Pricing a property to sell is an art rather than a science. And so each local estate agents will have their own particular way of determining how to price your house for sale.
While this might confuse or frustrate you, there actually some method to their madness.
This methodology involved is loosely based on three factors. And by understanding the three factors at play, you will have an advantage when finding, choosing and negotiating your next home.
So what are the three factors involved? Market price, true value and what you are willing to pay for it.
When all three are aligned, then you’ve got yourself a great deal! Let’s explore how to save money on your next home while controlling your emotions and understanding homes true value.
So, how do we to price your house for sale?
While most estate agents will ask their vendor what they are expecting for their property, most will have their finger on the pulse and know the selling price of your property.
This could be in part down to having sold many similar properties in the last year. Or it could be based on local sold data, which we’ll explore in a minute.
However, you agent could have stick his finger in the air and state a price he’ll wishes he can get (this is same as online valuation tools!).
In any case, if you have been watching your property market, over time you will start to see who is overpricing their stock or selecting only the best for their books. Therefore the price which the agent goes to market is a mere suggestion.
The property’s True Value
How do you know if the home’s asking price is correct?
Price is what the home should be worth today. However, for a variety of reasons, this isn’t the case. So how do we figure how what the price should be?
Luckily for you, all the data you will need is just a few clicks away!
Step 1: Create a spreadsheet
Start by creating a basic spreadsheet. In the top row, you will want to create the following: Address, Marketed Price, Sold Price, Sold Date, Total Rooms, Interesting Features.
That’s it for the top row. Now we need some data! There are three tools you need and thankfully, there are all free.
Step 2: Gather sold data
The first place you should have a look at is Land Registry. While you still have to pay for some things such as boundary maps and titles.
It’s free to search the database of sold prices which dates back over 20 years.
While their data will show you the full address, property type, sold price and the date the property sold.
What isn’t recorded is the floor plan, room sizes, interior finishes as well as other useful pieces of information.
Step 3: Add in property data
By having access to floor plans, photos and the agent’s description enables us to build a picture of similar local properties.
And therefore we can estimate a fair price for the property we are looking at purchasing.
While this might sound like hours of research, if it saves you money in the end, then it’s worth it.
It’s worth remembering that while the data doesn’t lie, you are dealing with people who may act irrationally. So you might want to think about the emotional side of the transaction.
Consider how you can build rapport with the seller so that you can use your data to your advantage.
What your prepared to pay
Whether decide to overpay, underpay or negotiate a healthy discount, it’s down to you. Unless, of course, you end up hiring a buying agent to do this for you.
So, using the data you gathered above, you can start to build a picture of what your target property is worth. Let’s explore a few examples.
Offering less than the marketed price
You might want to offer less than the price the agent is asking for if the vendor is desperate to move or the property is in need of extensive repairs.
Also vendor is more likely to soften on price if the property has been sat on the market for quite a while and they want to move soon.
Bidding around the marketed price
However, the agent might have done his homework and have priced the property inline with the current market.
This doesn’t preclude offering slightly less, but may swing how much you’re willing to negotiate.
Whether you’re offering more than the property is worth because it ticks your list of non-negotiables. Or the market in your area is moving quickly and so you want seize the opportunity.
You want to have a solid reason why and ignorance really is a good enough response!
A word of caution, it may feel like one property stands out more than the rest, however it’s likely that something better or similar is just about to hit the market.
As our father would say, never run for the bus as there’s another one around the corner!
So how to price your house for sale?
As you can see there are three factors which make up how houses are priced for sale.
Usually, the price is just an estimate and since there is no exact science, you will need to try and feel out your local market for yourself.