Thinking of selling your home? In this article, 24H explains:
- How a current market value is reached
- What the agent is looking out for in your property
- Questions that an agent will ask you at an appraisal
- How a selling price is agreed on
The blog concludes with some expert views about the valuation process, so to find out more, dive in!
How a fair market value is reached
Reaching an accurate market valuation is often viewed as a dark art, and while it is subjective to a certain degree, there are some elements to a property valuation which never change, and these are explained in this article.
While it is possible to get an idea of the market value of a property through online research and information about recent sales, all homes are unique: there will always be variables that specific data cannot reflect and this is where the knowledge of a local agent comes in. Their experience of properties similar to yours in their patch should provide in-depth knowledge to base a selling price on.
The time-honoured factors used to reach a property valuation are:
- Size of the property
- Recently sold examples of comparable properties
What the agent is looking out for in your property
These other factors are more difficult to assess, but they are all relevant in assessing property value. To appreciate them, a prospective buyer would need to view the property and a good agent should fully include such information in the on-line marketing details and any conversations with potential purchasers.
- Room layout.
- Any unique features, for example, if you own a period property, these might include original fireplaces or beamed ceilings.
- Condition: whether the house is pristine and has been recently painted and decorated, or whether it needs a superficial upgrade or substantial improvements will all be relevant to different buyers.
- Extensions or internal alterations and the quality and finish of the work carried out.
- Internal elements: flooring, double glazing, electrical wiring and insulation.
- The Energy Performance Certificate (EPC) rating which indicates the costs of heating the property.
- The type of heating system.
- The potential for improvements and extensions.
- The level of general wear and tear.
- Property boundaries and the proximity of neighbours.
It is best practice to assess all these factors in the appraisal process, combining this knowledge with evidence of recently sold homes in the local area and the level of demand for the type of house in question.
Questions that an agent will ask at a property valuation
The first step for a good agent is to get a real understanding of the house from talking to you; this will equip him or her with information to give to potential buyers which is relevant and tailored to their requirements.
Typically, an agent will ask about your reasons for buying the house in the first place, how long you have lived there and what you like about the house and living in the area. The discussion will involve local schools and facilities such as shops, recreation options including sports clubs, pubs and restaurants and public transport links.
During the appraisal process, an agent will also assess the layout, space, size of rooms, any relevant history and improvements that you may have made.
They will also need to establish whether you are looking to achieve the highest possible price for your property, or whether you need a quick sale: each alternative requires a different marketing strategy.
Putting a house on the market for the highest achievable price will obviously mean that it may take longer to sell, whereas setting a more realistic price is more likely to result in several viewings and a faster sale.
It is also worth remembering that an agent may be able to advise you on the best steps to take to improve your house to suit the market and therefore increase the property valuation. Suggestions might range from minor improvements such as a coat of paint on the front door, to adding an extension or conservatory to maximise the plot, or even an extra bathroom.
It may also be worth considering obtaining planning permission for an extension scheme (without carrying it out), which may provide an option which would appeal to certain buyers. Such an assessment varies with each appraised property and being able to maximise a home’s potential requires vision and expertise.
How a property valuation is agreed on
After considering the above points, the agent will reach a property valuation figure and the final decision on what price to market a house at comes down to what the seller thinks about this recommendation. A decision should be made based on the best approach to take to meet their aims and timeframes.
Always bear in mind that a property is only worth what someone is prepared to pay for it, and there can be a marked difference between the price that a house is marketed at and the actual sale price achieved.
Daniel Lewis, founder and managing director of FreeAgent247 Freeagent247 said that when he is asked to carry out an appraisal report, he makes a `marketing and pricing strategy appointment’, in which he will map out the seller’s journey onto their next chapter. He said:
“Circumstances sell properties and I need to find out how quickly a seller needs to move, based on individual reasons, such as a life event, they may have seen somewhere they want to buy, or how quickly they want to move.
I make sure I have most of this information before I get to the appointment, having carried out desk top research of comparable sales and possibly arranged video calls with the vendor and even watched a video walk-through of the property.”
“At the appointment, after looking at the garden, the boundaries and having a tour of the house, I consider any potential for conversion works and find out when any improvements were made, such as an extension, or when the house was last decorated. I will look at potential in the property for improvements prior to it going on the market, to make it as presentable as possible.
There may be scope for an extension or planning permission options. It may not be the best plan to put a house on the market immediately; I have looked at houses which have then undergone an improvement scheme for several months prior to going on the market.
When I go to appraise a house to reach a market value, I have price parameters in my mind from researching comparable houses; the more unique the property the wider the parameters may be.
Properties that have had a lot of improvement work done will reach a higher price, but of course if we are looking at an average 3-bedroom semi-detached house in a residential area, there will be a ceiling price.
We present ideas and opinions as to how a house would slot into the current market. In some cases, I will go away to calculate a selling price and have a further conversation with the vendors.”
Estate agent Tim Kampel, director of Box Property Solutions Ltd., Box Property Solutions Ltd said:
“There are market appraisals that estate agents (or anyone) could do which is to purely come up with a price determined by perceived value to the open market, or a valuation which is based on the above, plus a look out for obvious problems such as structural issues.
This is then added and compared to what is available at the time as a comparable. An agent will also take into account recent sold data, pulling information from the Land Registry and the portals.
This is done starting with the closest radius and dates as possible, and then this is opened up date and area-wise to justify the price.”
Professor Michael White from the Department of Property Management and Development at Nottingham Trent University said:
“Whatever the market, agents have a tendency to set asking prices based upon the most recently observed highest transaction price for the same/similar property type in the same neighbourhood.
The penalty for setting too high a selling price is an above average duration on the market before sale and/or a price reduction. This may be because the property is below average quality of similar properties that hasn’t already been reflected in the asking price.
However, agents have quite good local market knowledge. Probably the tricky part is market turning points. Buyers tend to adjust their view on house values faster than sellers so duration on the market tends to increase (fall) first when the market falls (improves).
The market knowledge aspect will also be useful for price setting within any particular price range. For a homeowner wishing to sell, any price set by an agent can’t be too far away from what a mortgage valuation would be, as the prospective buyer’s maximum mortgage will be related to the latter. This can be difficult though for more unique properties where there are few comparables.”
Do you agree with these points, or did I miss anything?
Let me know what you think. Leave your comments below.