How to Tell if a House is Worth the Asking Price

Is the asking price the right price? There’s lots of property on the market that is overpriced.

So, how can you tell if a house is worth the asking price?

At Stacks we work in the property market day in, day out and have done for over 40 years now. We can help you determine if a house is worth the asking price or if it is over priced. If you’re looking for a property buying agent, contact our team of regional directors today.

Why are Properties Overvalued?

In the property market, overvaluing occurs for several reasons. Estate agents can find themselves in a tricky position, trying to win an instruction when competing in some kind of beauty parade. Overvaluing may be the only way they can take the instruction. Usually vendors LOVE their properties and can insist on a higher-than-recommended initial asking price. Sometimes it can be a deliberate strategy if someone is open to negotiation further down the line.

Putting a market value on houses is a subjective exercise – three agents will rarely come up with the same value on a property, and the more unusual the property, the greater the discrepancy is likely to be.

So how, as a buyer, do you establish the ‘correct’ price for a property? How can you tell if a house is worth the asking price?

Asking Price vs Buying Price

It’s important to remember to take the asking price as the guide – but a property can go over or under that price when bids come in – in the UK the value of the house is what someone is prepared to pay for it.

As professional property finders, we take our clients through their offer calculations with the benefit of our experience, and there are several factors to take into consideration when it comes to deciding if the property is worth the asking price

At Stacks, we have created the below formula for you to use when calculating your property offer.  

Stacks’ magic formula is this:

B = A – M – V – Bf + CI + R

Where:

B = Buying price

A = Asking price

M = Market discount (Local market conditions and recent comparables – could be a ‘+’ figure!)

V = Vendor desperation (How badly the vendor needs to sell)

Bf = Buyer flexibility and attractiveness (How flexible you are in terms of timing, cash buyer, etc.)

CI = Competitive interest (How many other buyers are interested)

R = Rarity (How often a property like this one comes onto the market)

Tips for Making an Offer on a Property

If you’re ready to make an offer of a property, here are some tips from our property finders.

1. Initial Offer – Remember, once you’ve made an offer, there’s only one direction the price is going to go, and that’s up. So don’t start too high. At the same time, you can irretrievably offend vendors with insulting low-ball offers. Think about what you would be happy to go up to and start a little lower than that. 
2. Don’t threaten and then cave – it makes you unreliable – i.e. Don’t say ‘that’s my maximum’ and then go up further! If you are going to ‘best and final’ or ‘your absolute maximum’ – decide your limit – where you would not pay a penny more for that property- and ensure you are happy to walk away if it goes above that. 
3. Think About the Asking Price: A useful exercise is to ask the estate agents how they arrived at the price – was it based on some science (if so, what), or just what the vendor thought it should be?
4. Be Polite and Likeable: However punchy your offer, it pays to be a likeable buyer. Nobody likes an aggressive purchaser and some vendors will refuse to deal with you any further if you push too hard – remember this is someone’s home and not just a commodity. And always negotiate through the agent, not directly with the vendor.
5. Think Smart: Don’t be pressured by the agent, and don’t always believe that there’s another buyer who has just happened to come out of the woodwork. But be careful, sometimes there really is, so don’t try and be too clever. It’s a calculated risk how far to push negotiations, so don’t back yourself into a corner and allow a third party to nip in whilst you are procrastinating!

Final Thoughts on Houses and Asking Prices

In the end, the purchase price agreed has to be one that both buyer and seller can live with, and which will encourage all parties to co-operate towards a successful exchange and completion.

35-40% of transactions fall down after an offer has been accepted – at Stacks we are proud of our 97% success rate.

If you need assistance with your property search, contact Stacks today – we’re looking forward to working with you.