How do I set the asking price when selling my home?
‘How do I set the initial asking price when selling my home?’ ‘What’s the current market value of my home?’ These are the question most homeowners will ask themselves as they embark on the house-selling process. The truth is that setting the initial asking price for your property will be the single most important decision you make and to do that, you’ll need to know how much your home is worth. When addressing the question of ‘what sells a house’, few things are as important as the asking price you set which will determine the interest in your home. But set it too low, and you might struggle to achieve your property’s full price potential and lose money.
Selling your house will probably be one of the biggest financial undertakings you will ever experience in your life. It’s, therefore, essential that you do your homework. Your first task is to assess the likely market value of your home. You can do this job yourself, leave it to a property professional or rely on both methods to reach a decision that works for both you and the local real estate market.
Of course, your final decision will probably be determined by a range of issues. For instance, you may need to raise cash quickly, in which case an asking price below your home’s real market value will get things moving. Other issues to consider; the property chain, local demand, how much time you have to devote to the process and your plans for the future.
Setting the asking price for your home is a far more complicated decision than just comparing recently sold house prices in the immediate area. It should be a decision you think long and hard about, as it will be crucial to the timescale of the process and the final selling price you achieve.
What factors affect house prices?
Whether you decide to sell your house online or enlist the services of a traditional estate agent, there are some factors to consider when valuing your home and setting an asking price.
Among the factors that will play a part in your decision include:
- The age of your home
- The number of bedrooms
- The size and shape of your garden
- The overall size of your home
- Structural integrity
- Wear and tear
- Extras, such as a conservatory, double glazing, etc.
As well as the features of your property, some local issues will contribute to the overall market value of your home. For instance, the proximity of an excellent school is crucial. Parents will pay a premium for homes that lie within the catchment area of a high-performance school. Other issues that might bump up your home’s value include local transport links, municipal facilities such as leisure centres and parks, and crime rates.
Preparations for setting an asking price during the house selling process
To sell your home for the best possible price, you may need to take a systematic approach to both the valuation process and the setting of the initial asking price. Once you have done everything possible to make your house as attractive to prospective buyers as possible, you will need to do your homework. Whether you sell your property yourself, use an online estate agent or hire a High Street firm, you will make the final decision.
If you need to sell a house now, the best course of action may involve enlisting the expert services of a local estate agent to give you a headstart when it comes to marketing, interested parties and local knowledge.
If your priority is to save money, using an online estate agency could be your best option. You will be able to pay a flat fee — which may be less than £500. Of course, you pay this whether or not your home sells, and payment is required upfront.
Decide what level of help you’ll need with the house selling process, and you can then start to think seriously about the asking price you want to set. But remember, if you sell your house, there’ll be lots of research to do.
Researching recently sold property prices
If you are selling without the help of a real estate agency, the burden of research into local house prices will rest on your shoulders. But don’t worry, as there is a wealth of information available on the Internet. And this is the same data online estate agents like House Tree, use to help value properties without local knowledge.
There are several free resources on the Internet that provide recent data on property transactions in the UK. Rightmove, Zoopla and Mouseprice all offer reasonably accurate information free of charge. You can also find government data on house sales via The Land Registry web portal.
Use these extensive resources to find out what comparable properties have sold for in recent weeks. Also, keep an eye on current asking prices in the neighbourhood — you don’t want to undervalue your home or price it out of the market! And make sure you’re tracking what is happening in the local market right now. What is the overall trend? Is demand buoyant? Are homeowners struggling to sell their property?
You should always make the final decision on the asking price for your home
There are many ways to sell your house, but the final determination on asking price will always lie with you. It is, therefore, important that, whoever you choose to help you sell, you treat all advice with a degree of scepticism. Especially if your agent doesn’t have local knowledge, the asking price suggested to you won’t necessarily be 100% right for your home — or your circumstances.
There are two approaches to the decision-making process available to you:
Start high, and leave yourself room for negotiation
You have the option of setting the asking price at the upper end of the range for homes of your type, or even higher. If you sell at this price, that’s fantastic. If you don’t sell immediately, at least you know you won’t be missing out on value when your home is eventually snapped up.
But if interest is shown in your home, you can give buyers the impression you’re ‘caving in’ by lowering your asking price or accepting a lower offer. Because you’d set your asking price at a high level from the outset, you’ll still be getting a reasonable price. But a note of caution: if your home is on the market for a long time, local buyers may start to ask themselves ‘what’s wrong with it?’.
Start low, and hope that a bidding war ramps up the selling price
If your initial asking price offers the prospect of significant value, the chances are you will draw interest from several parties. Once you have the attention of buyers, a bidding war might ensue, a precarious strategy, and not one that is particularly popular in the UK. However, the property market in Britain is still relatively buoyant, and a lack of supply could make this method successful. However, you will probably need to reject a few offers, thus showing the market that you are a hard negotiator.
Differentiate asking prices from actual prices
Although it seems pretty obvious, try not to conflate asking prices with the sale price. During your research, you will come across the prices that homes sold for, and not necessarily the initial asking prices.
