What's the 'right' price of your house?
We tell you what the right price of your house is, and how to get the best price in double quick time.
Felicity Hannah's article Why house sellers are deluded? received lots of comments after she said she thought home sellers were pricing their homes too high. Many of you were debating what the “right” price of your home is.
There is the right price and the best price, and then there is how much a house is worth. These are three different things, but understanding them can help you to make better decisions, get faster results, and to sell at a price more favourable to you.
What is the right price of your home?
Some readers got the answer right in the comments section at the bottom of Felicity's article. To paraphrase them: the “right” price is what the buyer and seller agree to. All other prices don't lead to a transaction.
What your neighbour is selling his house for, what Nationwide says house prices are, what a potential buyer says you should be selling for – those things are irrelevant if the price isn't right for you too.
You can quickly establish the best price of your home
What is relevant – and where I can hopefully be a little more insightful for you – is that home sellers can find out the best price that buyers will pay for their homes much more quickly if they change their sales strategy.
The slow way to find the best price
The normal sales strategy is to price high and hope some offers come in. That's why Rightmove asking prices are tens of thousands higher than properties actually exchange for.
Estate agents are partly to blame for super-inflated asking prices. They convince you they can sell your property for more than anyone else, in order to win an exclusive contract with you – with expensive exit clauses.
Undoubtedly, some sellers really are deluded about what buyers will pay, as Felicity says. Others aren't bothered about selling quickly and can wait as long as it takes until buyers are prepared to pay their asking prices.
Properties aren't market stalls
I'd guess the main cause of high asking prices is that both sellers and estate agents get their negotiating ideas from car dealerships and market stalls.
Buyers visit markets, see what they like, haggle on price, and make a deal. Visiting the market is all part of the fun for the buyer. They already expect to get a bargain, which is why they want to go in the first place.
With car dealerships, the customer normally has a clear idea what the product is like before visiting. In other words, they're driven to go to the dealership because they already really want to buy the product.
Those techniques aren't appropriate when selling a home. Most people don't visit other people's homes for the fun of it and they don't just turn up to see what “wares” you've got. Nor do they know beforehand what the property is really like.
In other words, they have no pre-existing desire to own the property, or to visit the property, if the asking price is high.
Getting the best price – quickly
Remember, at this stage, all home buyers really have to go on, apart from a couple of blurry photos, is the price. They're looking for a bargain – not a hard bargainer.
Home buyers look at the asking prices on Rightmove. If they see it's thousands over their budget and over recent sales prices in the area, they'll skip over it. Many potential buyers won't even visit.
Potential buyers can't fall in love with your property unless they visit.
As a seller, then, you want as many people to come to your property as possible, so more can fall in love with it. That's your main goal, with negotiating techniques, sales pitches and all the other ideas on home selling being overrated distractions.
Rather than pricing high and putting customers off, you price low and encourage many more to visit – which they'll now do in double-quick time.
Worst-case scenario is you get no offers, or none above your low asking price. That's when buyers price the property far lower than you would like to. If you can afford to wait, at least you've quickly learned that the “right” price between you and a buyer won't be found. Try selling your property again later.
More likely, though, the many more viewers you receive will encourage a bidding war.
Probably neither of them would have visited if the asking price was high – and you couldn't have turned the sale into an auction between them.
Once the bidding is finished, you, the seller, can decide whether the best price is agreeable. If it isn't, and you can afford to wait, there is still no right price between you and any customer. Remember, there's no obligation to sell, even to the highest bidder.
This strategy works well in both a rising market and a falling one. I've sold properties during both in this way. One estate agent I used changed its entire strategy for all its customers off the success of mine, even though it was dead against it beforehand.
The worth of a home
The right price of a property is set by two people: the buyer and the seller. The best price of your property is found more quickly by encouraging an auction.
Estimating the financial worth of a property is much harder.
A property is worth all the renting costs you won't pay for the entire time you own, minus all the buying, mortgage and maintenance costs, plus, for the majority of people, the unmortgaged value of the property when you sell or die – minus the sale costs at the time.
Estimating the worth of a property is a whole article in itself. I'll have a stab at helping you do so soon.
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