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House valuation and property prices help - don't be confused

Your house valuation is too important to leave to other people. Plain and simple....

After all, your financial future is at stake...So..

No matter how you intend to sell, your home valuation is an area you'll want to take an interest in.

The good news is that valuing your home isn't too complicated.

Postscript September 2010: Since this article on house valuation was originally written the market has changed considerably. However, the principles remain the same. The biggest difficulty facing surveyors and home owners is the lack of recent sales data. Surveyors are now casting a wider net for comparables. Where no data exists, projections can be used.  You can do this too. The Land Registry and Registers of Scotland both publish trend data.

Armed with enough information, anyone should be able to form a range of valuations for their property. Valuation is an art and not a science.

For any given property there is a range of possible values. This range depends on a number of factors. Supply and demand being one. How quickly you want to sell being another.

Surveyors are able to come up with precise valuations, although these can be quite arbitrary at times. Our suggestion is not that you do the surveyor's or agent's job. But rather you develop the best informed opinion about the value of your home you can.

To what extent is any house valuation accurate?

Good question.

A number of commentators (including estate agents!) suggest the practice of over-valuing property in the UK is widespread. Who remembers the BBC’s ‘Whistleblower’ programme in March 2006?

Whether estate agents are consciously aware of the practice or not, it’s easy to see how some properties might come to the market over-valued.

Why you need to value your own house

But do remember, any house valuation will always involve an element of judgement. In a difficult market (September 2010), a lack of sales, can make valuations based on the recent past very tricky.

In its most basic form the over-valuation of properties is a tactic some estate agents may use to win new business. And if the actual selling price is a negotiated one then you may wonder where’s the harm?

In slow market an over ambitious asking price will result in no or few viewings for most properties.

Most of us want to believe (really we do..) our property is worth as much as possible. So it’s easy to be seduced by inflated numbers because ‘the estate agent knows best’.

Even if agents or solicitors are pragmatic, home owners can request the price is pitched at a level they feel they're entitled to. 

And the truth is..

An estate agent's house valuation is best thought of as an opinion on where you should pitch the asking price of your house. A house valuation is actually closer to a selling price rather than an asking price...except in Scotland where we benefit from Home Report valuations. They can be confusing too, as these Scottish valuations don't always reflect 'sold' prices.

At the other end of the scale you also need to guard against under-valuation of your house – particularly if you intend to negotiate with buyers directly.

We always ask people how they arrive at their house valuation. More and more are doing own research. A greater number of people also understand the relationship between current and historical prices.

The art of DIY valuation - the only way to safeguard your interests..

It is important to remember that some sellers (and buyers) are especially vulnerable to over-valuations. Don't be one of them. Your property sale is more likely to fall through if it is over-valued in the first place.

Think about it.

With so many ways to compare property prices buyers may 'cool off' or their lender may fail to value the property at its asking price. Even worse, your house may fail to attract offers. Alternatively, you might end up turning down perfecting reasonable offers!

Guidance is at hand..

If you're selling a property soon do take a look at our extensive house selling guide. Our site map is good place to start.  No matter how you plan to sell, our guide will help you get a better price for your property.

But for now, more on valuations..


Technical talk...but only for a moment..

There are three methods of property or house valuation:

  • cost approach
  • income approach
  • comparables approach

    The generally accepted method in the residential property market is the comparables method of house valuation. So we are going to focus on that.

    Most property people (including us) use some form of comparables approach because it is objective. The method does not rely on one person's preferences whether they are a surveyor, agent, buyer or seller. The downside is that it works less well for unusual properties.

    How to value your house

    Let's be clear...

    This is exactly the same approach we would use if we were valuing your house..

    We recommend you incorporate most, if not all, these steps into the process you use to research your house valuation and its asking price.

    Step one  - Research historic prices.

    This will give you a baseline to bat from..

    Get recent online historic data for properties like yours (preferably in your street) using sites like Our Property, Zoopla and Net House Prices. 

    Although this information will be out of date it will provide you with a baseline of selling prices rather than asking prices.

    Then fast forward to the current market..


    Step two - Speak informally to local agents (or solicitor agents in Scotland) about current prices and demand.

