Determining the value of your property
If you are considering selling your property, the first and most important thing to establish is the asking price. By determining the market value of your property, you can make an informed decision: is this the right time for you to sell or not?
You will have to be realistic: determining the true market value is not the same as deciding what you would like your property to sell for. It means finding out what buyers are currently prepared to offer for a property similar to yours. If you demand too high a price for your property, you will fail to reach the market place and prospective buyers will not even bother to view it. Set your price on the low side and you might achieve a fast sale, but you will have to consider if you are giving away too large a part of your assets.
Market Research
Determining the right asking price for your property should be the result of thorough market research.
Research the market for similar properties in your own area, either through estate agents’ windows, local property supplements or property websites and find the answers to the following questions:
- Is the market flooded or are similar properties in your area difficult to come by?
- What are other owners with similar properties asking?
- Is your property unique in any way and will that allow you to ask a higher price?
Research actual prices fetched by such properties. Most owners will build in a margin for negotiation into their asking price and depending on the market conditions, they may fetch more or less than they asked for. Finding out the actual sales price of a property is trickier than finding out the asking price, but you can find out a lot by simply asking around:
- Approach your community administrator, they are often aware of the transactions that have taken place and are a good source of information;
- Approach the estate agents in your area to find out if any of them have successfully negotiated a sale in your community;
- Approach your neighbours directly to find out if they have received any offers on their property or how much they have bought/sold for. If you are not comfortable discussing this with your neighbours, you could obtain an extract from the Property Register that will show you the Deed Value of the property your neighbour has bought/sold.
Determine the market conditions. Selling in either a Buyer’s or Seller’s market has a significant impact on the sales price that you can realistically achieve.
- Buyer’s Market: A market in which supply exceeds demand, in other words: a market in which there are too many properties on the market for the number of buyers. As a result, homes take longer to sell and prices are likely to fall. In these market conditions, as properties become more competitive, buyers soon realise that their interest is at a premium. Buyers are more likely to increase their demands and likewise sellers are equally more willing to negotiate.
- Seller’s Market: A market in which demand exceeds supply, in other words: a market in which there are fewer homes for sale than there are buyers. These market conditions favour the seller over the buyer: prices tend to rise – and sometimes escalate - and homes start to sell more quickly, a property may even have interested buyers before it is formally listed, leaving little bargaining opportunities for the buyer. A sellers' market can cover entire cities or even countries, but could also be limited to a neighbourhood or even a single street.
Ultimately, the market determines the asking price of your property. Your personal circumstances may dictate whether or not selling your property at this asking price is a viable option for you, but it is not advisable to price your home based on considerations that do not affect its market value. How much you need to purchase your next home; how much you paid when you bought the property; how much you spent on improvements; the value of a similar home in a different community and your personal attachment to your home are not factors that have an impact on the market value of your house.
Professional Advice
Estate agents can of course be an extremely valuable source of market information, but keep in mind that the asking price they specify is merely an estimate and not an official valuation. A reputable, experienced agent will be well aware of the market conditions that determine a realistic asking price and their estimate could be as reliable as a valuation. Unfortunately, an estate agent could also be more driven by sales objectives and maximising profits, pricing your property with their own benefit in mind as a result. Never accept an agent's estimate at face value and insist that your agent share their market knowledge and the market variables affecting your property with you.
Should you be unconvinced about the estimate you receive from your local estate agent, you could have your property officially valued. In Spain, the banks employ an independent professional to carry out an official valuation before they decide whether or not to grant a mortgage on a property. If you are unsure of how to value your property you could have a similar valuation done privately. A valuation will cost in the region of € 300 - € 500, although this can vary depending on your property.
Negotiation Margin
The sales price of your property will not necessarily be the same as your asking price. Especially in times of a buyer’s market, it is considered that a seller should avoid setting the asking price at the lowest acceptable offer. As buyers are more likely to increase their demands and sellers are expected to be more willing to negotiate in these market conditions, it would be prudent to build a reasonable margin for negotiation into the asking price. In general, most buyers want to be perceived as winning in a negotiation to purchase, regardless of the initial asking price.
Setting the asking price
Once you have investigated the market, sought professional advice and considered your negotiation margin as recommended above, you are ready to set an asking price for your property. Regardless of what your agent may tell you, you are the person that will ultimately decide the asking price and whether you are asking as much as you possibly can, without the property appearing overpriced in the market place.
If you are not satisfied with the asking price that the current market would suggest, you should consider postponing the sale. You could also set a higher price and hope that your property’s market value will eventually increase towards your expectations. Bear in mind that this last strategy is likely to incur a lot less interest from both agents and clients, resulting in fewer showings of the property and a sometimes frustrating waiting game.
Determining the value of your property
Preparing your property for viewings
Receiving and negotiating an offer