Scotland’s Offers Over System – The Scottish system of setting “offers over” pricing on properties is unlikely to ever return to its peak 2007 level, when house sales were automatically expected to achieve high premiums. According to Edinburgh’s leading solicitor estate agent Warners, the Scottish property market has been fundamentally changed by the recession and the introduction of Home Report legislation – making huge “offers over” premiums a thing of the past.
Scotland’s Offers Over System – Warners believes that Home Reports in particular have created a greater sense of realism among buyers and sellers across Scotland, as they are now able to use property valuations contained in the reports as a marker when judging how much to buy or sell a home for. And the firm says that, although “offers over” prices will eventually return to the market as competition increases for property in Scotland, sellers are unlikely to ever see a return to the peak scenario in 2007 where they enjoyed premiums of 25% or higher.
Scott Brown, estate agency partner at Warners, said: “Over the past year, we have seen offers over prices dwindle in Scotland as more sellers have chosen to market their properties using ‘offers around’ instead. “This trend was helped by the introduction of the Home Report legislation, which meant that prospective buyers could view the valuation of a property that was included with each report and make a judgement on how much to offer for it – rather than having to make a ‘blind’ offer above the price quoted by the seller. “However, I do not think that this has killed off the offers over system for good. The property market is continuing to improve and we are already seeing offers over prices returning in some areas of Edinburgh; particularly when properties sit around a Stamp Duty threshold. “What is changing, however, is sellers’ expectations over the values they expect for their homes.
]When the market was at its peak in 2007, many people would deliberately set a low offers over price on their property and would not accept an offer unless it was at least 25% higher than that price. It was a situation that created a lot of confusion among buyers and meant that sellers had an automatic expectation for huge premiums on their properties. “With the Home Report legislation now firmly established in the Scottish property market, I do not see this situation returning. While offers over has traditionally been the most popular way of marketing properties and it is likely to become popular again, the premiums achieved on these sales will be much less than they were during the peak.” Scott says that if competition returns to the market, house prices are likely to increase as prospective buyers try to outbid each other to secure a new home. In some instances this could lead to properties achieving bids far higher than the price they are marketed at but he adds that this will be an exception to the rule rather than an expectation. He continued: “I think we have seen a fundamental change in the property market over the past year. There’s more realism in the market and buyers are becoming cannier when it comes to searching for a home, so I don’t think there will ever be a situation again where you’d be expected to pay at least a 25% premium to secure a home – regardless of how much the market has recovered. “Of course, in instances where competition is high and there are a number of interested parties, buyers may find they have to stretch their offer a little further in order to get a property but this will be in exceptional cases. I believe the Home Report valuations will act as a ‘common sense’ marker for prospective buyers and will make it less likely for buyers to get carried away when going for a new home. “Likewise, the valuation will be a marker for sellers to consider as well. They may choose to market their home at offers over but, thanks to the Home Report valuation, they will have a rough idea of the price range they are likely to achieve. For example, they may choose to set their offers over price slightly lower than the Home Report valuation and see whether competition drives the final offer higher, but they won’t expect a huge premium – unlike the situation in 2007, where they would deliberately set a low value but demand a final offer of at least 25% above this price. “At the moment, I do feel that the greater clarity and transparency of pricing is helping sales across Edinburgh and the rest of Scotland. In the past 20 weeks at Warners we’ve achieved 263 sales, compared to 186 during the same period in 2008.
This is an increase of over 40 per cent, which is a direct result of clear pricing, rising confidence and good marketing. “Some agents are already setting offers over prices on their properties and, although offers around prices are still proving the more popular choice for marketing a home at the moment, I can see the situation changing over the next couple of years. “However, I also believe that anyone who thinks that further recovery in the property market will mean a return to the ‘old’ system of big premiums for offers over prices will be very disappointed.”