People selling in 2020 want to secure the best house price possible, and that's understandable given our uncertain economic future post Covid. But, as it turns out, a significant number of sellers are substantially overvaluing their homes, in some cases by as much as a fifth.
- Find out the latest, accurate information on house prices in our guide
While house prices have been rising steadily since the lifting of a UK-wide lockdown in May, it is more important than ever to be realistic when pricing your home. Colin Shairp, director of Fine & Country South Hampshire, puts it bluntly:
'[O]vervaluing your property can be financially wounding. It will stay on the market for longer, while you continue to pay the mortgage, rather achieve a realistic price.'
It's a known phenomenon in the world of real estate: a property that has been overvalued fails to sell, and then becomes less desirable in the eyes of prospective buyers, which, in the long term, can actually reduce the house price it can command.
Especially now that changes to mortgage rules are making buying a home more difficult, savvy buyers are on the lookout for properties that haven't sold – and the offers they'll be making on those properties will be much lower than the original price the seller had hoped to achieve. In fact, if it takes a very long time, you might end up in a situation where you'll be forced to accept the first offer you'll get, especially if you're moving onto another property.
Some sellers are seduced by the high house prices they're seeing on online property search engines. Shairp cautions against this approach:
'It is far better to have an agent who knows your market well, can give a fair market appraisal, come up with a reasonable price based on their experience, rather than setting the price too high from the outset. The right agent will be able to demonstrate a database of potential buyers with the financial means to deliver.'
There may be all sorts of reasons why a house that seems similar to yours is going for more: it may be in much better condition, or it, quite simply, may be located in an area where buyers are able to pay more. Don't assume that because people are able to relocate post Covid that you'll get a buyer with lots of cash to splash; local market conditions will still apply to your home.
One final thing to remember is that your buyer may fail to get a mortgage if your house is overpriced; the mortgage lender will do their own evaluation, and if it's quite a bit lower than the price you've set, the buyer may well have to go through the entire process again.
Our advice? Choose your estate agent wisely: good ones are worth their weight in gold right now.