Why You May have to Reduce Your House Price
From lenders, to estate agents to buyers, can you please them all?
Putting your house on the market is an exciting time. Your estate agent will come around and value your home, telling you what they think it is worth, and given the general upward trend of house prices in most of the UK, this price will probably come as a pleasant surprise.
The heady days when your house earned more per year than you did may be gone, but average house price growth in the UK has still been healthy for a long time. The ONS statistics show that house price growth has been in the positive since 2012 and prior to the financial crash, it was running at above 10% year on year.
So you put your home on the market with a smile, delighted with the prospect of the windfall to come. But sadly, all is not what it seems, and the price you ultimately get is rarely the price you initially asked for.
Dropping the asking price
The first hit often comes due to lack of interest. A slow market, or an over optimistic asking price, can lead to little or no viewings. This may be due to seasonal peaks and troughs, such as a summer lull, or the run up to Christmas. People are generally more interested in moving when they are considering school applications in the autumn, or in that fresh burst of enthusiasm that comes with the new year.
There could be a number of other reasons why your house isn’t selling too, but more often than not it is down to over optimistic pricing. It’s not easy to know how to price your house, but if other similar local properties are selling well, and potential buyers have no interest in yours, then chances are it’s overpriced.
After you have been on the market, unsuccessfully, for a while you will inevitably have to drop the price of your home to attract a buyer. There are many different schools of thought on when to reduce your house price, or how long on the market before price reduction is needed, but three to six months is usually about right.
As a rule of thumb, you may need to reduce by 5% if you are having viewers, and by as much as 10% if there is no interest at all. This is the first chip away at that original valuation that you were so excited about, but it is far from the last.
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Eventually, your reduced price will attract a buyer, and they will have a survey done on your home. If your home is immaculate, up to date and has no problems whatsoever, then you will be fine, but let’s face it, how many homes are like that?
Most surveys will find something that needs putting right. These are usually things you have put up with quite happily, but the new owners want fixing. The older your property, the more these repairs and refurbishments are likely to cost. To save the sale, you agree to fund these repairs, chipping away at your original asking price a little more.
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Even if you have dropped your asking price and agreed to fund repairs, chances are you will still receive an offer that is less than you hoped for. In March this year, no fewer than 86% of home sales were completed at less than the asking price according to the National Association of Estate Agents. That’s seven out of every eight homes.
Rightmove estimates that the average reduction is around £10,000, with offer to asking price differences rising from 2.8% lower to 3.3% lower in the last two years. Zoopla recently put the figure at 3.86%, with some areas, such as Bradford (6.32%), Preston (6.24%) and Swansea (5.87%) reporting much higher discrepancies.
These days, everyone wants to do a deal, and no one expects to pay the full asking price unless the property is in big demand in a sought-after area. The fact that you have already reduced the price is irrelevant to most buyers, and they will start their negotiations at the current asking price and work down from there.
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The mortgage lender's valuation
As we discussed in our recent article about down-valuations, even if you have agreed an offer to sell your home, you are still not out of the woods. Increasingly, the official valuers for the banks and building societies are valuing homes at less than the asking price or agreed offer.
While your estate agent is obliged to get the best possible price for you, the valuer works for the lender, and is obliged to protect them from risk. In a way, both ways of looking at the market value of your home are correct, yet there may be a difference of £10,000 or more between the two figures.
If your buyer is hoping to complete their purchase with a mortgage, you may have to reduce your price yet again to meet the new valuation, or at least meet them half way. Of course, you can stick to your original agreement, but if the buyer doesn’t have the extra cash they need to make up the difference, then you could lose your sale altogether.
Drop after drop after drop
By the time you actually complete the sale on your home, you could be a long way away from the original asking price that you were so excited about. You will have had to reduce the price by 5-10%, fund the cost of repairs thrown up by the survey, then still accept an offer that is several percent lower still. And even then, you still might not get this price.
All in all, it can be a very demoralising situation, made worse by the long, drawn out nature of the process that leaves you feeling helpless as you watch the price drop and drop again.
Even when you finally do manage to complete the sale, you’ll still have to part with another one, two or even three percent of the sale price to pay your estate agents, plus you’ll have significant legal fees to pay for your conveyancing.
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One price, no haggling
When you consider all the different ways that your original asking price can be reduced, it starts to make sense to consider other, hassle free options. Prompt, professional property purchasers, such as Yes! Homebuyers, may offer you less than the asking price, but this figure is guaranteed and won’t suffer the kind of erosion that the open market inevitably brings.
On average, they will offer around 80% of the value of the property, which may sound like quite a hit. But when you add up all the reductions and other costs discussed above, it doesn’t seem such a bad deal. Once you have reduced your price to generate interest, paid for survey repairs and then accepted a lower offer, the difference becomes much less.
Better still, with Yes! Homebuyers there are no estate agent fees to pay, and they will pay your legal fees for you, making the price differential even smaller.
A hassle-free sale
Services like Yes! Homebuyers not only offer a great deal, but they also provide great service too. Rather than waiting for months on the open market, having to keep your home constantly viewer-friendly, you can complete the sale as soon as you need to. You’ll usually get an offer in 24 hours following a survey and you could agree a sale in as little as seven days.
A prompt, professional sale can get you moving sooner, avoiding problems with buying chains, slow solicitors and a myriad of other issues that can slow you down. It frees you up to move on with your life and can mean the difference between getting the home of your dreams and watching it go to someone else as you sit waiting to sell.
Remove the uncertainty
From the initial estate agent’s valuation, to the final, and far lower, net price, selling a home can be fraught with uncertainties and heartache. But you can avoid all of this with one quick call, giving you a prompt, professional sale and money in the bank within as little as a week.
It may not be right for everyone, but it is turning out to be a good move for more and more people who are fed up of the non-stop negotiations of the open market.