Let’s say you have found two houses in your street that recently sold for £200,000. Should you list your house for sale at £200,000? Probably not. Most agents and property professionals would recommend marketing your home for 5% to 10% more than the mean house price in your area — in this case, the asking price set at between £210,000 and £220,000. Of course, you might need to accept that, realistically, you’ll probably attract offers nearer the £200,000 mark.
In reality, most buyers in the UK make an initial offer of well below the asking price. According to a survey by ‘Which?’, 73% of customers offered below the initial asking price, and 66% succeeded in paying less than the price their home was originally marketed.
But, as with everything related to the UK property market, the situation is complicated. The same survey revealed that 5% of buyers paid more than the initial asking price for their home. Local knowledge becomes crucial in these instances. If demand is high, prices in the immediate area are rising, and homes like yours are in high demand, you might want to gamble on buyers paying a premium. In short, if demand is outstripping supply in your neighbourhood, be optimistic with your initial asking price.
There is an excellent chance that the final price you achieve for your home will be significantly different to the original asking price you set, so you should plan for this in advance. Buyers in the UK approach the house buying process with the assumption that all asking prices are inflated to allow for negotiation. Also, the stamp duty payable on your home could affect its market value, so factor this in.
Factor in your personal circumstances
Home selling is not always about achieving the highest possible price. For some people, securing a quick sale is the priority which is right for you if you’re worried you’ll miss out on your dream home, or if you need the equity in your home to settle debts. You might only want to retire in the sun, without the hassle and stress of a long and drawn-out selling process. Think about what your priorities are before you set your asking price. There is a chance that achieving the maximum possible price for your home will take a little longer than you’d like.
If you need to sell a house quickly, the initial asking price you set will be crucial to your chances of success. Consider the following options that could help you to secure the quick sale you need:
Set a relatively low asking price
You might see statements in High Street estate agents such as ‘priced to sell quickly’. The personal circumstances of homeowners call for the quickest sale possible, so there’s an acceptance that the final sale price will be lower than it could be. By setting a markedly low asking price, you will generate interest very quickly, and attract investors and developers looking for a quick cash sale.
Ask for sealed bids
You can avoid a long, protracted negotiation period by asking all interested buyers to submit their highest (and final) offer for your home by a predetermined deadline. Not only will this speed up the process, but it will also spook buyers into cutting to the chase and offering as much as their budget allows. The fear of losing a purchase is a great incentive for a purchaser to be generous with their offer.
Of course, this method could leave you with several bids that don’t match your minimum price expectations — leaving you back to square one. But there is no legal obligation to accept any sealed bid. If your minimum price is not reached, then you can only start the process again or pursue negotiations in the usual way.
If you can afford to take your time and search for the best possible offer, there are several steps you should consider taking:
Set a relatively high asking price
If time isn’t a major issue, set your asking price at the upper end of the locally sold house price range. While you will need to be prepared to lower it, you can be sure you’re extracting maximum value from the sale. If you struggle to attract serious interest, make incremental reductions in the asking price, and give each one two or three weeks to filter through to the market.
Tips to sell your house using the most appropriate asking price
To achieve the best house selling outcome possible, you need to find out how much your home is worth about current market conditions. If selling your house privately, you may not have the expertise of a property professional to call upon, so you will need to do everything you can to ensure the final valuation is as accurate as it possibly can be.
Check what is happening on the High Street
Check asking prices in the windows of High Street estate agents, and then compare them with actual sale prices on the likes of Rightmove and The Land Registry. And don’t forget to check estate agents websites too, as five percent of UK house sales sold via online services.
Get three professional valuations
Ask at least three local estate agents who have recently sold properties similar to yours to value your home. However, don’t just choose the highest value, as this may be wholly unrealistic and make selling that much harder.
Plan your sale with your future purchase in mind
If you are buying a new home at the same time as you’re selling, time may be crucial. Otherwise, you could miss out on your next move. Work out the minimum you can afford to accept, but don’t just settle if you don’t need to. And remember, if you are forced to take a discount for the sale of your property, you still have an opportunity to recoup at least some of that discount with the property you’re buying.
Setting an asking price is not an exact science
There is no secret formula for valuing a home. Even the most accomplished and experienced estate agents will use the same information you use to set an appropriate asking price. All you can do is research the local market, assess your personal circumstances and create an action plan.
Unfortunately, there is an element of chance at play whenever a house changes hands. You might get lucky and come across a buyer who needs to relocate as quickly as possible. A situation like this could put you in a strong negotiating position. And of course, house buying is often an emotion-driven process. If you’re lucky enough to find someone who falls in love with your property, your sale price might exceed the local average by quite some distance.
Market your house for sale with an asking price that reflects current sales prices in the area. But be prepared to be flexible on price if your circumstances necessitate a quick sale. And remember: regardless of what people tell you, or what the market suggests, your property is only worth what someone else is willing to pay for it.