Should I pay over valuation for a dream plot of land?

[frugledoc]

So my wife and I (and our baby daughter 10 weeks) have been living well below our means for quite a long time, but had a very good quality of life.  My current net worth not including public pension is 420,000.  I received a significant boost recently after selling a property in London where there is a property boom, realising 180,000 pounds of profit.

We now live in Scotland and have never wanted to buy a ready made property. We always find new build properties pokey and crammed together and older properties look like too much maintenance.  We have dreamed about self building for a long time but wanted a plot with a view.

For me, I wanted a plot where I could live and feel like I was on holiday all the time.  We have found it but there are other interested parties so it is going to sealed bids on a closing date (i.e. nobody knows what anybody else is bidding). 

As I have a large wad of cash sitting in my bank account following the sale of my flat we are struggling to know what to offer.  It doesn't really matter to me if we over pay by 10 - 20% if it means securing it but that could mean bidding significantly more than the next highest offer.

Should we over pay or be more sensible and risk losing it?

[MoneyCat]

Are you going to live on the land for a really long time?  In that case, overpay and let the land's value catch up with what you pay.  When we bought our house, we overpaid by $20,000 to beat the other bidders and now the house is easily worth a lot more than that and it's value will continue to grow since we plan to keep living here for at least another 30 years.

[frugledoc]

Hi Moneycat.  Yes I believe we would live there forever.  We have moved around a lot in our lives, Scotland, England, New Zealand but are permanently settled now.

I am thinking along the same lines as you.  It's not like I'm blowing the money on a new car or something stupid.

[Pinkie Mustache]

Sometimes, when it's the one, it's the one.  If you know it is, and you can do it, do it. 

And then let us know when the guest quarters are ready ;0)

[East River Guide]

If you win the auction, by definition you are paying more for the property than anyone else would.  If it is worth the extra 20 to you, then bid it.   At some point it's valid to think about these things as "would I be happier without the property but with the 20k in the bank, or happier with the property."   Most people shouldn't start that way, you need to start building savings and not spending, but at some point the marginal utility of an extra 20k can be far below the satisfaction of achieving something significant to the quality of your life.

[former player]

Sealed bids means that if you get it you will never know how your bid compared to others, except that it was the highest.  As long as your bid is what you can afford and what it is worth to you, you aren't overpaying.

I agree with MoneyCat: if this is your lifetime home, go for it.  I paid full (high) asking price for my current home 12 years ago, but 1) I could afford it - just, 2) nothing like it has come on the market in this area since, and 3) I wake up happy to be here every day, and it is my "lifetime" house.  I would have regretted not buying it much more than I would have missed the money in my bank account.

[Pinkie Mustache]

If you don't mind, let us know how it works out - hope your decision works out well for you!

[rmendpara]

So my wife and I (and our baby daughter 10 weeks) have been living well below our means for quite a long time, but had a very good quality of life.  My current net worth not including public pension is 420,000.  I received a significant boost recently after selling a property in London where there is a property boom, realising 180,000 pounds of profit.

We now live in Scotland and have never wanted to buy a ready made property. We always find new build properties pokey and crammed together and older properties look like too much maintenance.  We have dreamed about self building for a long time but wanted a plot with a view.

For me, I wanted a plot where I could live and feel like I was on holiday all the time.  We have found it but there are other interested parties so it is going to sealed bids on a closing date (i.e. nobody knows what anybody else is bidding). 

As I have a large wad of cash sitting in my bank account following the sale of my flat we are struggling to know what to offer.  It doesn't really matter to me if we over pay by 10 - 20% if it means securing it but that could mean bidding significantly more than the next highest offer.

Should we over pay or be more sensible and risk losing it?

Financially, a "prime" house is a poor decision.

However, given you have met your other financial goals, then what's wrong with paying the maximum that the property is worth to you? After all, you have the money.

Best thing is that you have time on your side, so even paying an additional 10% will work itself out on a 15+ year horizon... unless your area is unique and something drives down property values.

[solon]

If it doesn't matter to you if you overpay by 20%, then bid the full 120%. You stand a much better chance of being the winning bidder. And if somebody else outbids you, you can take comfort in them getting fleeced!

[defenestrate]

If it doesn't matter to you if you overpay by 20%, then bid the full 120%. You stand a much better chance of being the winning bidder. And if somebody else outbids you, you can take comfort in them getting fleeced!

Bid your reservation price--not a penny over what you would regret paying. This price is in fact the value of the land to you, and that is all that should matter. You will not be overpaying. If you feel no one values it as much as you, then bid 1 quid more than what you believe the second highest bidder may bid.