If you are trying to sell your home, the phrase of the moment is “precision pricing”. Get the value of your property right and you can still sell quickly and (somewhat) competitively. Get it wrong and you could end up in a state of property purgatory, unsure of when you will move.
However, in the present environment of down-valuations, setting the right price can be difficult.
More surveyors are declaring a home to be worth less than a seller hopes it is. The difference can be as much as six — or, as we report below, seven — figures. Even if your home is not down-valued, you may find it hard to secure a sale because of the cost of moving to the next step of the ladder, which can be prohibitive even in a slow market. This is what you need to know to make an informed decision about how to secure a sale.
Price it right
In the present market homes either go under offer very quickly — say in two weeks — or they stick.
The ones that stick have owners who are trying their luck. They are pricing their home higher than they think they are going to achieve, just in case someone will pay over the odds, or in an attempt to leave some wiggle room for the price negotiations. Those days are over. “If you want to sell your home for £690,000, you have a much better chance of achieving that price if you put it on the market at £690,000 rather than £725,000,” says Kerrie O’Sullivan, the founder of Inhabit London, a buying and selling agency based in north London.
“If you put your home on for more than you expect to get, it will stick on the market and, after four or five months, you will get an opportunist buyer, sensing a desperate seller, putting in an offer of £650,000.”
The longer a house sits on the market, the less chance you have of achieving the best price. The first potential buyers through the door are the most likely to pay the top price, says Belinda Hutchinson Smith, the head of Strutt & Parker in Shrewsbury, Wiltshire. “They are the ones who have been searching and reacted the quickest to a telephone call or email alert, so they are the most motivated and keen to find something.” There is reassurance in knowing that someone else wants to make an offer on a property. “If no one else is interested, buyers don’t know at what level to make an offer — and so they often wait for someone else to make an offer to ascertain the ‘market value’,” says Christian Warman, a director of Tedworth Property, an estate agency. “It is not uncommon for a property to sell for more than it might have done if two buyers like it.”
Tom Page, the manager of the Shoreditch office of Fyfe Mcdade in east London, says that there are no longer enough buyers for overpriced properties to get attention. This is forcing sellers to price more realistically.
Agents, too, are having to abandon their old tactic of valuing a home high to win the listing, then dropping the price after a month, after the sellers get zero viewings in the intervening time, which is frustrating. According to research by Savills, the majority of homes on the market are reducing their asking prices. Its data shows that just shy of 300,000 marketed properties had cuts to their asking price in the second half of last year. This meansthat there were 61 properties with price cuts for every 100 properties for which a sale was agreed — 30 per cent more than in the same period a year earlier.
Consider the moving costs
Stamp duty can cost up to 15 per cent of an agreed sale price, substantially more than the 4 per cent rate of eight years ago. It is no surprise that buyers are taking their time and waiting until they find a property that is reasonably priced.
Research conducted by Savills shows that if you are a homeowner in Wandsworth, south London, moving from a two-bedroom flat to a four-bedroom house in the same area will cost you just less than £600,000 (stamp duty and the cost of the larger house). For someone living in Guildford, Surrey, the figure is £359,996, in Reading, Berkshire, it is £257,465 and in Harrogate, North Yorkshire, it is £222,544.
Added to this are the costs of legal work, searches, surveys, producing an energy performance certificate, estate agency fees and removal costs. This totals £5,537 for the average UK home, according to Really Moving, a house-moving website, with London homeowners typically paying about £16,000 in stamp duty and £11,000 in estate agency fees.
The cost of moving, aside from the expense of the bigger property, has risen 47 per cent in London in the past decade, according to Lloyds Bank, with stamp duty accounting for the bulk of the increase, swollen by higher house prices.
“These figures demonstrate the huge extra cost of upsizing from a flat to a family home in the same area, particularly in high-value locations where price growth and rising levels of stamp duty have dramatically pushed up the cost,” says Lucian Cook, the head of residential research at Savills. “People needing two extra bedrooms may consider a lower-cost move to a three-bedroom home, perhaps adding the extra bedroom through extending when they can afford to do so.”
In the meantime, it is making the government a lot of money. Last year the amount made in stamp duty receipts from residential property reached a record high of more than £9.5 billion, a 16 per cent increase on 2016, and more than twice the amount received five years ago. This is despite the fall in transactions caused by the increase in moving costs, and mortgage approval rates falling to a three-year low in December.
Down-valuations by surveyors acting on behalf of a buyer’s mortgage lender are rife in some parts of the property market. Enness, a mortgage broker, has found that seven out of ten properties are being down-valued. And the trend is not confined to London. Agents in Yorkshire and Bristol put the figure at between 15 and 20 per cent of marketed properties. Drops in value of six figures or more are not uncommon, with one homeowner in south London experiencing a down-valuation of £130,000, while another high-end homeowner dropped the price of their £28 million home by £6.5 million.
These changes in value cause sellers a lot of stress. They can lead to fraught negotiations with buyers, who may struggle to get the finance they need (and the sellers the money they need to buy their onward home).
“Despite the valuation process being far from scientific, the surveyor’s value is final as far as many lenders are concerned and cannot be challenged, even with compelling evidence,” says Islay Robinson, the chief executive of Enness.
He recommends that anyone selling a home pays for a valuation survey — a separate survey to the mortgage valuation — early in the selling process. This will give an expected value range, helping to save on aborted applications and wasted fees.
One reason why down-valuations are more common is because fewer homes are selling. Surveyors rely on comparable sales to back up their valuations, so in the present market, where the number of sales is lower, surveyors are finding it hard to find comparables to justify prices.
What some sellers, mortgage brokers and estate agents term a down-valuation may be viewed by a surveyor as a more realistic, and less aspirational, assessment of the value.