How Much Is My House Worth? A Guide to Valuing Property
If you’re selling your house, or even thinking about selling your house, then you’ll want to know how much it is worth first. Here’s a guide to help you find out exactly what your house is really worth.
Quick Links
- What is Market Value?
- What Determines the Value of your House?
- How Not to Value your House
- Valuing Your House: What You Need to Know
- House Values and Asking Prices: How They Differ
- The Truth about Estate Agents’ Valuations
- The Problem with Online House Price Calculators
- So, How Much is my House Really Worth?
What is Market Value?
What your house is worth is known as its market value. Market value is the value of a property when it is offered for sale on the open market and is the price which a willing and able buyer is prepared to pay. Market value is not necessarily the same as the asking price.
So how much your house is worth largely depends on what willing buyers are able to pay.
The value of your house can be affected by a number of other factors, however.
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What Determines the Value of your House?
Its size: That buyers will pay more for a larger house than a smaller one is common sense. But square footage alone is not a reliable guide to the value of your house. For example, a three-bedroomed house may be worth more than a two bedroomed house the same size.
Its location. Location, location, location usually rings true. Some areas are more expensive while some areas are cheaper. This can be difficult to judge though as pricing can vary by town, district or even just the street.
Local amenities. Buyers are generally prepared to pay more for houses that have good local amenities including shops, public transport links and of course schools.
Its condition. The value of your house may be higher if it is in good condition. It will likely be lower if it is in poor condition, both due to the repair costs involved and also because there are fewer buyers willing or who can afford to take on a project.
The kerb appeal or tidiness of your house will not necessarily add to the value of your house although it may help to attract more viewings and so more offers.
The asking price of similar houses: Or what are known as comparable properties. You can find asking prices of similar houses in the area by searching on Rightmove or Zoopla.
But remember that asking prices are not the same as market value or actual selling prices.
The actual selling price of similar houses. This is an even better comparable. You can get sold prices from a site like Nethouseprices.
You can also get this data plus information on average selling prices plus annual rises/falls over the last year for every council area (England & Wales) from HM Land Registry.
But there is a catch here: What a buyer was willing to pay a year ago, or even a month ago, does not mean buyers will be willing to pay the same now – especially as that particular house is sold.
The price of similar houses that have not sold can be a factor too. If those similar houses remain unsold it could be because they are overpriced.
Whether a hot or cold property market. A hot market, or seller’s market, is one where there is lots of demand to buy but not enough properties available for sale by comparison, so it is easy for sellers to sell. A cold market, or buyer’s market, is the reverse. There may be many properties for sale but few (or no) willing and able buyers, making it hard to sell.
How Not to Value your House
Here are a number of methods which are NOT a reliable way to value your house:
- What you think your house is worth.
- What you bought your house for, plus an allowance for price rises since.
- How much you have spent on your house, such as any extensions and improvements that have been done.
- The rebuilding cost of your house, eg. an insurance valuation.
- What you need to sell your house for, eg. to buy another one or pay off your mortgage.
- What an estate agent decides your house is worth... more about this coming up.
- What online house price calculators say your house is worth... more about this coming up.
Valuing Your House: What You Need to Know
A good way to value your house is to understand the process by which most buyers buy a house.
When buying most people know what sort of house they need or want, what area they want to buy in, and have an idea of their budget. They may have a mortgage in principle stating the maximum mortgage they can get based on their income and available deposit.
Prospective house buyers are then likely to search the market to find the houses for sale that fit their criteria before deciding which, if any, to view.
Human nature means that buyers are usually attracted to properties which appear to be the best house for the least money. So, the true value of your house is a value that is competitive compared to others on the market at the same time.
What you need to know about mortgage valuations: Another factor at play here is that most people buy with a mortgage. As part of that process, their bank or building society will ask for a valuation from a surveyor. This determines the maximum mortgage and so the maximum price the buyer can pay.
Generally, surveyors undertaking mortgage valuations take a conservative view of the value of your house.
