Selling your first home in 2017- Preparing to sell

Selling your first home in 2017- Preparing to sell

October 19, 2017

 

 

For many homeowners, preparing to sell their house is one of the most difficult and daunting prospects, not least because there’s so much invested in the property; the amount of money you’ll have paid to purchase and maintain your home makes it absolutely vital to get as much as possible when you sell. When you’re looking to sell your first home, you should be sure to follow some basic first principles in order to ensure that your sale goes as smoothly as possible, and that you get the right price for your property.

In this section of the guide we’ll examine what you’ll need to do when preparing to sell, and what you can do before the “For Sale” sign goes up to make your property that bit more appealing. For first-time sellers, this guide will provide a valuable insight into the foundations of putting a home up for sale, but shouldn’t be taken on its own; the services of an estate agent are crucial to ensuring that you have expert guidance and assistance on hand, so sellers should be sure to find and contact a trustworthy local estate agent.

Setting an Asking Price

 

If you’ve been following through our guide to selling your house, you’ll already have found a reputable estate agent in the local area to help you make the sale. The next step is to decide how much your property is worth, and how much you should ask for it – this is the most agonizing part of the sales preparation, and also one of the most vital things to get right. Your estate agent will be able to provide you with an estimate of how much your property is worth, but you can also request several independent quotes.

In addition to professional estimates, you can also do some research of your own. Check out online property portals like Rightmove and Zoopla to get an idea of what similar properties in your area are selling for. You can also often find out how property prices have changed in recent years – are they increasing exponentially, or gradually slowing?

It’s also important to take economic trends into account, and keep an eye on how easy it is for people to borrow money; whoever buys your house will probably be paying for it with a mortgage, and if these have become more expensive buyers will be reluctant to borrow more. Check for changes in the Bank of England base rate to get an idea of how expensive borrowing is – the higher their interest rate is, the more it’ll cost consumers to take out a mortgage.

“So How Much Should I Ask for?” – Setting the Price

 

The process of buying a house is largely based on negotiation. Unlike with most transactions, the agreement doesn’t become binding until both parties have signed contracts, and in the UK this is one of the final parts of the sale. This means that both buyer and seller are free to leave the deal at any time, so there can be a fair amount of back-and-forth between the two parties.

The asking price you set isn’t a flat value, it’s simply a starting point for negotiations, and you should expect to buyers to submit offers which don’t necessarily meet your requirements. The role of an asking price is to attract buyers and tell them how much you want from them, so let’s look at how you should decide on a price:

What happens if you set the price too low?

 

If your house is estimated at around £200,000, you might decide to put it on the market at £190,000 instead. If it’s worth more, though, why would you accept £10,000 less? Asking below the market value for a property can:

  • Eat into the money you have to buy a new home, forcing you to take out a larger mortgage
  • Slightly reduce the amount you pay in fees charged as a percentage of the sale price
  • Find you more buyers, which allows you to pick and choose who best suits your needs
  • Find buyers quickly and attract their attention early – this can cause buyers to bid against each other, and even raise their bids above the asking price

If you present buyers with a bargain, you’ll grab their attention. This is very useful if you’re in a hurry to sell; you won’t have to wait around for weeks while people decide whether to make a bid or not, and you can quickly move on with the process of buying your new home. Of course you’ll need to establish ahead of time what your bottom line is, and how much money you’ll need to buy a new home – don’t ask for less than this, as you could find yourself in a tricky spot later on.

You must be certain of your reasons for asking for a low price. If you change your mind several months after accepting an offer it will be very difficult to get more money from the buyer, and you may have to go back to square one. Set the price at a reasonable level, and don’t just offer a steep discount to generate interest.

What happens if you set the price too high?

 

You could take the same house worth £200,000 and ask for £210,000 instead. Asking for more than a property’s really worth can seem like a risky proposition, so let’s consider what could happen if you set your asking price above the market value:

  • Buyers will know you’re asking more than the property is worth, but if they fall in love with the house they may be willing to pay over the odds for it anyway
  • Buyers will have to pay more in Stamp Duty, which increases the cost of buying the house for them. In addition, you’ll have to pay more to your estate agent when the house sells.
  • If the property market rises to meet your price you may well be ahead of the curve, and have a head start on other sellers.

