Value of A Property |
Ignore asking prices.
This is a key piece of advice I give all my clients. Asking (also known as “guide”) prices are largely irrelevant when you are trying to value a property.
You need to work out what you feel is fair value based on the research you carry out on what other properties have sold for in the area. The asking price should not influence your thinking in this respect. Once you have carried out your research you should be confident in your valuation.
The asking price is hugely relevant when considering how to approach the negotiation itself.
Of course you should have carried out a lot of research into not only the value of the property but also the owners themselves and why they are selling. But what can the asking price tell you?
Is the price:
Too High? Does this signify that they are not serious and are just hoping that they will find a buyer who doesn’t know what they are doing and will pay too much?
Too Low? Are the sellers desperate so have priced the property to sell quickly?
About Fair Value? Does this mean that they seem sensible and will negotiate accordingly?
It is impossible to tell. Which I admit is not helpful, but I will show you what this has to do with emotions in a second.
Unveiling the Value of a Property and the Role of Emotions
First just consider the following:
If it is priced too high, this may have more to do with an overly ambitious estate agent than the owners themselves.
If it is priced too low this may be part of the sales’ strategy. When I advise clients on selling their homes, we sometimes undervalue the property to generate interest to create a bidding war. This has proven to be a very profitable strategy in the right market conditions.
(Please note that I specialise in acquiring property for my clients and do not sell property. However, I do advise my clients on strategy and the best agents to use to ensure that they maximise the value of their property. I firmly believe the best agents are very good at what they do. Unfortunately, many agents are not very good.
Avoid any estate agents or buying agents who both buy and sell. Do you think they are more interested in giving best advice or their commission?).
But let’s take the first instance where the asking price is too high.
Most buyers do one of two things:
- They simply ignore the property assuming that they cannot negotiate a sensible reduction. Instead they keep looking at other properties while monitoring the property for a price reduction
- They go in with an offer below fair value or at fair value. In both cases the buyer provides a coherent, logical justification of the offer in the hope that the seller will follow the logic and agree to their price.
Route 1 obviously won’t work because the buyer is not even in the game. Route 2 is better but still has little chance of success. Why?
Because logic rarely wins a negotiation. And if you don’t believe me, think of the number of times you have tried to reason with other adults and totally failed to get what you want, even when it is absolutely clear that you were “right”.
The reason why many negotiations fail is that neither party considers the emotions of the other side. Now I am not about to pretend that I am a new-age hippie and believe that you should start hugging people into submission/co-operation. Anyone who has met me will know that I am the polar opposite.
Nevertheless if any side of a negotiation is in a heightened, aggressive or defensive emotional state then failure is virtually inevitable because they won’t be listening to what you are saying. And if they aren’t listening even the clearest logic or common sense in the world is useless.
Consider the seller whose home is overvalued. They may not know it is overvalued and have simply taken the advice of an agent who was desperate to win the instruction and put in a high valuation. If you put forward a low offer, then the owner will understandably be quite surprised and will probably think that you are not serious. Alternatively they could be quite upset or angry.
At the same time, you need to consider the estate agent too. How will he or she be feeling in this situation? Embarrassed maybe? Perhaps they will go on the offensive to try to justify their valuation. If so, would that help you in the negotiation? Almost certainly not.
So before you put forward an offer you need to consider how the sellers and their agent will react. Asking for a big price reduction in your first offer is not necessarily the best way to start a negotiation.
Contact Mercury Homesearch
There are far more effective techniques you must use if you want to acquire your ideal home or investment for the lowest price possible.
If you would like to discover more about negotiation, you can request a complimentary copy of my book, The Insider’s Guide To Acquiring £1m to £100m Property in London. Simply click here, email Dee@mercuryhomesearch.com or call 02034578855 (+442034578855 from outside the UK).
The book reveals the tested and proven techniques I have been using for over 20 years to acquire London’s finest homes and investment properties for prices that my clients hadn’t thought possible.