Here is what we at Jukes Estate Agents Harlow have been banging on about for ages! Independent property market experts ‘The Advisory (https://www.theadvisory.co.uk/) have released the following data on: Why you need an accurate valuation . It makes a great read. Enjoy..
Here’s why you want to form an accurate assessment of what you home is worth, and not ask too much money:
Step by step.
- You set a high initial asking price (above ‘Market Value’) in the hope it attracts a high offer.
- No one makes you an offer so you sit and wait.
- While you sit and wait, your overpriced home helps make more competitively priced property look better value for money. You actually help others to sell before you!
- Eventually you bite the bullet and make a small price reduction. You wait but it does nothing so you reduce the price again. This goes on until you reach the point where your property is priced at ‘Market Value’. It should now sell but it doesn’t.
- The problem now is so much time has passed. Therefore the property been so overexposed to the market, it’s become a ‘stale listing’.
- Buyers start to think “What’s wrong with this property?” They have lost confidence that your home is a ‘good buy’ and continue to stay away reluctant to offer.
- To generate offers from serious buyers you have to reduce your price below ‘Market Value’ to counteract the negative stigma now attached to your property.
- As counterintuitive as it seems, properties initially priced above ‘Market Value’ tend to sell for less that they could have if their original prices had looked more attractive to buyers.
END RESULT IS: YOU UNDERSELL & LOSE £1,000’S.
Many house sellers have to live in denial about this. They are forced to tell themselves there’s no way such a struggle could’ve resulted in anything other than the best possible price being achieved.
That’s a horrible thing and a fate we fully intend to make sure you avoid.
How much is your house worth today?
Contrary to popular belief…
…When selling your home, its value is determined by one thing and one thing only:
What a qualified (and able) buyer is willing to pay for it.
No more and no less.
The bottom line, and inescapable truth is this:
“Your home is never worth more than what a buyer is willing (and financially able) to pay.”
So how do buyers decide what they’re willing to pay?
What buyers will be willing to pay for your home; in today’s market (i.e. what they think it’s worth) will be determined by comparing your home to the others for sale right now.
In other words: “Today’s competition determines today’s value of your home.”
Makes sense when you think about it, after all…
…No buyer can purchase a property that has already been sold. They can only purchase a home that is currently for sale.
You’ve actually already experienced this first-hand..
..When you bought your current home, how did you establish it’s value?
Think back:
- You probably had budget?
- You probably had an idea of the kind of property you needed?
- You probably had an idea of where you wanted to live?
- You probably got out there and viewed all the properties that looked interesting within your affordability range?
- You probably consciously (or unconsciously) compared all these properties against one another and ended up buying the one that met your needs and gave you the most value for the price paid?
Does all that sound familiar?
We hope so because we’re happy to report nothing has changed. House buyers still behave in exactly the same way today.
Key takeaway:
Key takeaway: “Essentially, buying a house is a massive comparison-shopping exercise.”
As such, the value of your home is not determined by:
- What you want for it.
- What an estate agent may think it’s worth.
- What it costs to rebuild.
Instead, it’s value is determined by:
- Buyers comparing it to the other homes available in the market at this particularly moment in time.
In practical terms:
- Buyers visualise the value of one property versus the other(s) available to buy, by comparing the features each offer for the price they are asking.
- Buyers typically do not ask, or care, what the seller’s opinion is of their property’s price / value.
- Buyers determine the intrinsic values to themselves by inspecting the properties and making their own judgments.
- In that regard, the value of your property (when it comes time to sell) simply reflects what buyers think its worth despite a professional’s view
Part 2: Estate agents are NOT all the same
True, estate agents all do basically the same ‘stuff’ i.e. marketing, negotiating, building relationships with buyers.
It’s just that some estate agents do this ‘stuff’ substantially better than others.
Experience tells us there is roughly a 10% spread (either side of the theoretical market value of your home) where your sale price can end up.
How far above (or below) the theoretical market value of your home your sale price ends up, will be directly determined by:
- Your choice of estate agent.
- The skill of that estate agent.
- The suitability of that estate agent to sell a property like yours.
Bottom line: A house is never worth more than what a buyer is willing to pay…
…But, what a buyer is willing to pay isn’t fixed.
The right estate agent will get them to pay you more providing it is priced correctly in the first place!
Part 3: Common myths about value
In part 4 we’ll look at how to do the research and think like a buyer, but first let’s quickly cover a few key points that can get in the way of being able to do that.
Factors that DO NOT affect the value of you home
As discussed (and I hope you agree), value is determined solely by what a buyer is willing (and financially able) to pay in today’s market.
