By Graham Norwood – telegraph.co.uk
When the owners of this home decided to sell, the experts could not agree a price. It’s a growing problem. Graham Norwood advises on how to value your home.
Malcolm Cox knows how much his house is worth – give or take a million pounds.
Cox, who owns a street-lighting firm, spent seven years building his six-bedroom house himself. When he and his wife Maxine decided to move recently they needed to know their home’s value so asked eight agents to offer a sale price.
The prices varied from £2.45m to £3.5m. It was blindingly obvious they didn’t have a clue what to compare it with or how to agree a price,” says Malcolm.
The couple became so disenchanted with agents that they put their home, near Stratford-upon-Avon in Warwickshire, up for sale via an online competition.
Tickets priced £25 each sell on http://www.wina3millionpoundhome.com, a website which makes it pretty clear what the family think the property is really worth.
Jamie Moore’s valuation problem is even more stark.
He bought a period stone-built bakery just outside Chester in 2007 for £194,000, moved in and spent £70,000 turning it into a high-specification, all mod-cons house.
Last year, he wanted to start another project and arranged rival valuations. Estate agents valued it at £350,000 but a bank – brought in by Moore, who was considering remortgaging the bakery to release money – valued it at a paltry £200,000.
“We said forget that, and stuck it on the market for £345,000. We had three offers within 24 hours, accepting at £330,000,” says Moore, a building conservation expert.
These experiences show how hard it is to get a definitive property value in today’s market, even from the experts. It is only when you ask that you realise there is no such thing as ”a value” – just ”an estimate”.
“Valuation isn’t a science or a fine art. Most agents simply make appraisals of a property and produce a figure that they think sits well in the local market,” says Peter Bolton-King of the National Association of Estate Agents.
He admits some agents produce high figures if the market is rising, while others may pitch a low price to generate competitive bids and, perhaps, an eventual sale price which is higher than that asked.
“Surveyors for banks and building societies are extremely cautious – too much so. They’ve consistently undervalued properties to protect the lenders. That situation is improving but it’s still a factor, especially with new homes,” Bolton-King says.
He advises sellers to quiz agents on the number and type of comparable properties they have sold and how quickly they went. The Royal Institution of Chartered Surveyors, which regularly updates its “Red Book” guide to valuation, also says comparable property sales are a good – but not exact – guide to a home’s worth.
Buying agents, who earn their keep bartering down sale prices for purchasers, have yet another approach based on looking beneath the surface of the sale and sellers.
“Factors that help are how long a property’s been on the market, past price reductions, and offers that were made and turned down, or accepted but then failed to proceed,” says James Greenwood of Stacks Property Search.
“Value is also affected by individuals. How badly does a vendor want to sell? Is it divorce, probate or desperation? How badly does a buyer want it? How long have they been looking? Our only assumption is that the asking price is in the right region – but with flexibility,” he says.
Estate agent, Danny Williams, has a radical suggestion – forget experts and do the valuation yourself.
“Most people are accurate to within 10 per cent of a home’s value. It’s easy these days to discover what other properties sell for, thanks to the internet. And as 80 to 90 per cent of homes are similar to those nearby it’s easy to make comparisons,” says Williams, who has just started the online estate agency One London Property.
He has written guidelines for people to value their homes, using property websites recording historic sales information for each postcode and others with asking prices of homes on sale now.
This guidance may irritate professional valuers, but it is in fact similar to the technique used by most estate agents today.
“You have to consider the motivation of the valuer. An agent’s chief objective is not to give the value, but to win the instruction. Likewise, a bank valuer’s chief objective is to protect the lender as much as possible in a volatile market. That’s why valuations differ hugely,” Williams says.
To complicate matters, many valuations are now done electronically without visits to a property. Automated Valuation Models (AVMs) use thousands of pieces of data from councils, utility firms, estate agents and the Land Registry to calculate property sizes and compare them with others close by.
Firms such as Rightmove and Hometrack, although best known for advertising homes or producing price indices, make much of their money from selling these AVMs to insurers and similar companies that need to know property valuations.
The Nationwide and Halifax use their mortgage data to create the AVMs that power their online house price calculators. In theory, these guide home owners on their values, but they differ widely from prices put on properties by local estate agents.
For example, in 2003 I paid £430,000 for my home. The Halifax AVM says it should today be worth £480,000 and the Nationwide AVM suggests £520,000. Yet three local estate agents have put prices on it ranging from £495,000 to £650,000.
Little wonder I don’t know whether to sell or stay put – and little wonder no one really knows how much their home is truly worth.
A guide to valuing your home
2 Visit http://www.rightmove.co.uk, http://www.zoopla.com and http://www.primelocation.com and view homes like yours now on sale locally and, as above, take the average price of the three most comparable homes on sale. Establish a “valuation range” between points 1 and 2 above.
3 Finally, add five per cent “if you are genuinely keen but not desperate” to sell, or deduct five per cent “if you’re in a particular hurry”.