Whichever way you think house prices are heading this year, those buying and selling will have to decide whether an asking price represents fair market value.
The average asking price is currently 23 per cent higher than the average price that properties are actually selling for, suggesting that some sellers are setting their sights too high.
As of March the average UK asking price on Rightmove stood at £365,357. The average sold price, according to the Land Registry, was £289,818 as of January.
Proceed with caution: The asking price is not necessarily what a home is worth – or what a mortgage valuer might sign off on, according to professional buying agent Henry Pryor
When it comes to selling a home, establishing what it’s worth before putting it up for sale is crucial.
Sellers who demand over the odds may have to watch their home linger on the market for months.
Often, the longer it remains, the less interest it will attract – with potential buyers deeming the months of marketing as a sign there must be something wrong.
On top of the time wasted, the asking price will need to be slashed – perhaps multiple times – and the owner risks selling their home for less than they would if they had started with a more accurate valuation.
Equally, if the value of their home looks like a bargain they may be selling themselves short by tens of thousands of pounds.
Henry Pryor, a professional buying agent says: ‘What a property is worth is part art, part science. The asking price is part of the marketing. Pitched correctly it should attract potential buyers.
‘What other similar properties have sold for is helpful, but what other similar properties are for sale for is perhaps more relevant in many ways. What else could a buyer choose, rather than your home?
‘Likewise, how many people are looking for your kind of property, and how much have they got to spend to compete with one another for it?
‘If there are 20 people each with a £1 million, then you may sell for a premium.’
Is the price right? What a property is worth is part art, part science, according to Henry Pryor
As for prospective buyers, Henry Pryor says they should never take the asking price too literally.
The asking price is not necessarily an indication of value, according to Pryor, nor is it a statement of what the seller might accept.
It is also not necessarily what the estate agent advised, or what a mortgage valuer might sign off on.
If you want to know what a property is worth then ask an estate agent – preferably not the one who is selling the property you intend to buy
Buyers would therefore be wise to do their own research before offering. This doesn’t just mean scrolling for hours on Rightmove and Zoopla, according to Pryor. It also means speaking to local estate agents.
‘If you want to know what a property is worth then ask an estate agent, says Pryor. ‘Preferably not the one who is selling the property you intend to buy.
‘They will know who is looking, what they have to spend, what else they could buy and which way the market is going.
‘At the end of the day the buyer is the one who decides what it’s worth. The seller has the luxury of deciding if it’s enough.’
We spoke to Henry about the seven things that won’t determine what someone’s home is worth – despite what sellers and buyers might think.
Buyers can deem months of marketing as a sign there must be something wrong with a home
Things that won’t determine what a home is worth
1) What you paid for it
Nobody wants to sell their home for less than they paid for it, but ultimately in some cases they may have to.
The old adage that property prices always rise doesn’t always play out the way people would like it to.
Even if news headlines are telling you that house prices have risen in recent years, the situation may be very different in certain areas of the country.
Buying agent, Henry Pryor says: ‘At the end of the day the buyer is the one who decides what a property is worth. The seller has the luxury of deciding if it’s enough.’
There is also a chance you may have paid over the odds to begin with. Those who buy new builds tend to find that the price depreciates at first – just like with a new car.
The good news is that even if a property has fallen in value, the chances are, properties in the same area will also be cheaper.
Pryor says: ‘What you paid for the house might have a bearing on what you might accept, but it’s unlikely to motivate someone when making an offer.’
2) What you need
There is no harm in testing the market for those who need a certain figure – perhaps in order to buy their next home.
However, if they’re asking for more than buyers are prepared to pay then they’ll likely end up disappointed.
Pryor adds: ‘What you need in order to make a move to the next house is of course important – but again, it doesn’t mean that someone will offer you more just because you have expensive tastes.’
3) What your neighbour is asking for their house
Noticing a neighbour’s home on the market has spurred many a seller into action – particularly when they’re pleasantly surprised by the asking price.
First, it’s important to establish if the neighbour’s home is of a similar size and condition to your own.
If it is, remember their asking price is not the same as the sold price and the difference between the two can become stark.
The average UK asking price on Rightmove is currently £365,357. The average sold price, according to the Land Registry, is £289,818 as of January.
Don’t follow your neighbour: Their asking price could end up being very different from the price they ultimately sell for
Pryor says: ‘Your house will be different, and so worth a different amount. Your neighbour may have different reasons to sell which justify a higher or lower asking price.
‘You should price your property to compete with theirs and get buyers to come and see your home instead.’
4) What your friends say
Everyone has an opinion on property these days – but it doesn’t mean they have a clue what they’re talking about.
Family and friends will likely base their opinions on their own experiences, and what they’ve read on social media and in the news. Take it with a pinch of salt.
‘Most sellers get the advice of friends and family whether they like it or not, but unless they are getting their cheque books out it’s not really relevant,’ adds Pryor.
5) What estate agents say
Estate agents will likely be the people most sellers will rely on to give the correct valuation.
Unfortunately, some agents may be more concerned about winning the instruction, than they are with giving an honest assessment on price.
They’ll then spend the next few months blaming the market for the lack of interest and claw the price down.
This is why it’s important to audition a number of estate agents for the part. And don’t necessarily go with whoever says the home is worth the most, or who says they’ll sell for the lowest fee.
‘With the market hardening and new business hard to come by, I’m afraid there are some agents who will flatter you with an inflated figure in the hope of getting your business,’ says Pryor.
‘One of the biggest agents in London only sells one in five of the properties they take on because they are so optimistic in their pricing.’
Don’t give in to flattery: Some agents may be more concerned about winning the instruction, rather than giving an honest assessment on price
6) The cost to rebuild
This is one that homeowners may be familiar with on their insurance policies. A home’s rebuild cost is not the same as its market value.
This is how much it will cost to have the property re-built from scratch if it was destroyed – for example, following a fire or an explosion.
The rebuild cost is typically much less than the market value. However, with some older or unconventional properties, it can be much higher.
Pryor adds: ‘The cost of rebuilding or the insurance value doesn’t include the land that the house is built on.
‘It’s just the value of what might have to be repaired if, for example, it were to be burned down.’
7) What you’ve spent on it
Unfortunately, this can be another psychological barrier for sellers to overcome.
Just because they’ve added a loft conversion, side return or renovated the entire kitchen, it doesn’t guarantee they’ll make a profit – or even get that money back – when they come to sell.
Pryor adds: ‘You may have spent a fortune on fancy lights or a posh kitchen but it only helps to sell the house. It isn’t included in the value, especially if buyers don’t appreciate it.’
What is the difference between asking and sold prices – and why does it matter?
- The asking price is what a property is listed for, while the sold price is what it ultimately sells for.
- Typically the average asking price tends to be higher than the average sold price.
- Many sneer at asking prices as a result, saying these are too variable to use to judge property market trends.
- But asking prices do have some use – they give a snapshot of what is happening in real time.
- House prices indices such as Nationwide and Halifax relate to approved mortgage applications, which means there is a time lag in the data.
- The Land Registry’s house price index is based on sold prices, which means there is an even bigger time lag.
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