Therefore, none of the following have any effect on the market value of your home (i.e. how much serious buyers will be willing to pay):
- What you paid
- What you need
- What you want
- What your neighbours say
- What your friends say
- What estate agents say
- The cost to rebuild
- The cost of improvements
Consider this…
…If you were looking to buy a house, would you care what the house seller paid for it or how much they spent repairing the roof, or on their kitchen refurbishment etc?
Factors that DO affect the value of your home
Homeowners often place major value on minor things – proclaiming their home to be better (and so more valuable) due to superior; condition, amenities or decoration.
These things make a difference but not as much as one might think.
The major factors that determine value (and their relative impact) are as follows:
- Amenities
- Condition
- Size
- Location
Bottom line:
- Location and Size account for the majority of ‘value’ for any home.
- Condition and Amenities contribute far less to ‘value’ but can make a big impact on ‘saleability’ (i.e. how much more appealing it is to buyers compared to similar homes).
Part 4: How to intelligently research open market value
Successful house sellers know:
“The key to accurate valuation is to see the market through the eyes of buyers.“
Focus on finding facts because facts are what will give you the best insight into what buyers are seeing and thinking:
- What similar homes historically sold for are facts.
- What similar homes recently sold for are facts.
- What similar homes you’ll be competing against are facts.
- What similar homes are failing to sell for are facts.
In hot markets (where prices are rising) what buyers will be willing to pay will be above what similar homes recently sold for, but below what similar homes are failing to sell for.
In cold markets (where prices are falling) what buyers will be willing to pay will be below what similar homes have recently sold for, but potentially above what similar homes have historically sold for.
Part 5: The problem with free valuations from most estate agents
A competent (and ethical) estate agent will be your most useful ally when it comes to correctly accessing how much buyers will be willing to pay for your home.
However, probably the number one reason in the world for property not selling (or underselling) is deliberate overpricing / overvaluation:
- In the UK it’s estimated that roughly 50% of all homes that go to market, either don’t sell or fail to sell within 12 months.
- It all stems from FREE ESTATE AGENT VALUATIONS which create an environment that encourages homeowners to choose to list their homes at overinflated prices with the least competent estate agent.
The ‘price is right’ game
- The great challenge estate agents have when working with homeowners is presenting their opinion of value and what price is achievable.
- Often times what a homeowner does is to interview 2 or 3 estate agents and ask them all the same question, “How much do you think my house is worth?”
- They compare one estate agent’s answer against the others to see who gives them the highest number.
- Then make their decision on whom to hire based on price.
- Totally understandable given that to the general public the majority of estate agents all look the same, sound the same and do the same.
- What else is there to differentiate them on but price promised (and cost of service)?
The most common mistake house sellers make is to list their home at the highest price with the least competent estate agent.
The estate agency industry we deserve?
1,000,000’s of homeowners have gone before you and played ‘the price is right‘ game with estate agents.
Over time this has created an estate agency industry acutely aware that:
Giving an honest opinion of value (at a free valuation visit) is often NOT as effective (at securing new business) as telling the homeowner something more flattering.
As one very successful London agent once told us:
The big problem with being an estate agent is that you don’t win instructions by telling the truth!”
Be in no doubt – most free estate agent valuations ARE a bidding war.
The winner of that bidding war (more often than not) being the estate agent who comes up with the highest promised price for the home.
It’s a universal problem!
In a recent survey we asked estate agents covering over 2000 postcode districts one simple question:
“Is deliberate ‘overpricing to win instructions’ a problem with one (or more) of your competitors?”
100% of respondent said ‘yes’!
When you think about it, it’s crazy really because:
- Estate agents have absolutely zero control over the value of your home.
- They no more determine today’s market value of a property any more than the weatherman dictates the weather.
- The market (and the market alone) determines the value of your home.
Never the less, deliberate over-pricing / over-valuation is a strategy that wins business. Always has and always will.
What can be done to stop it?
Simple, make a stand and commit to being a savvy seller that values facts and truth over opinions and empty promises.
We can tell you, estate agents are desperate to meet people like that.
You’ll probably get hugged…
..Or at the very least you’ll receive better service, huge respect and the best possible result from your sale.
Making it happen is easy, all you do is proactively demonstrate (to estate agents) you value, reward and can handle the truth…
…Otherwise it’s back to the front line of the valuation bidding wars you go.
So here’s your plan of attack:
Administer some estate agency truth serum
To get the truth out of them, estate agents often need to be given permission to be brutally honest.
You can help by having a quick discussion with them BEFORE they offer their thoughts on what they think your home is worth.
Here’s the dialogue to use:
You: “Before we talk about price, I want you to understand that I don’t want you to tell me what you think I want to hear.
