Why is it important to value your property correctly from the start when selling?
The value of a property can seem complicated to arrive at, as it’s the result of a host of factors that have nothing to do with the price of the bricks and mortar. But ultimately, the value is the result of a compromise between buyers and sellers. The seller wants to make as much money as possible from the sale, and the buyer wants to pay as little as possible. Somewhere between the two parties’ wildest dreams is what we’d call a fair price, or the property value, and it’s ever-changing as the market shifts.
The risk of overvaluing
So is it worth taking a chance on a high asking price? In most cases, the answer is no. If the seller sets the value too high, they might have a hard time finding a buyer, and it may even be unsellable once it passes a certain point. Maximising the income from the sale has to be balanced with optimising the chances of selling it.
We know that the best time for a property to attract interest is in the first fortnight, and dedicated house-hunters will set alerts and check the main property websites multiple times a day to be first in the viewing queue. Those websites also allow users to filter out properties that have been on the market for more than two weeks, or list them in order of recency.
It’s quite normal for interest in a property to drop by a half after a month. Why does this matter? If it’s overvalued from the start, you could miss this key period of selling opportunity. Many buyers are ready to proceed at a moment’s notice and you don’t want to miss them.
And here’s the really important part. It’s that initial valuation that gets people doing virtual or real tours of the home, and then there’s the opportunity to raise more from the sale – “a bird in the hand” and all that. If your property’s looking great and people love the location, they might be prepared to up their offer to assure a sale, and some competitive bidding might get started.
You can fine-tune this process by using phrases such as “offers over” or “offers in the region of” to show buyers that the advertised price isn’t necessarily set in stone. It can prepare them for the possibility of a higher price, or even a lower offer, but if they love the property or have had multiple offers rejected, they could be eager to seal the deal with a more generous offer.
Should I undervalue?
It’s actually quite rare for someone to undervalue their home against estate agents’ advice, at least on purpose. Undervaluing usually happens when the seller has had a valuation a year or two previously and has not paid attention to a rising market in their area. We don’t see much evidence of undervalued homes selling quicker, either. As we said above, an attractive, reasonably valued property is often snapped up within days when it looks too good to miss.
What goes into a valuation?
So, now we’ve seen the drawbacks of overvaluing, how can we be sure that we’ve got the valuation just right? Valuing a property is really a judgement on what is the best price a seller is likely to get in the prevailing property environment.
House prices do go up and down in real terms, but the changes are usually signposted pretty clearly to those of us in the industry. Some short-term events can put pressure on property prices. For example, recently, there have been increases in the Bank of England base rate, which has made mortgages more expensive. That can make some buyers lower their aims. But generally, prices continue to edge upwards – even during the most disruptive days of Covid, house prices continued to rise, by as much as 25% in some places.
Location is an obvious factor, but again, it’s not quite so simple. It’s good to be close to shops, railway stations and restaurants, but not too close, as they can be noisy and make parking difficult. Similarly, being in the catchment area of a well regarded school can add serious value, but that doesn’t mean you want to be right next door to it, especially at 8:30 a.m. Some properties just find themselves in sweet spots, and often, the things that make them sweet weren’t there five or ten years ago.
The selling prices of similar neighbouring properties are also considered, and probably give the biggest clue as to the value, particularly that shift in desirability over time. Past sales are proof that there are people willing to pay a certain amount for a property near yours. However, estate agents will also know whether those sales were quick or difficult, and can advise on marketing it accordingly.
Should I spend time and money on home improvements?
Finally, there is of course the state of the property itself. Some buyers want to move in and not even think about decorating for a few years, and are willing to pay extra for it. Others are looking for a doer-upper. Either way, there are some quick and inexpensive things you can do to keep the property aesthetically pleasing – a lick of paint here and there and some jet washing outdoors can make the difference. Major operations like new central heating or windows might not pay for themselves in terms of adding value to the home, but might make the sale quicker, so listen to any advice your estate agent is giving you in that regard.
Stick with the valuation
Local estate agents are always the best people to sell through as they have greater understanding of the region, usually because they live there themselves. For example, an estate agent in Salford and Greater Manchester will know how the schools, public transport, shopping and such like feed into house prices in this part of the world, so it’s worth taking their valuation recommendations on board. That should lead to a quicker sale, which is just what you need when you’re looking for your next home.