Calculating the value of any property is more of an art than a science. Ask a few local estate agents what method they use to value property, and you’ll get a range of answers.
None are wrong. There’s no single way of determining how to value or price a home for sale.
While this might confuse or frustrate you, they’re 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 accurately value property 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, your agent could have stuck his finger in the air and state a price he’ll wish 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.
Accurate property value
How do you know if the home’s asking price is correct?
The advertised price should be the current value of the property. However, for a variety of reasons, this isn’t the case. So how do we figure how what the true value is?
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 look at is Land Registry. It’s free to search their online database of sold prices which dates back over 20 years. However, you’ll still have to pay for such things as boundary maps and titles.
For each property, you should be able to see the full address, property type, sold price and the date the property sold.
What it doesn’t show is the floor plan, room sizes, interior finishes as well as other useful pieces of information.
Step 3: Add in property data
In most cases, we can uncover the missing data using either Rightmove or Zoopla. Both generally save a copy of every property’s particulars listed on their site. They’ll also display the sold data from Land Registry (although, it’s good to check the source too).
Having access to floor plans, photos and the agent’s description enables us to build a picture of similar local properties. So, we can begin to estimate a fair price for the property we are looking at purchasing.
If this sounds like hours and hours of research, then consider how much stronger your negotiating position will be with this data. Just imagine how much you could save.
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
However, using the data you gathered above, you can start to build a picture of the true value of any property. It’s best to illustrate with a few examples.
Offering less than the marketed price
In certain circumstances offering less than the asking price makes a lot of sense. For example, the property could require extensive repairs or the vendor is desperate to move.
If a property has been languishing on the market for months, then the vendor might be open to taking a discount.
However, one of the biggest risks surrounding offering less is gazumping. The agent might find someone willing to pay slightly more and your purchase fails to complete.
Bidding around the marketed price
The agent could have done his homework and have the property priced correctly for the current market. While this doesn’t preclude offering slightly less, it could restrict how much you’re able to negotiate.
You could offer more than the property’s value because it ticks your list of non-negotiables and you want to seize the opportunity before someone else.
You do, however, want to have a solid reason why. Sadly, ignorance isn’t a good enough response and could leave you vulnerable to ghost gazumping (where the agent tries to get you to raise your offer.)
A word of caution, it may feel like one property stands out above the rest. However, odds are 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!
How to value a property for sale!
There are many factors which make up how to value property – regardless of how much you offer.
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.
Whatever you do, make sure you do your research and quiz agents.