Why being over-ambitious with your asking price can net you less overall

The CEO of leading Scottish property portal ESPC shares why a discerning pricing strategy can improve the prospects of your property sale.

When it comes to selling your property, it’s incredibly common for sellers to already have a figure in mind that they’d like to market their home at, thanks to a wealth of sales data available online, alongside ubiquitous news headlines about the property market, or sometimes it’s taken from what the neighbours sold their place for a few months ago.

Of course, we all want to sell our properties for as much as we can, especially if we intend on using the funds to purchase an upgraded onward home, but I believe that, at times, especially as the amount of choice on the market increases, there’s cause for pricing your property more conservatively, in order to achieve better results overall.

Valuation is an imprecise science, and the old adage is certainly true – a property is only worth what someone is willing to pay for it. It’s important to somewhat disregard what you’ve seen in the news, or what you’ve heard from friends or neighbours about how much their home sold for; every property sale is truly unique, and circumstances, trends and climates change so quickly that comparing similar properties can sometimes not result in a true comparison. This is why it’s so important to trust the process and the opinion of your solicitor estate agent when it comes to setting the marketing price for your property.

Unrealistic expectations

Even Home Report valuations can fall foul of this, as they consider what similar properties in the area have sold for, when that data might be out of date or no longer relevant by the time you are ready to start the sales process.

The asking price of a property tends to be a few thousand pounds either side of its Home Report valuation, with sellers expecting to then achieve over and above the official valuation figure. But Home Report valuations in themselves can set unrealistic expectations. For instance, if you are selling your home in January, a Home Report surveyor may be looking at what houses sold for six months prior, in the peak summer season, to set your property’s value, therefore starting you off at an inflated, and potentially unattainable figure.

I’m in no way saying that you should then market your home for less than its value – but it’s essential to be realistic about the amount over the value that you should then be expecting to achieve. The higher the initial value, the less likely it is that buyers will be able to bid significantly above it. The asking price is there to lure buyers in, and it’s this that should be considered very carefully, to ensure maximum appeal in a highly competitive market.

There is a strong case, therefore, for setting the price correctly at the very beginning of the sales process – looking closely at the state of the market and average house prices, but also considering very carefully what your property is likely to achieve today, in the exact climate you’ll be marketing it in, and adjusting your expectations accordingly. As a seller, you have one chance to make a first impression, and in an increasingly competitive market, it’s imperative to get it right.

Above the valuation

ESPC sales data shows, unsurprisingly, that there’s a strong correlation between the amount of time a property is on the market for versus the percentage of its Home Report valuation it achieves at sale. There’s also data that indicates that the percentage of the valuation achieved in properties that are marketed at an appealing, appropriate price is higher, versus a property that’s perhaps been overegged and then must reduce its price to make it more competitive, or buyers feel no need to bid competitively to secure it, and feel more confident in making lower offers.

In 2023, we saw a huge increase in the number of properties coming to market at a fixed price, which we can assume to be a way of maximising appeal to unconfident buyers and securing a quicker sale, rather than looking for crazy bids over and above the valuation figure. While this has calmed down in 2024 so far, with the ‘offers over’ marketing method applied to the vast majority of properties for sale on espc.com, we can see how marketing your home at a sensible ‘offers over’ price helps sellers to achieve a higher net sale price overall.

Our data shows that when properties are marketed at a fixed price, the asking price is around 99% of the Home Report valuation, with sellers understandably reluctant to market their home for less than its value. Generally, fixed price properties then sell for around 98% of their Home Report valuation, meaning that buyers offer exactly the asking price, or sometimes slightly under. 54.3% of fixed prices homes sold last year achieved a figure less than their valuations, while just 11.5% achieved a sales price higher than valuation.

However, ‘offers over’ properties must work harder to be more appealing than those listed for a fixed price, as buyers come to these properties well aware of the risks of a bidding war ensuing – properties must stand up to the task. It’s far better to impress than underwhelm, and pricing competitively can certainly assist with that.

From our data, we can see that properties marketed using the ‘offers over’ model have a lower asking price compared to the valuation (averaging 96%) compared to fixed price homes, which then subsequently drives a sale price of around 108% of the property’s Home Report valuation. This suggests that pricing the properties lower than the Home Report valuation drives increased value overall, compared to the fixed price system, where properties tend to break even at best. 76% of properties sold in 2023 achieved above their Home Report valuation at sale.

Asking price also affects the time the property is on the market for. Unsurprisingly, properties that sold the fastest achieved the highest percentages of Home Report valuation, with buyers keen to snap up a perceived bargain and thus submit more competitive bids. Homes that sit on the market for longer then run the risk of cheeky lowball bids, or the sellers feeling pressured to officially reduce the price, although this is uncommon with properties sold by ESPC solicitor estate agents. A stagnant property also impacts your onward purchasing journey, with your own bids to buy less appealing if your current property hasn’t yet found a buyer.

Clearly, the best practice for selling your home (and achieving the best price) is to be modest with your asking price. It’s tempting to be ambitious and try to secure the highest possible price for your hard-earned property, but it’s important to resist the urge to go big – if you price cleverly and conservatively at the first opportunity, the evidence shows you might just end up with a higher sales figure at the end.