What actually makes a property a bargain
Every property is worth what it is worth. The only question is whether the asking price is below that figure, and most of the work is establishing the figure.
A bargain is a price below value. It is not a low price, and confusing the two is the most expensive mistake a buyer can make, because it turns the search into a hunt for the cheapest listing rather than the best-value one.
The distinction matters because the cheapest properties are cheap for reasons. Sometimes the reason is a defect you can fix more cheaply than the discount — that is a bargain. Sometimes the reason is a defect you cannot fix, or a location nobody wants, or a legal problem that will follow the property forever. That is a liability with a low price attached.
Establishing value independently
Value comes from evidence, and in the UK the best free evidence is HM Land Registry Price Paid Data, which records the actual price of every residential sale in England and Wales. It is searchable by postcode and it is the only figure in the transaction that was agreed by two parties with money at stake.
- Find at least three sold comparables of the same property type, within a short distance, sold within the last twelve months
- Adjust for condition, size, tenure and any material differences between them and the property you are considering
- Check whether the local market has moved since those sales, using the UK House Price Index for the area
- Ignore asking prices entirely — they are opinions, and frequently aspirational ones
- Treat an estate agent's valuation as a marketing opinion unless it is backed by comparables you can verify
Pricing the reason it is cheap
Once you know the value, the next step is to establish the cost of whatever makes it cheap, because the discount has to exceed that cost for the property to be a bargain. This is where discipline separates buyers who make money from buyers who think they have.
The costs fall into two kinds. Remediable problems — a dated kitchen, a failed roof, a tired bathroom — have a price and a known outcome. Structural problems — subsidence, flood risk, short leases, restrictive covenants, non-standard construction — have a price and an uncertain outcome, and uncertainty should be priced at more than its expected cost.
The three tests
A property is a genuine bargain if it passes all three of these. Failing any one of them means you are buying a problem rather than a discount.
- Value test: you can point at sold comparables supporting a figure materially above the price you would pay
- Cost test: the cost of remedying whatever makes it cheap is known, and is less than the discount
- Exit test: there is a realistic buyer for the property when you come to sell it, at the value you assumed
Common questions
- How do I know if a property is genuinely below market value?
- You check the sold prices, not the asking prices. HM Land Registry Price Paid Data is free and shows the actual price of every residential sale in England and Wales by postcode. If you can find three comparable sales from the last year that support a value above the asking price, the discount is real. If you cannot, the figure is a marketing position.
- Is a cheap property always a bargain?
- No. Price and value are different things, and the cheapest property in an area is frequently cheap because of a defect, a legal problem or a location issue that will not go away. A property at a genuine discount to a verifiable value is a bargain; a property that is simply the cheapest on the market is usually the cheapest for a reason.