House Values and Asking Prices: How They Differ
The value of your house is not necessarily the same as the asking price.
It is a usual practice for house buyers to make an offer that is under the asking price for your house. Both buyer and seller may also be willing to negotiate. To allow for this, house sellers usually set an asking price that is above the market value of their house, and above the lowest price, they will accept.
Valuing your house accurately is an important part of this process: If your asking price is too low you could receive offers for less than the market value. But if your asking price is too high you may not receive any offers at all. You may then need to reduce it gradually so that it is closer to market value – at which point it could attract offers that are too low. In addition, prospective buyers are often deterred from (not attracted to) houses which have had large price reductions.
An accurate valuation and appropriate asking price is usually the best way to attract strong offers from willing and able buyers.
The Truth about Estate Agents’ Valuations
You can find out what your house is worth by asking an estate agent. If you do this however you need to know that an estate agent’s suggested asking price may not always be what your house is worth!
Good estate agents are experts in their local property markets. They will have a good knowledge of what other houses are for sale locally, what is selling at what price – and what is not selling. A good estate agent will know what is the true value of your house.
Estate agents, however, are in a competitive situation with other estate agents to gain instructions, and this can put them in a challenging position. If they suggest a lower asking price they are likely to lose instructions to estate agents who suggest a high asking price. A high asking price may not be to your advantage, however, as an overvalued house may fail to sell. In some cases, a lower asking price may help to attract more interest from buyers, create more competition and so achieve the highest actual selling price.
When selling your house it is a good idea to ask several estate agents for a valuation and to suggest an asking price and then compare them all. Ask each estate agent how they arrived at their valuation and suggested asking price. Tell the estate agents that you are interested in establishing the highest eventual selling price, not necessarily the highest asking price.
The Problem with Online House Price Calculators
Online house price calculators, sometimes known as automated valuations tools, are online systems that will tell you what they believe your house is worth. Online house price calculators are popular because all you need to do is tap in your address and postcode and they offer an instant, free valuation. However, there are some possible problems with automated valuation tools.
Online house price calculators use what is known as an automated valuation model. They use an algorithm to give you a valuation. The algorithm is usually kept secret but they most likely utilise data including past sale prices, current asking prices, sales trends and average house price rises/falls in the local area.
The problem with automated valuation tools is that they cannot take account of every possible factor which affects value. They cannot account for the sometimes irrational way in which real human buyers act. As a result, they can sometimes produce valuations which are much too high or much too low.
If you wish to get a free valuation from an online house price calculator it is a good idea to try several, and see to what extent their valuations vary.
Some online house price calculators include:
Many estate agents have a free online valuation tool on their website which is designed to generate leads for them. The service is usually provided by a third party supplier such as ValPal.
So, How Much is my House Really Worth?
Getting a valuation for your house is simple in theory but it can be a complicated process in practice! The best way to value your house is to combine a variety of methods:
Step One. Disregard what you think your house is worth!
Step Two. Consider online house price calculators and automated valuation tools as a guide, and a guide only. Be aware that they can be massively wrong in some cases.
Step Three. Ask several estate agents for their estimate of the correct market value of your house and for an appropriate asking price.
It is a good idea to ask at least three estate agents, including traditional high street ones, and compare them. Be aware that because of the way the competitive estate agency market works there is a tendency for estate agents’ valuations to be optimistic.
Step Four. Do your own research to find comparables. That is similar properties which are for sale, which haven’t sold, and which have sold recently. Use Rightmove, Zoopla and HM Land Registry as a guide.
Consider whether the market in your area is hot, cold or somewhere in between. There are a number of housing market heatmaps which can give you information on this including PropCast.
In summary, it’s very true to say that valuing your house is never an exact science. There’s really no such thing as an exact value for what your house is really worth, but many different valuations. Buyers, sellers, estate agents, surveyors and others will all take a slightly different view, with the true value of your house being somewhere in the middle. At the end of the day, your house is worth what a willing and able buyer is willing and able to pay for it.
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