I want you to tell me the truth.
I need to know what you honestly think I can sell this home for and how you came to that conclusion.
It doesn’t mean I’ll agree with you, but I want you to know that I’m not basing my choice of agent on who tells me the highest price.
Does that sound fair?”
Ask the 3 magic questions:
Instead of (or as well as) the dialogue above, another way to get the truth out of estate agents is to ask the questions below.
Again, do it before the estate agent has given you their opinion of your property’s value.
- What are the properties on the market right now that the buyer of my property is going to be giving serious consideration to?
- How does my property compare to these properties?
- Where do we need to position my property against these properties to make mine stand out as the best value for money?
If none of these properties are generating interest, the next question to ask is:
- How far below the competition do we need to price my house to generate offers?
The bottom line about estate agent valuations
- Estate agents have no control over the value of your home.
- A good estate agent knows they’re not there to tell you what they ‘think’ your home is worth.
- A good estate agent knows their ‘opinion’ has little to no merit and that only ‘facts’ (and the opinion of potential buyers) count.
- A good estate agent knows their real job is to show you the facts in the market so that together you can estimate value and select an asking price that will attract buyers.
Final thoughts
Everyone has an opinion of what your home is worth.
But you’ll only know whose opinion was most accurate the day you exchange contracts with a committed buyer.
That said, the chart below shows you where opinions tend to lie in relation to market value.
- Broadly speaking, buyers tend believe the value to be lower and sellers believe it to be higher.
- A surveyor should be about spot on or perhaps a bit low.
- The honest and experienced estate agent will be at the top end of what is realistically achievable, as they will know recent sale prices of similar homes and how much buyers (in your price bracket) have been willing to negotiate.
- Other estate agents, depending on their level of desperation and lack of integrity will be well above market value.
In the end, the opinions you should pay most attention to are those of buyers (and their surveyors if buying with a mortgage).
It’s then your estate agent’s job to raise buyers’ opinions as high as possible through good marketing and negotiation (and in the case of surveyors, the provision of supporting market data / ‘comps’).
Offers from buyers are NOT proof of market value
Just because you get an offer at a certain price, don’t jump to take it as conclusive proof your home is worth that amount.
The fat lady only sings once a buyer has exchanged contracts at that price.
Scenario one:
Your home needs work and a buyer makes you an offer but underestimates the scale of the work needed.
- When they find out (after survey) they pull out.
- As such you may only find a buyer willing to exchange contracts (with full knowledge of the work) at a lower price.
Scenario two:
You receive an offer from a buyer that has a property to sell.
- Their home is on the market for £500,000 but it’s unsold and overpriced by £50k.
- For the buyer to perform at the price they’ve offered you, they need to sell for the full £500,000.
- That’s not going to happen and so the price they’ve offered is not be taken as proof of market value for your home.
The hierarchy of information
If you want to properly research the value of your home for sale, there are four levels of information you need to progress through:
1 – Look at Zoopla valuation estimates (just to see if it needs changing).
2 – Look at historic sold prices of comparable properties.
3 – Look at comparable properties currently on the market to see what prices your competition are asking, failing to sell at and going under offer at.
4 – Identify and interrogate the local estate agents that have the most up-to-date knowledge about buyers (in the market right now looking in your price bracket) and the results of recent sales (not yet recorded at HM Land Registry).
The 5 golden rules
Rule 1 – Never make any important decisions bases on figures provided by an online valuation tool or house price calculator.
Rule 2 – Never take an estate agent’s opinion of value at face value.
Opinions are meaningless unless they are backed up with facts (and they have to be the ‘right’ facts at that):
- Firstly, what similar homes historically sold for are facts.
- Secondly, what similar homes recently sold for are facts.
- Thirdly, what similar homes you’ll be competing against are facts.
- Finally what similar homes are failing to sell for are facts.
Rule 3 – ‘Recent’ sold prices are a more accurate than ‘Historic’ sold prices when it comes to accessing what buyers (in the market right now) would be willing to pay for your.
Rule 4 – The agents serving your patch will have differing levels of direct contact with the buyers active in your price bracket (i.e. the buyers that will be interested in your home).
- The agents with the most direct contact will have the most relevant / most up-to-date market intelligence / market experience to share with you (and inform their valuation).
- What an agent has recently sold (and is currently selling) determines how in touch they are with the facts in the market that will best inform how buyers are likely to react to your home.
Rule 5 – Today’s value is determined by today’s competition (it’s that simple).
A new property added to the market or removal of one, which has just sold changes the market instantly.
A buyer can now select the new property and the one that sold is no longer competing in today’s market.