Setting The Asking Price
Pitching your asking price correctly is a key strategic decision. Buyers normally expect to get something knocked off the asking price, so it needs to be set a few percentage points above what you consider the ‘true value’ to be. This leaves room for buyers to negotiate a lower figure and enjoy basking in the warm money-saving afterglow.
But before negotiating your sale it’s important to set two figures in your mind – the lowest price you are willing to accept, and the ideal price you would like to achieve.
Prices are sometimes set too high where agents are desperate to win business or where sellers have an unrealistically high opinion of value and insist on a stratospheric figure. Testing the market with a high asking price is sometimes justified on the basis that ‘you can always come down later’. The trouble is, such properties can become a drag on the market, even after the price is later reduced. Buyers are wary of ‘dinosaurs’ that have been around forever, and may attempt to drive a hard bargain. Greed can make you miss a buyer.
But there is another approach, widely employed north of the border. When a property is hard to value, agents sometimes set a relatively low ‘offers in excess of’ guide price designed to stimulate interest. As with an auction, this is designed to generate competition, with rival buyers bidding the price up, sometimes way above the true market value.
Crucially, when setting an asking price you need to take account of stamp duty thresholds. A property priced even £10,000 or £20,000 above a threshold is realistically likely to stick just below the point where stamp duty kicks in. It has to be priced significantly higher for reluctant buyers to make the ‘jump’ and swallow the big hike in tax.
Getting the best price in a market downturn
It’s understandably very hard to regard falls in prices as anything other than bad news if you’re selling a property.
But if you want to trade up to a more expensive property, it can work in your favour, as the extra money you have to pay gets smaller. For example, if you are selling a £200,000 flat and prices have fallen ten per cent, you will receive £20,000 less. This will be more than offset, however, by the £40,000 you get off the £400,000 house you want to buy.
In other words you can take a hit on your sale safe in the knowledge that you will do at least as well when negotiating on your purchase. As they say, you can get away with being greedy on your sale or cheeky on your purchase, but rarely both. The best strategy is to research your local market, and work out how big a hit you are prepared to take on your sale. When the market eventually bounces back, so too will the price of your next home.
In a falling market, prices of different properties tend to drop at different rates, as supply and demand varies across the spectrum of property types. Depending on what the planners have permitted in a particular area, there may be a local oversupply. Flats can be especially vulnerable in a market downturn because of the high number of first-time owners who may have had to borrow up to the hilt, with limited income to manage interest rate hikes.
This in turn may lead to greater numbers of repossessions and quite dramatic falls in value, depending on local conditions. Small flats have a habit of ‘bombing’ in a downturn, only to catch up again when prices boom.
In a slow market, buyers can become incredibly sensitive to the slightest problem. Being too close to a road or near a pub, or simply in a postcode where there has been flooding, are suddenly major issues. It’s often fringe areas that suffer most.
These may be the very same places that are labelled ‘up and coming’ during boom years. But some potential issues can be pre-empted. As property-makeover programmes never fail to remind us, you can increase the price that someone is prepared to pay for your house with surprisingly little effort. Some carefully chosen quick-fixes prior to viewings can work wonders.
Our next blog – coming soon …….
Moving house in a market downturn
Check out our Rightsurvey blog page for more industry tips and secrets written by property professionals to help put you in control.
