The BIG question: What is my house worth?

What is my house worth?
This is the big question, and as Estate Agents, it is one we naturally get asked most frequently, but it is also quite a difficult question to answer, mainly as there are a number of ways of answering it. Let’s look at them in depth:

1. What the Home Report values it as.
This is generally the accepted de facto answer. We are blessed in this area that we have a number of excellent local surveyor firms who are generally excellent at valuing local properties, and the Chartered Surveyor who will carry out your Home Report will have based his or her valuation on a number of factors, and used their experience to factor in all pertinent attributes relating to the property..
…however, this is just one person’s opinion (albeit a very experienced and learned person’s opinion!) and it is inevitable that their thoughts will be influenced – for better and worse – by recent experience. Surveyors themselves state that their valuation is based on “what a normal person might pay in a normal situation” however we are dealing with real life where there is no such thing as ‘normal’!!
It is also worth stressing that a property’s value will be constantly changing due to market conditions, whereas a Home Report value is merely a snapshot in time.

2. What a similar property elsewhere sold for.
By identifying a house of similar size/design/layout etc. that has sold in recent times can give a good idea of the value of a property. However, the main flaw to this method is summed up by the old estate agency saying of “Location, Location, Location”, and so the location of the property will have such a large bearing on the value, that comparing values of similar properties elsewhere should only be used as a very loose indicator. A location will easily account for 10’s or 100’s of thousands of pounds of value of a property.

3. What the neighbouring property sold for.
This is a reasonable guide to any house price, and by comparing properties within close proximity, it will to some extent remove the element of variation that the location will place on a property’s value. However, it has been known for two identical properties on opposite sides of a certain street to have significantly different valuations. This is the fundamental flaw in the ‘valuations’ you will get from a property portal or a non-local agent. For example, it is often the case that houses on one side of a street will have fine open countryside or even sea views, whereas an identical house on the other side of the street looks onto more houses. Although less relevant here in the Highlands, this stark pricing difference can particularly be seen in areas where the catchment area for a desirable school may be bounded by the centreline of the street, and one house is within the catchment but the other is not!

This method can be supplemented by doing what is known as a ‘cost-walk’, whereby one takes the value of the similar property, adds or subtracts ‘value’ based on features (or lack thereof!), condition, etc etc. To illustrate (using approximate figures for guidance only):

Number 27 in ‘Anytown’ sold for £215,000, so what is number 22 worth?

Value of number 27………………………………………………………………………….£215,000
Number 22 has 3 bedrooms (Number 27 has only 2) ……………………+£15,000
Number 22 doesn’t have a garage (Number 27 does) …………………..-£8,000
Number 22 has had a recently refurbished kitchen + bathroom ……+£13,000
Value of number 22 ………………………………………………………………………….£235,000?

Obviously, different people will place different values on these features – some people need a garage more than a 3rd bedroom for example – and some features will be more or less important depending on the property and its location, and so this method is not an exact science.

Note: One warning about methods (2) & (3) above, where the value of one property is compared against one sold previously, is that the other property could have been bought for significantly more or less than its actual worth based on the buyer’s or seller’s personal situation e.g. seller desperate for a sale and so the house sold for less than its true worth, or buyer fell in love with the property and was willing to pay over the odds to secure the property which brings us nicely onto…

4. What the Estate Agent thinks it could/should sell for.
Like the Surveyor, a local Estate Agent will have an excellent knowledge of the local property market, but a good local agent like Fiuran Property will also have an in-depth knowledge in knowing how other comparable properties have fared in the marketplace, how long they took to sell and the feedback from the market regarding those properties. And whereas the Home Report valuation will look solely at the property and its current position in the market, the Estate Agent will also have a ‘real time’ handle on exactly how the property market is fairing and the feedback on similar properties. The Estate Agent will also take into account the seller’s personal circumstances & wishes with respect to the sale and this will effect the price that the seller wishes to offer the property for.

5. What someone is willing to pay.
This is often given as the right answer, and this goes beyond the basic calculations used to generate the Home Report figure. The great thing about properties is that no two are identical, and certain features may not have a strong monetary value, but a huge emotional draw which the right buyer may put a monetary value on over and above its actual worth.
However, to illustrate a flaw in the ‘what someone is willing to pay’ strategy, I’ll use an example of a 1 bedroom flat coming onto the market, offered at £82k:

Scenario 1: At the time, there is only person (Person A) seeking a 1 bed flat who is ready to buy. This person has a budget of £85k, but offers the asking price of £82k and, in the absence of competition, the seller accepts the offer.
Result:- Property sells for £82k

Scenario 2: At the time, there are numerous buyers in the market seeking a 1 bed flat, and subsequently a closing date is set. Person A offers their full budget of £85k and this offer is accepted.
Result:- Property sells for £85k

Scenario 3: Person A is awaiting his annual bonus from work which will allow him to fund his full budget of £85k, but it won’t come through for another 2 months and so Person A cannot currently pursue the flat. In the absence of any other buyer, the seller decides to drop the price in a bid to attract a buyer. A local developer sees an opportunity and offers £79k, the seller accepts as they have found their ideal next property and are keen to secure their next purchase.
Result:- Property sells for £79k.

You will note that nothing changed with the property itself, nor did what someone (Person A) was willing to pay for it, it just came down to correct buyers being in the market for that particular property at that time. The more unique a property is, the more it will tend to be affected by this, purely as unique properties have a limited market in the first place.

So you can see, the question of “What is my house worth?” is a very difficult one to answer! As ever, if you’re thinking of selling your property and need advice, talk to a local Estate Agent who knows the local area and market. At Fiuran Property we are specialists in residential property sales in Oban and the surrounding area.
We look forward to hearing from you.