How much is my house worth? The 10 key factors that really drive house prices
We are often asked 'How much is my house worth?' So here are the 10 most important things that really drive house prices:
1. Do you want to sell your home right now?
If you don’t then, take a deep breath, sit back and relax, it really doesn’t matter. If you are not looking to sell right now then your ‘house price’ is somewhat academic. There are only two times when the value of your home really matters, when you want to sell it and when you want to remortgage or secure finance against it.
2. How quickly do you want to sell your home?
If you are eager to sell in order to get settled in the catchment area of a great school before the start of the next school term then you are likely to accept a lower price than if you are under no time pressure to move. Similarly if you have put made an offer on your dream next property you are probably more interested in not losing out on that home than in risking the sale purchase falling through because you were holding out for top dollar on your existing home (the home you actually want to move out of…)
3. Do you have a target house price in mind?
This is where online property valuation tools can get you started. A reasonable starting point is what you paid for your home when you bought it plus (or minus..) the local house price inflation (the change in underlying house prices since you bought your home). But this is only one part of the story. Unfortunately we do not get to set house prices. Okay, on one level we can, I can tell you that I believe that my small flat is worth £25 million, but it is actually only worth what a home buyer is willing to pay for it.
BONUS TOP TIP BE WARY OF ON-LINE HOUSE PRICE VALUATION TOOLS
On-line valuation tools have no idea of:
how many people are looking to buy a property like yours,
how eager they are to move,
how able they are to move, and
how much they can actually afford
At best they give you a guide as to what has happened to overall house prices since you purchased your home at worst they set unrealistic price expectations for you which might not be met.
In our view if you are serious about selling your home it is always best to get two or three reputable local estate agent rounds to value your home
4. How many people are looking to buy a home like yours?
If there is only one person looking to buy your home and you need to sell, then unfortunately they have a lot of power in deciding how much your home is worth. However, if there are 10 homebuyers eager to buy a home just like yours you are in a much stronger position.
The price however is not decided by an online house price valuation and you still do not get to set the price, it will be down to how much they are willing and perhaps more importantly able to pay.
If you are lucky enough to have a bidding war and I’m sure with a home as nice and stylish as yours you will, it doesn’t matter what your starting price is. A bidding war is effectively an auction and auctions start off with a low price and let the market decide, this is true whether you are selling an old washing machine on ebay or a Van Gogh at Sotheby’s. If it sells the starting price is very rarely the final price.
5. How do you tell how many people are looking to buy a home like yours?
A good initial step is to look at how many homes have recently sold. You can do this by looking at the land registry database. A better way is to speak to a good local estate agent, they will be speaking on a daily basis to a pool of home buyers looking to buy a home like yours.
6. How eager to buy your home are those people who are looking?
This is another area where online property valuation tools fall short. A good agent will know how quickly a buyer wants to move and where they are in their house buying journey – is yours the first house they have put an offer on, are they looking at several, or have they lost out on several homes and really need to complete by the end of the month?
7. How many for sale boards are on your street?
The number of for sale boards alone doesn’t tell you much about house prices. Are people selling because of anti social behaviour in the street, or issues of recent subsidence? It does however highlight who the active estate agents near you are and an estate agent is unlikely to take on your property if they didn’t think they could sell it.
However be careful… (top tip – beware of agents who charge you whether or not they sell your home – if you have to pay the agent whether or not they sell your home how hard will they try to sell it and how hard will they try to get you the best price?).
8. How many sold boards are on your street?
For our money a better indication of housing market activity than for sale boards is the number of sold boards. If houses are selling like hot cakes then housing demand is greater than housing supply and that in our view leads to rising house prices.
9. Will a New Kitchen or new bathroom increase the value of my home?
99 times out of 100 Nine times out of ten unfortunately not. However, it will help you sell your house more quickly. Everybody's house is unique and everybody’s tastes are unique, so unless you have managed to put in the eventual buyers dream kitchen and bathroom and painted your home in their favourite colours you are unlikely to see a big increase in value of your home by putting in a new kitchen or new bathroom. A personal example I bought a flat once that had a brand new ensuite to the main bedroom, the bathrom was funkily hidden behind wardrobe doors (yep no windows in the ensuite) and as the owner was leading up to the big reveal he told us that he was ‘very pleased with it, I’d wanted an en suite in here for years, I’m a bit sad to be moving out’ I couldn’t wait and when they opened the doors ‘ta-dah’ a black marble bathroom…. (I did mention no windows in the bathroom right…) his dream was my nightmare, but was I willing to pay more or less for the flat?
10. Is your day job negotiating the price of houses?
Most people very infrequently get to lead the price negotiations a home being sold and you know what they say 'practice makes perfect'. If you do negotiate the price of houses all day everyday that is great. If you don't please take our advice and use a reputable high street agent who has lots of experience in negotiating the best prices. I am not sure why we all (myself included) believe that we are best placed to value and negotiate the price of our home. When my car needs a service I take it to a garage, when I have tooth ache I (eventually) go to a dentist. It is usually best to leave things in the hands of experts and we believe the same goes when it comes to selling your own home.