How should buyers judge the price of a property on sale?

Stacks Property Search says buyers of all kinds – including investors – should factor in the elements that might affect what will represent a price that’s acceptable to the vendor.

Stacks’ James Greenwood says: “Over valuing occurs for several reasons. Estate agents can find themselves in a tricky position, trying to win an instruction when competing in a selling agent ‘beauty parade’. Over valuing may be the best way for them to get the instruction. Alternatively, they may be pressurised by the vendor to put the property on the market at a higher price than they would otherwise recommend.

“Putting a market value on houses is an objective 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? Our advice is to view the asking price as a guide price on which to base your calculations. There are several factors to take into consideration, but if you do your research, and make sure you look at all the crucial elements, you will come up with a figure that is a sound basis from which to negotiate.”

He says the criteria that will have an impact on the initial asking price and the subsequent ‘acceptable’ price include:

1. Buyer flexibility and attractiveness – Are you a cash buyer, and are you flexible in terms of timing?

2. Local market – Market conditions, supply and demand. If the local market is robust, supply low, and demand high, you may struggle to negotiate. Recent comparables will help you here, but in a rising market, they need to be very recent.

3. Vendor situation – How badly does the vendor need to sell? The estate agent may give you some inside knowledge on this, but your conversations with the vendors themselves, finding out whether they have found something they want to buy, whether they need to relocate, or whether they’re separating, will give you a great deal of insight.

4. Competitive interest – If there’s more than one buyer in the frame, your negotiating position will be compromised.

5. Rarity – If the property is one of a kind, in an unusual position, an amazing view, or some other unique characteristic, it will be harder to negotiate, as such features may be difficult to replicate.

Greenwood continues: “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?

“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.

“In the end, the 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.”

This article is taken from Property Investor Today