Data from Rightmove and HM Land Registry has just been released showing that 45% of property sales in Yorkshire and the Humber area of England and Wales achieved their asking price or above. The national average for England and Wales was 37%. The North West of England was second on the list at 41% of sales achieving asking price or above.
For anyone thinking of selling, this may be good news. However, as the majority of sellers are also buyers, there is little to be gained by such a strong property market. First time buyers in particular are losers in this ‘game of Monopoly’, at least initially. Assuming you don’t have to move-on within a year or two, the probability is that you’ll still make money from your purchase.
There is a temptation for sellers to want to put their property on the market for a much higher price than was originally expected (or assessed by their agent). I would urge caution with such strategy. You don’t want your property to stand-out from the crowd, especially for prospective buyers to see your house sitting alongside larger properties for the same price, or even properties in nearby areas where demand is even greater. Over-pitching the asking price can give prospective buyers the impression the seller is ‘greedy’ – a real turn-off for many buyers.
A seller may be prepared to negotiate, but a disproportionately high asking price can give the impression that there isn’t any room to negotiate. Purchasers are keen to bid competitively when they know there are multiple people interested in a property, but reticent to make offers on a property they consider over-priced. We see this psychology in auction rooms, where no one initially opens the bidding. When the auctioneer starts to invite lower bids at an attractive level, suddenly everyone wants a slice of the action, so to speak!
I’ve seen the same where seller’s (or their agent) have adopted an “Offers Over…” strategy, but foolishly listing the property at well above the market value. Why would a buyer want to start the negotiations by offering over the asking price when they already consider the asking price excessive? Seller’s need to get buyers through doors and that always necessitates a sensible starting price (along with good photos, informative brochure, etc.) Buyers then start to ‘fall in love’ with the property. Once these two steps have been made, negotiations can begin.
One should also be aware that lenders are now taking a more cautious approach with their mortgage security valuations. Although banks and building societies are keen to lend, and have recently introduced some very attractive, low-interest rate, mortgage products, the lender still needs the assurance that the money they are lending will be secure. A mortgage valuation has to be undertaken (whether physical or nowadays more often ‘desktop’). The professional valuer will be required to have evidence of three comparable sales to support the valuation. The valuers have some leeway for price inflation, but where there is evidence of price growth at say 7% per annum for a location, they will down-value anything that is priced significantly higher. We’ve recently had a couple of flats down-valued. The sales fell through and we remarketed and re-sold them both quickly – for the original price. However, we have yet to see if another valuer will also down-value them!
If we had listed those flats at lower prices, generated multiple offers and then closed a deal via ‘Best and Final Bids’, we could have provided the mortgage valuer with evidence of the demand for the flats. As the asking prices were ‘full figures’ to begin with, we had no evidence to support the selling price, hence the original buyers both pulled out of their deals. Whether we can justify the re-sales on the basis we’ve now had two buyers offering the same asking price remains to be seen.
As a local agent in the area for 40 years I have always provided mortgage valuers with comparable sales evidence to support our selling prices. The data is on our files when we list a property for sale. When we are asked to provide a free market appraisal to a potential client, we provide the client with a pre-marketing report that includes comparable sales evidence that supports our assessment of value, including analysis of floor areas, size of garden plots, topography, orientation, etc. We also provide information on properties that sold for more than the asking price and how long they took to sell, along with details of properties which have been on the market for an excessive period of time, most often due to being pitched above market value.
The comparable sales evidence can be used to support negotiations with buyers, as well as it being available for mortgage valuers. Our sales success rate has always been above the national average, but recently, in this ultra-strong market, we’ve been achieving over 90% completion rates. I believe a significant reason for this is the time we invest in our pre-sale ‘homework’. As with most things in life, preparation is essential.
Whether you are one of our retained management clients or new to Moores, if you are considering selling now (or even in the next 12 months) feel free to contact us. I can provide you with a Market Appraisal Report on your property, completely free of charge and without obligation. We offer physical market appraisals by visiting the property, or we offer desktop appraisals – especially useful if your property is tenanted and you don’t want to alarm or worry your tenant about the fact you’re thinking of selling.
– Newsletter Editorial by Director Michael Moore