Asking a lot for a property is a sound idea if you think there’s something special buyers will pay for, or if you can afford to wait. This tactic is unlikely to result in a quick sale, but if you’re in no hurry to move and can spend the time trying to find the ideal buyer then the extra money you make could be well worth it.

Bear in mind that your buyer may suffer second thoughts if they feel they’ve paid well over the odds for your house. As mentioned previously, there is no binding agreement on a property transaction until the final contracts are exchanged, so they’re free to walk away if they regret offering too much. Sellers should be wary of asking extortionate prices, because buyers will always be free to walk away even if they agree to meet the initial asking price.

Factoring in Lowball Offers:

 

There’s almost an unspoken rule amongst buyers and sellers that an asking price is only a guide. As with any negotiation, the buyer will attempt to secure themselves a better deal, which usually means their opening bid is 5% under the asking price. This is a way for them to test the waters and determine if the seller’s price really is as firm as they say it is, and is fairly routine; in response, many sellers will also inflate their asking price by 5%. Sellers can then accept lowball offers because they actually only want as much as is being bid. This is fairly common, and has led to many buyers simply tacking 5% on to their asking price in the expectation that they’ll receive low bids as a matter of course.

Sellers need to understand that this is fairly commonplace, and decide whether to inflate their asking price accordingly or not. The rationale for doing so corresponds to the points outlined above – not every buyer will make a low bid, so inflating by 5% could price some buyers out of the market. However, buyers might only submit low bids in the understanding that the seller’s “actual” asking price is lower than what’s on the listing. Whether this is common practise or not depends on the local real estate market, and is a good question for your estate agent.

What Will You Do Once You’ve Sold?

 

How you progress the sale will depend very much on what your intentions are once it’s complete. You may be aiming to have bought a new home by the time your current one has sold, in which case you’ll need to carefully coordinate the two transactions. Alternatively, you might decide to rent for a while to give yourself more time, or even move into rental housing as a long-term solution. Deciding what your plans are is crucial at this stage, because it helps you to lay the framework for the rest of your sale.

The Property Chain:

 

If you’re going to buy another house, you’ll be caught in the property chain. This is the metaphorical chain that binds the buyers and sellers of houses together; since few buyers can afford to purchase a house without a mortgage, they’re reliant on selling their current property in order to finance their new one. This means that many buyers and sellers have to rely on each other to complete all their sales at the same time, and if one person decides not to buy an entire chain can collapse, often causing several other sales to fall through.

There are ways to break the property chain, and savvy buyers can take out bridging loans as alternative finance to secure their ideal property. These forms of funding can be expensive, though, and should only be considered by experienced individuals.

The Rental Route:

 

If you can afford to wait a few months, renting a property in the short term can be a very useful option. Being forced into a chain makes it hard to make decision on your own, and it’s easy to find yourself forced into other buyers’ schedules – you may find yourself having to accept a low offer on your property just to complete the sale, which is a frustrating and unsatisfactory way to finish a transaction. To give yourself a little more breathing room, consider moving into rented accommodation instead; although it’s expensive, and contributes to the cost of moving, it can be a great way to ease the stress of completing both a sale and a purchase simultaneously.

If you’re moving to a new city, renting a property there for a while also gives you the opportunity to experience the area at “ground level”, and make up your mind where you’d ideally like to live. You might discover the perfect property near a local park, or find that a certain area attracts loud crowds in the evening; there’s no substitute for local experience when it comes to picking a new home.

 

There are two downsides to renting. Firstly, there’s the cost; even if you’re only in a property for a few months it’s going to eat into the funds you have for buying a new home, and if you’re renting a family home this could be a considerable amount. Short-term lets are also often in high demand, and can attract a correspondingly higher price tag, so be sure that your budget can accommodate the extra expense. You’ll also have to go through the hassle of living without your belongings for a while, because everything you unpack you’ll have to pack again once you buy a place. This means that there’s likely to be a few months where it feels like you’re living out of suitcases – even if you aren’t literally, it’s not worth unpacking all of your possessions just to pack them again.

Selling Your Home in 2017

 

In this article we’ve looked at some of the basic preparations you’ll have to take in order to sell your home in 2017. In the next part of this series, we’ll consider what steps are necessary to prepare your property for viewings, and how to attract buyers to your house.