Many homeowners think that property values and an accurate valuation are based on current local asking prices, but the vagaries of the property market flaw this simplistic approach. Instead, given a reasonable marketing time scale, your home is worth what someone is prepared to pay on the day.
If you are about to list your house for sale, the first thing on your mind will probably relate to your home’s value, its ‘market value’. If you’re anything like most homeowners in the UK, you will probably already have an idea of the final sale price you’re happy to receive. But to save yourself time, marketing costs and a great deal of disappointment, you should take a pragmatic approach to house selling.
Property valuing is not an exact science when trying to ascertain the market value of any property in the UK.
How much is your house worth? Any home is only worth what someone is willing to pay for it at the time of its listing (putting it ‘on the market’). Therefore, your hopes for a particular property value are almost irrelevant. Unfortunately, too many homeowners fall into the trap of over-valuing their houses and wasting time and money on misguided marketing strategies.
It is only natural that you’d want to maximise the sale price your home achieves on the open market, but your own bias and skewed outlook could result in you pricing your home out of the market. Furthermore, if you alienate potential buyers before they have had a chance to look around your home, you could be in for a very long and stressful house selling process.
Many homeowners think that an accurate valuation is the current asking price in the area. Still, the property market is too nuanced and inconsistent with taking such a simplistic approach.
An asking price should be a starting point for negotiations; it shouldn’t represent the actual market value of your property or what you believe that value is. For instance, if you notice that a neighbour in your street has listed their house for sale with an asking price of £250,000, you should consider whether or not an over-zealous estate agent has added an extra 10 per cent. It might also be the case that the asking price has inflated to give the owners a little wiggle room when negotiations on price begin.
Property values in the UK rarely compare accurately with asking prices in the UK. However, once you differentiate between recorded sale prices and the prices you see in estate agents’ windows, you can start to look for an accurate figure using a ‘value my property’ tool or the Rightmove website.
No estate agent or house buyer can predict property values with complete accuracy. In most cases, agents will briefly assess the critical attributes and then produce a valuation that roughly aligns with Zoopla property values in the immediate area.
Either laziness or inexperience will lead many estate agents to produce unnaturally high asking prices when the local market rises. And some unscrupulous agents might slightly inflate an asking price to win the account.
Estate agents can bring knowledge and experience to the table, but they can’t deliver any promises when it comes to a final selling price on the open market. Even the most experienced agents in your area will be giving you an estimation of your home’s value – something you can do yourself.
How to value your property
Rather than gathering anecdotal evidence and looking at asking prices for similar homes in the area, the best way to assess the value of your property is to research the actual selling prices of homes in the immediate vicinity. Zoopla property value refers to the recorded selling price – and not the asking price.
Property valuations – a scientific approach
Although there is no definitive way to assess the actual value precisely, a reasonably accurate property value estimate can be reached by taking a more scientific approach to the one most estate agents take.
Imagine a 650 square foot property in your street sold for £250,000 five months ago. If you divide the price by the square footage, you can find out a rough cost for property in your area – based on space. In this case, the cost of property per square foot in your area would be approximately £384. Now, imagine you discover that your own house is 900 square feet, so by multiplying the two, you work out that a comparable value for your own home is £345,600.
It would be best if you now considered what has happened in your local market during the five months since that house sold on your street. Imagine you look up house price growth on The Land Registry website, and you see that estimated house price growth in your town during the last five months stands at five per cent. You should add five per cent to the figure you have already calculated, giving you a valuation of £362,880.
But before you can settle on a scientifically calculated property valuation, you need to consider the current condition of your property. For example, imagine you’ve had a good look at the house down the road that sold five months ago, and you noticed that there were several issues with the property’s windows, roof and brickwork. Because your home is in pristine condition, you should add a further 10 per cent to its value, giving you a final valuation of £399,168.
While this approach to valuing your home will give you a more accurate result than simply comparing sold house prices in the area, it is still only a way to estimate what your house is likely to achieve on the open market. A property value estimator on the Internet should make this process a lot quicker.
Local market conditions can affect property values
The property market in the average UK town or city can be highly nuanced, and supply and demand for houses can fluctuate from street to street. It is usually not enough to know what is happening to property values or house prices in an urban area; you must delve into the detail of house prices, supply and demand in your street.
For instance, you might discover that there are already five houses for sale in your street. If this is the case, buyers looking for property in your area will have options. However, if the supply of available property in your immediate area outweighs demand, the market value of your home might be detrimentally affected – albeit temporarily.
It’s also worth considering proposed new developments in the area when assessing the potential value of your home. For example, is there a new school planned in the area? Is the local authority making improvements? Or is a new transport link being mooted in the press?
House buyers are still a little suspicious when it comes to asking prices – particularly after so many homeowners left with negative equity after the house price crash of 2008. If you are unrealistic with your asking price concerning your local neighbourhood, you risk alienating prospective buyers almost immediately.
Creating competition among buyers for your home will increase the selling price.
The property market in the UK is a fluid entity, and what stood true just six months ago might paint a wholly false picture of the market as it stands today. For example, a property value calculator on the Internet may be using house sales data from six months ago, which will give you an inaccurate picture of the local market – and the potential value of your property. In addition, competition among local buyers can complicate the house selling process yet further.
A good agent will have the skill, knowledge and experience to pit competing buyers against one another by setting a low asking price for your home. More viewings usually mean more serious interest in your home, and a good agent will be able to exploit this situation to spark a bidding war between buyers.
It is usually not enough, so call up a property sales history in your area and set your price expectations accordingly. However, the property market in the UK is highly complex, and house prices can fluctuate from street to street. Moreover, several issues can affect property values in highly localised areas. So while it is possible to perform an Internet search using the term ‘value my property, it’s important to remember that any property market is subject to short and long-term fluctuations that online tools won’t use.
If you were to do your valuation, obtain a valuation from an automated valuation model from the Internet and then ask a local estate agent in the area to value your property, the likelihood is that you’d get three very different figures.
Unfortunately, you won’t know exactly how much your home is worth until you receive the highest offer.