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Are you confused by property terms such as Asking Prices, Market Values, Automated Valuation Model (AVM) prices, Transaction Averages (SOLD Prices), Valuation Lag and the various House Price Index figures?


Let’s try and clear things up here The Asking Price of a property is the


figure suggested by an estate agent that has visited your home to carry out a full market appraisal. An experienced agent, well established in your area, will have a pretty good idea of what might be achieved but cannot provide 100% certainty.


Before an agent will set an Asking Price, they must account for vendor expectation and thoroughly research recent, and, possibly, old transaction data. The purpose of the exercise is to release an initial asking price that will generate interest, rather than stifle it. Asking Prices should be based on sold prices and not on similar properties still on the market. When set correctly, an Asking price acts as bait that attracts buyers to the property.


There are other factors that can affect the Asking Price set by the agent such as a forced sale scenario. Here, the initial Asking Price may be 10% or more below an unforced sale value. This is guaranteed to bring in many more potential buyers. Similarly, unusual properties with no comparable figures can cause headaches for agents. Ultimately it can come down to the best guess by the agent. Only by releasing the property onto the market can interest and accuracy of this initial asking price be determined.


Asking Prices can also be influenced positively and negatively by factors external of the housing market such as geographic changes e.g. big company relocations (BBC opening in Salford positive effect), planning changes stimulating regeneration (positive) or environmental (construction of waste and recycling plants negative on the immediate area).


Portals regularly publish Average Asking Price figures, those published by Rightmove will offer better accuracy due to this portal having the largest proportion of listings available shown on the site (though, by no means, does it include every listing).


The Market Value of a property is always


determined by the level of market activity but ultimately rests with one thing: What a qualified and proceedable buyer is willing and able to pay. Market value is not set in


stone and is in constant flux affected by competing properties coming on to the market or being sold and taken off.We are witnessing a very strong market right now, fuelled by a lack of available stock. Basic supply and demand economics are in play with scarcity and 'fear of missing out' pushing up prices.


Robert May, founder of rummage4property (pictured right), talked to us about the confusion with the various terms relating to house prices. On market value, he told us; 'this is best determined by having, at the very least, two parties who are each in a proceedable position and one that mirrors the timeframe suiting the vendor'. 'Having two parties (or more), ensures that one bid is higher than the other'. The agent's job, therefore, is to create as much interest as possible, in turn, to generate as many viewings as possible and produce competing bidders.


According to Robert, where an agent has 50 applicants on their books that they deem would be interested in the property, they would seek to have the best ten parties view the home in order to produce two acceptable offers. 'The skill of the selling agent comes in to play when one of these bidders drops out and the third, fourth, etc most interested parties are encouraged to get involved with an offer', added Robert. Only by exhausting this process, will you achieve the best value for the property.


Quite often, Robert points out, 'where there is high interest in a property, the way to obtain the best price for the owner is to submit to the auction or sale by tender routes. These options offer surety to the vendor with fixed timescales.


Automated Valuation Models are


constructs of digital technology. You'll see them as 'Instant Valuation' on websites such as Zoopla. They use algorithms to best guess the estimated value, or value range, of your property but they cause so many headaches for estate agents. Experience has shown they are unreliable. They are regularly used as a hook mechanism to generate physical valuations which may, or most likely may not, corroborate with the random number generator figure or range.


SOLD Prices are recorded at the Land www.theadvisory.co.uk


Registry around three months after legal completion. This information is now freely available, previously a fee had to be paid to discover the value of each sale transaction. At best, Land Registry data on


sold prices should be seen as a rough guide or an indication but nothing more when it comes to setting your asking price.


Transaction Averages


are a


better guide to value than the Land Registry Index suggests Robert May who explains here: 'If you divide the cumulative value of completed transactions by the total number of sales that has taken place, you end up with a Transaction Price Average. This includes all types of property and has no regard to number of bedrooms for instance.'


'Only 36% of all property transactions are recorded by the Land Registry, why is this?' 'Well, unless a property has changed hands on a minimum of two occasions since 1995, a new entry will not be created. New build properties don't feature until a new record can be created, once it has sold for a second time'


'There is a higher volume of lower priced properties recorded and this massively skews the figures. This is the main reason why the regularly published Rightmove Average Asking Price is so different from the Average Sold Price (typically out by £100,000 or more).


Valuation Lag


A property whose sale price is recorded in December of the year probably completed during September. This would suggest that it became 'sale agreed' during the prior June and possibly came to market three months before that in March. The market appraisals by local agents may well have taken during January or February. Almost one whole year between the asking price being set and the resultant sale recorded at the Land Registry, this period of time is referred to as the Valuation Lag.


We are currently witnessing extensive delays in the conveyancing process mainly as a result of the 'hot market' produced by Stamp Duty holiday announcement. This means the effect of the Valuation Lag is felt even more and the figures recorded may not be such a reliable contributory factor when deciding your asking price.


House Price Indices


You will see monthly updates on house price movements published by the Halifax Bank and Nationwide Building Society.


• Robert May


Both indices are based on owner- occupier house purchase transactions involving a mortgage. This means the contribution made by Buy-to-let and cash purchases are not recorded and the effect on house price movement is not known.


The monthly figures measure the mix adjusted house price for houses across the UK. The average price recorded by these indices differs from that produced by the Land registry for reasons discussed above. For the February reporting period, the Nationwide published an average price of £231,061 compared to £251,697 from the Halifax bank. Compare these figures to the average asking price for February published by Rightmove of £318,580.


In 2016, the UK House Price Index (UK HPI) was launched as a collaboration between the Office for National Statistics (ONS) and HM Land Registry with data taken from the registers of Scotland and Northern Ireland. The latest figure available for the UK HPI average UK house price is for January 2021 - £249,309. According to the UK HPI, average UK house prices peaked in December 2020 at £250,448.


Robert May offers some advice when it comes to choosing the right estate agent to set your asking price and sell your home: 'There are agencies, typically online-only firms, who operate without the benefit of registered buyer database. These companies put properties on the portal and hope for the best. They do not have a list of potential interested parties and have no control over who is looking'.


theadvisory.co.uk


'A highly respected website, , has carried out


research which suggests that online-only agencies achieve, on average, 5% less than a traditional estate agent which is able to mine their database and produce competing bidders'. 'It is imperative to select the best agent likely to achieve the best price for you'.


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