’re paying more than the property is worth.

Can I get a mortgage to help fund the amount I have paid above the home report value?

It does, and sadly you can’t. This is important, because you need to get the figures correct.
You will need at least a 5% deposit, based on the valuation figure. If you bid over that, the lender will not take that into consideration.

To keep the numbers simple, let’s say a property is valued at £100,000. You would need at least £5,000 to have your 5% deposit in the eyes of the lender. If you then bid £105,000 to get the property, you would need £10,000 cash in total. It’s not 5% of the £105,000.

How does paying above a home report affect my mortgage product?

In theory, it doesn’t change much, but people tend to use their funds to bid over the home report, and that can effectively reduce the amount of deposit they have to put down, in the eyes of the lender. That could impact the interest rate they qualify for.

The bigger the deposit you have, the greater discount on interest rates you get. If you’re putting less deposit down in the eyes of the lender, the interest rate you qualify for might be just a little bit higher.

It’s worth chatting that through with your advisor, but that’s the main impact it would have.

Can I just put down a 5% or 10% deposit based on my purchase price?

If the purchase price is below the home report value, or equal to it, then yes, you can just put down 5% or 10%. You cannot put down 5% or 10% of the purchase price if it’s above the home report value.

What is a closing date? How do closing dates work?

If a lot of people are interested in a property, an estate agent often sets a closing date. They might say that they want sealed bids by Friday at 12 noon from anybody interested in buying the property.

You would instruct your solicitor to put an offer in on your behalf. Then, at 12 noon, the seller’s solicitor will open all the offers and, generally, the highest bidder will win.

You can’t then go back and up your offer by £10,000 after the closing date. They’re usually looking for the highest bidder, but they’ll sometimes take into account the bidder’s circumstances.

If you don’t have a property to sell, that puts you in a stronger position. If you do have a property to sell and it’s not on the market yet, that might weaken your offer. The estate agent is looking at how likely you are to be able to make good on this offer quickly, as well as how high the bid is.

How can a mortgage broker help with Offers Over?

This is one of the things that I work most closely with clients to help them to navigate. No one can tell a client what they should bid for a property, because you just never know. But your advisor will help you work out what’s possible for your budget, and what that looks like in terms of mortgage figures.

Then you can reflect on what it’s worth for you. In a lot of ways, we’re like a well-informed friend and a sounding board. We look at what’s possible to allow you to come to a decision about what’s right for you.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.