Ahead of the five steps, we first need to cover some context.
Asking Prices
Asking prices are the prices you see on Rightmove, Zoopla etc. or in your local agent’s window. You will see many different asking prices. Below we have grouped some common examples.
- A straightforward price – e.g. £375,000
- A range – e.g. from £370,000 to £380,000
- “Guide Price” or “Offers in the Region of”
- “Offers in Excess of “or “Offers Over” or “From”
Every house seller has different plans, so they set the initial asking price to best achieve their goals. Agents then express asking prices to suit their plans for the upcoming negotiations.
For example, a vendor who needs to achieve a specific price to complete their chain may position a price to prospective buyers as the lowest they will go by marketing as “Offers Over £325,000”. At the same time, another seller, with different circumstances, could list the same property as £320,000.
Equally, one agent’s style may be to start low and hope for a bidding war, while another starts high and expects the actual price to be lower.
As you can see, even at this stage, things are more complex. We always advise caution when using asking prices to value your home and recommend using sold prices instead.
Sold Prices
A Sold Price is what it sounds like, the price that a buyer and seller agreed on when selling. It can surprise people that Sold Prices are all publicly available. Looking these up is simple, and there are several ways to do this.
- Land Registry is the source of the data. It could be more user-friendly, but a lot of data is available.
- Rightmove and Zoopla both have searchable databases on their websites which you can search by postcode and then filter based on your criteria.
The advantage of sold prices is that they remove the fog of tactics sellers and agents use to kick off their negotiation and show what price the buyer and seller agreed on. The only catch is it takes between three and six months for the data to become available.
The Five Steps
1. Choose your Data Source
- Head to Rightmove, Zoopla or the Land Registry and look for Sold Prices.
- Search for sales 1/4 a mile from your postcode within the last 12 months.
2. Find at least five comparable properties, but as many as possible.
- Find the same type of property with the same number of bedrooms as you. If you have a three-bed semi-detached house, you look at these.
- If your search returns fewer than five, increase the distance to 1/2 a mile from your property, but pay attention to the area as often a street or two will make a big difference to values.
- Note down the standard of each property and whether it is worse, about the same or better than yours.
3. Do some maths
- Hey! Come back! You’ve made it this far, and this will be simple, I promise.
- First, draw a line through the highest price on your list (sorry) but also the lowest. Now add up the price of all the remaining properties to give you a total. Next, divide this total by the number of homes you have on your list to get the average.
4. Get Judgmental
- Take the average and consider if your home is more or less desirable than those on your list, then judge how far above or below the average you think your home sits.
- This is difficult as it is subjective, and we need to remain as objective as possible. The most helpful advice is to consider the difference in price between the best house and the least desirable from your list. This range indicates the value you add or take away from your home when you improve or impair its condition and can give you a guide as to where to place it versus the average.
5. Sense-check
- Well done. You now have a reasonably good estimate of what your home is worth. Now it is time to sense-check this.
- Imagine you are a buyer looking for a property in your area. Head to your favourite property portal, search for your postcode and select a 1/4 mile radius.
- For the minimum and max prices, choose a range of £25,000 lower and higher than your estimate. So if you have estimated £300,000, select a price range of £275,000 to £325,000.
- Now think like a buyer. Would you stop scrolling and book a viewing if your property was on the list at £300,000? Would it seem like a bargain or too expensive against the other listings? If it feels about right, great job. Otherwise, think about tweaking your price up or down a little to fine-tune your estimate.
Is that it?
Well, sort of.
You haven’t just wasted your time; this is an excellent exercise and gives you a better idea of your home’s value than you get from scrolling through pages of asking prices.
The weakness of this method is that it relies on having a good number of comparable sales in a small area within a relatively short timeframe. The picture can change significantly if you move too far beyond your postcode.
I am writing this from a 3-bed semi-detached home in Beeston valued at £295,000. The garden of this property backs onto a 5-bed detached property with a value of over £850,000. Whilst these are not comparable properties, the value difference is so extreme that it strongly indicates that the two properties are in very different markets and shows the power of one street over another. Some areas also have a ceiling, so no matter how well a property has been extended and finished, its price will not break through a certain level.
Equally, if you go back too far in time (beyond 12 months), your number becomes skewed again. Two years after the pandemic’s start, average property prices had increased by 25%, so you can see how easy it is to get this wrong.
The final issue is that the data is a few months behind the market, so you should treat it cautiously, especially when the market is going through a period of uncertainty.
Summary
The process of valuing homes is actually relatively simple. If there are a lot of comparable houses on your street selling frequently you’re no more than five steps away from calculating this for yourself.
The reality however is that finding enough good comparables is quite tricky. More often than not you will have to increase your radius to over 1/2 a mile, or look back more than 12 months or even consider properties with more or fewer bedrooms to get a gauge.
This is where the estate agent comes into their own. As agents are focused on this professionally they have a familiarity with the numbers. They also have access to the live data as they know what their properties are selling for and they are the first to pick up on market trends.
If you would like a full non committal appraisal of your home why not book us in today. It is as easy as clicking the button below.
