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"A house is only worth what someone will pay for it". True though this is, people base what they are prepared to pay for a property on two key factors:
- How much similar properties in the same area have been sold for.
- How much buyers can actually afford.
How much similar properties in the area sell for can be found out. Keep your eyes on the property sections of the local press, and see what the asking prices for - remember houses sell for an average of 5% less than the advertised price. If there are few similar properties in the surrounding area, you may need to do more research. Check out your post code at upmystreet.com.
The second factor is more important when considering buy-to-let buyers. They will consider how much rental income the property can get and then multiply by the percentage they wish to make on their capital. For instance, So, if they require a return of 9% (per year) on a property that can get £1,000 per month:
100 * £1,000 * 12 = £133,333
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There is another important factor in pricing your house - how much do you need to sell it for. If you are about to buy another property, you need to work out what you can afford. This gives you a minimum price that you can sell for (this is very useful to know when price pressures are applied later). Remember to keep these numbers secret when negotiating and to keep them updated with any developments along the way (additional costs, changes in circumstances etc.).
So do some preliminary homework:
Get your new mortgage agreed in principle. Find out if there are any arrangement or administration fees.
Calculate your main costs:
You then know how much you can afford for your new home and how much you can negotiate.
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