BLOG: ‘How do you deal with vendors who have valuations in mind?’

The wealth of available online sales data alongside ubiquitous news headlines about the property market means that it’s incredibly common for vendors to already have valuations pre-worked out in their own minds.

Of course, we all want the best sales price but there’s cause for pricing property more conservatively in order to achieve better results.

IMPRECISE SCIENCE

Valuation is an imprecise science and the old adage is certainly true – a property is only worth what someone is willing to pay for it.

Every property sale is truly unique and circumstances, trends and climates change so quickly that comparing similar properties doesn’t always give a true comparison.

In Scotland even Home Report valuations can fall foul of this.”

And in Scotland even Home Report valuations can fall foul of this, as they consider what similar properties in the area have sold for, when that data might be out of date or no longer relevant by the time you are ready to start the sales process.

The asking price of a property tends to be a few thousand pounds either side of its Home Report valuation, with sellers expecting to then achieve over and above the official figure.

UNREALISTIC valuations?

But Home Report valuations in themselves can set unrealistic expectations. For instance, if someone is selling a home in January, a Home Report surveyor may be looking at what houses sold for six months prior, in the peak summer season, to set the property’s value, therefore starting at an inflated and potentially unattainable figure.

It’s essential for vendors to be realistic about the amount over the value that they should then be expecting to achieve. The higher the initial value, the less likely it is that buyers will be able to bid significantly above it. The asking price is there to lure buyers in and it’s this that should be considered carefully to ensure maximum appeal in a highly competitive market.

Buyers feel no need to bid competitively to secure the property.”

Our own sales data shows  that there’s a strong correlation between the amount of time a property is on the market for versus the percentage of its Home Report valuation it achieves at sale.

There’s also data that indicates that the percentage of the valuation achieved in properties that are marketed at an appealing, appropriate price is higher, versus a property that’s perhaps been overegged and then must reduce its price to make it more competitive, or buyers feel no need to bid competitively to secure it and feel more confident in making lower offers.

In 2023, we saw a huge increase in the number of properties coming to market at a fixed price, which we can assume to be a way of maximising appeal to unconfident buyers and securing a quicker sale, rather than looking for crazy bids over and above the valuation figure.

OFFERS OVER

While this has calmed down in 2024 so far, with the ‘offers over’ marketing method applied to the vast majority of properties for sale we can see how marketing your home at a sensible ‘offers over’ price helps sellers to achieve a higher net sale price overall.

Our data shows that when properties are marketed at a fixed price, the asking price is around 99% of the Home Report valuation, with sellers understandably reluctant to market their home for less than its value. Generally, fixed price properties then sell for around 98% of their Home Report valuation, meaning that buyers offer exactly the asking price, or sometimes slightly under. 54.3% of fixed prices homes sold last year achieved a figure less than their valuations, while just 11.5% achieved a sales price higher than valuation.

‘Offers over’ properties must work harder to be more appealing.”

However, ‘offers over’ properties must work harder to be more appealing than those listed for a fixed price, as buyers come to these properties well aware of the risks of a bidding war ensuing – properties must stand up to the task. It’s far better to impress than underwhelm, and pricing competitively can certainly assist with that.

From our data, we can see that properties marketed using the ‘offers over’ model have a lower asking price compared to the valuation (averaging 96%) compared to fixed price homes, which then subsequently drives a sale price of around 108% of the property’s Home Report valuation.

INCREASED VALUE

This suggests that pricing the properties lower than the Home Report valuation drives increased value overall, compared to the fixed price system, where properties tend to break even at best. 76% of properties sold in 2023 achieved above their Home Report valuation at sale.

Asking price also affects the time the property is on the market for. Unsurprisingly, properties that sold the fastest achieved the highest percentages of Home Report valuation, with buyers keen to snap up a perceived bargain and thus submit more competitive bids. Homes that sit on the market for longer then run the risk of cheeky lowball bids, or the sellers feeling pressured to officially reduce the price.

It’s tempting to be ambitious and try to secure the highest possible price but it’s important to resist the urge to go big – if you price cleverly and conservatively at the first opportunity, the evidence shows you might just end up with a higher sales figure at the end.

Paul Hilton is Chief Executive of property portal ESPC