By Perry Power, property sales specialist at Perry Power
Let me begin by saying that the value of your house should be based on its true market value at the time you want to sell it, rather than what price you’d like or think you should achieve. Sometimes there’s a significant discrepancy between the two. This can lead to difficulties in marketing the property, such as discouraging potential viewers and offers. No agent worth their salt should market a property at an unrealistic price to please the seller, and then drop the price when the house sits on the market for months.
One of the most common mistakes I come across is a property valuation based purely on the asking prices of similar houses in the local area. For example, a house for sale on your road is similar to yours in age and design and is on the market for £400,000. However, your house has a larger garden and newer kitchen, so it must be more valuable and could be priced realistically at around £430,000, right?
Always remember that the marketing price and the actual value of a property are not the same thing. Although the owner and agent for the other house have decided to market it at £400,000, its true value could actually be £370,000. Therefore, even if your house has more to offer, it may only be really worth £400,000. Perhaps the owners of the other house were ill advised to market it at £30,000 over its true value, and the amount of time it has sat on the market is a good indication of this.
The key to valuating your house accurately is to look at actual recorded selling prices of recently sold similar houses in your area, and not what is currently available. The Land Registry or Rightmove websites are a great place to start.
Where possible, try to work off a similar square footage.
A 1300 square foot (sq ft) house a few doors from you sold for £400,000 four months ago. Divide the price by the space to give you a true value per sq ft:
400,000 / 1300 = approx. £307 per sq ft
You discover that your house measures at 1000 sq ft. Multiply the sq ft by the approx value per sq ft:
1000 x 307 = £307,000 (value)
Next, consider market fluctuations. The other house sold four months ago and you know from The Land Registry that market prices have increased by about four per cent in that time. You should add four percent onto £307,000, which gives you £320,000.
Finally, think about condition. Your house is in slightly better condition than the other one. It would normally be safe to presume that you could add another ten per cent onto the price, which would make the true value of your house approximately £352,000.
Although it’s important not to get too hung up on the marketing prices of other properties in the local area, it’s important to see which properties you’d be competing against, then decide if you should place your property on the market today.
If your house were the only one on the market, there wouldn’t be any problem. However, if there are four houses similar to yours up for sale, clearly you’re going to have to do something to attract the buyers to your house – so assessing the competition would be useful.
Remember that a house is one of the most costly purchases a person will ever make. With so much at stake, it pays to understand that most buyers will have done their own market research on local house sale prices, and an unreasonable or inaccurate marketing price will alienate them from the outset. Some agents will advise a higher marketing price for your house, simply to get you on their books.
Be realistic, do your homework, and don’t rely purely on the advice given to you by your agent if you feel the marketing price is excessive, and not representative of other recently sold properties in the area. It could be the difference between selling your house quickly for the best possible price, and your home languishing on the market for months before you’re forced to make a price reduction. Go through this valuation process before you bring in the right estate agent.
The property market is constantly fluid, so although your internet research will show you the sold prices of properties six months ago, it can’t give you an up to date picture of the market. This is when a good estate agent becomes worth their weight in gold. I recently had a client with a three-bedroom semi. After assessing the market, we felt the guide price should be £435,000.
After 20 viewings and five offers, it was natural – in light of demand – for the price to rise to £470,000. I anticipate that it will take around six months for that sold price to be published online, which means that to the individual who’s looking to value their home, it will seem that £435,000 is an acceptable price to pay – potentially losing out on £35,000.
A trusted estate agent will have their finger on the pulse. They’ll know the local market inside out, and can value and market your property accurately to reflect the market conditions.
Image credit: Perry Power