    You can research current asking prices on the web using the likes of Rightmove. But you'll also have to speak to local agents. In Scotland conveyancing solicitors have access to databases of recent sales data.

    Local estate agents will be able to talk to you about very recent and current sales and market sentiment. If any estate agents have 'for sale' boards up in the immediate vicinity contact these first. Note that legally speaking, agents cannot reveal how much a property sold for until three months and one day after it sold. But they should be able to comment on the relationship between asking and sold prices.

    In England and Wales the most comprehensive source of individual house price information can be found at Land Registry and is useful if you want to know the price specific houses sold for.

    Then bring out the big guns..get professional help for pennies..(almost)

    Step three - buy a third party valuation report.

    Invest in a Hometrack Report for your property – this is available at Hometrack. You're not limited to using Hometrack. There are alternatives, but it's robust and well priced. It also has the advantage of being widely available to buyers and sellers.

    The Hometrack system is widely respected by finance and property professionals including surveyors and some agents who use it as one of the components of their own house valuations.

    The Hometrack system is a bit like having a team of surveyors working for you..

    Why this system? The reports use Realtime™, an automated valuation system used by high street banks and mortgage lenders. If it's good enough for these guys..then it's good enough for us.

    In most cases the Hometrack system will give you a good  indication of a property’s current value: expressed as a range with an associated confidence level.  You can't get this from simply looking at previous sales in your area.

    There are some circumstances which limit the value of a Hometrack report - only because it is based on the comparables method.

    Each Hometrack valuation comes with a confidence level of low, medium or high. The more unusual the property or the fewer comparable sales available, the lower the confidence level.

    However for the vast majority of properties the given price range is an excellent guide.

    How to use the report..

    You then simply use the other information collected in the other steps in the process to establish where your property should be on the range. Depending on the confidence level attached to the reported average price for your property you can weight the report more or less.

    A Hometrack Online Valuation Report for your property is available for around £20. In our view it is worth every penny. Especially when you consider how much money is at stake.

    Each report of about 10 pages in length includes essential information on the price of comparable properties in your area and important trends such as the average number of viewings per property and the average time it takes to sell a property in the area.

    Making sense of the information collected so far..

    Does all the information collected so far make sense? You may not be able to explain any anomalies but are you comfortable with the trends? The information you have collected should give you a pretty good idea of a range of likely values for your house valuation.

    Still want an estate agent's input?

    An optional step..meet the agents.

    Step four - Get estate agents valuations

    Estate agents' input is always an important part of the house valuation process no matter how you plan to sell your home. Only agents are really in tune with local sentiment. Get three estate agents valuations for your property. You'll get better quality information from the agents if you invite them round to view and value your house. Most will give you an opinion on the phone if you approach it the right way..but if you are selling through agents you might as well invite them round..

    Milk the meetings..

    Use the meetings to grill agents on local market conditions and their experience of selling a house like yours.

    Having obtained three estate agents valuations the average of these may be the best starting point for establishing an asking price all things being equal.

    The final selling price is likely to be +/- 5%-10% of this figure depending on demand for your property at a given point in time.

    For more detail on how to assess agents please return to the estate agents section of this site.

    In Scotland, where there is a different selling process, the available information is slightly different. As is who you might talk to. But the use of past and present prices is comparable. Hometrack now covers Scotland and further resources are provided in our Directory

    You're not through yet..one more refinement...but it's  important.


    Step five - Settling on an initial figure

    Having collected all your information compare the agents' average valuation to the 'estimated value' thrown up by the Hometrack report. You can anticipate the agents' average valuation will be slightly higher than the Hometrack average. Refer to your other research if the Hometrack report has a low confidence level or appears out of whack with the agent's house valuation.

    The killer question..

    The question to then ask is any difference between the two numbers easily explained by the condition of your property and current demand or the difference between asking and sale prices?

  • Now we need to talk tactics..

    Planning to sell your house? There are hundreds of house selling tips on our site..stay and look round..Get to know us better.

    And, if you're up against it for any reason and need to sell quickly or to a firm deadline we can buy your house for a fair price in as little as 14 days. But in any event, in a time frame to suit you.

    Just call us on 0800 043 0669 to find out how we can help or send the details of your sale to us on our quick house sale form requesting a FREE independent house valuation report.








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