When selling your house you’re obviously trying to attract the perfect buyer willing to pay your asking price. However, there’s a big difference between an asking price and a sales price, and savvy sellers should know the difference.
The sales price is the amount you actually get for your house – the money in the bank, if you will. The asking price is the price advertised (your ideal figure) and is typically set at a price that’s between 2 and10 per cent higher than the expected sales price.
The difference is sort of a sales gimmick that allows sellers a bit of leeway to negotiate with buyers while allowing buyers to feel satisfied with getting a good deal. In the end, sellers should be happy because they’ve obtained a price within their target range, and buyers should be happy because they’ve paid less than advertised price.
How to set the right price
The asking price is closely linked to the perceived value of your house, so if you can set your asking price to reflect good value for all that your property has to offer, you’ll have laid the first important step towards attracting buyers.
Take note that the buyers’ point of reference on value is directly related to the houses they’re viewing. So you must make sure that your price fits within certain (vaguely) defined property brackets that are tailored to certain sectors of the market. The value of your house (or the bracket) will be determined by several factors, including location. So a five-bedroom house with a beautifully manicured garden may sell at a higher price in one area than in another.
It is also important to compare your house to other properties on the market with your value bracket. You need to make your home more attractive than the house down the road with similar features. Usually, this involves dropping the asking price or emphasising/adding other features.
Or you can close the gap between the asking and acceptable sale price, while still giving potential buyers the opportunity to ‘haggle’ over price. If successful, this strategy may result in several buyers competing for your home and the chances are good that one or more will make an offer that matches or exceeds your asking price – which is fantastic.
To round off or not round off
Many of us think it would be easier to just round off our asking price, so we don’t have to deal with fiddly numbers, but sales research has repeatedly shown that rounding off prices wards off potential buyers, whether it’s a can of soda or a house. So if your house is worth £288,000 (and houses in your area are selling at 97 per cent of the asking price), your asking price should be £299,995 (instead of £3000,000).
It’s also important to bear in mind Stamp Duty Tax, especially if your house falls into the following price ranges:
• Up to £125,000
• £125,001 to £250,000
• £250,001 to £500,000
These price ranges make houses a bit tougher to sell because they’re just over the tax thresholds, for example, being in the £250,001 to £500,000 price range takes the tax rate from 1 per cent up to 3 per cent.
A way around this tough sell is to set an asking price that’s between 3 and 4 per cent of the tax threshold, at this level you’ve got a better chance of attracting buyers because it’s not too much above the tax threshold. You should also be prepared to negotiate to just under the tax threshold.
Don’t be ambitious
There is common misconception that you need to start high (overvaluation) so that you can be negotiated down to the price you want. The fact of the matter is that an inflated asking price sets you up for a serious fall because people don’t like being taken for an obvious ride. Your house could end up on the market for months until you have to dramatically drop the price. The downside to this is that buyers may assume there’s something wrong with the house and they’ll still avoid it.
The best way to determine the right asking price – so you can get the best possible selling price – is to consult an estate agent. So if you want to put your house on the market, find a reputable agency with experienced property experts.