If you’re on the hunt for a new home, or you’re planning on selling yours, you’ll likely have come across the term ‘guide price’. Let’s take a look at what this means, when it’s used, and how the process works for buyers and sellers.
Related: Guide to selling your home
Guide prices explained
The ‘guide price’ is the figure that the seller hopes to sell their home for on the open market. While they’re often used in property auctions and for high-value houses, guide prices could also be a result of the seller disagreeing with their valuation.
Find out what happens at a professional valuation
Guide prices vs. asking prices
A guide price typically sets a minimum for what the seller is willing to accept, thus opening the price up to negotiation.
Conversely, an asking price is the exact figure that the seller is asking for. However, depending on the current market conditions, the asking price may be lowered or raised at a later date.
Related: What does SSTC (Sold Subject to Contract) actually mean?
Offers over
You might also come across the term ‘offers over’, which is different to guide prices and asking prices. A property asking for offers over means that the seller will only consider offers over a certain price. While a guide price provides flexibility, offers over sets a minimum expectation.
What is the purpose of a guide price?
Guide prices are sometimes used to entice potential buyers to make an offer. They are more of a ‘ballpark’ figure which should be set by an experienced agent. If the guide price is set too high, the property may not attract a buyer. If it’s set too low, the property could sell for far less than it is worth.
Related: Seven good reasons not to overprice your home
Guide prices and mortgage valuations
The person buying your house needs to be sure that they are not overpaying, or their lender may not approve their mortgage application. Therefore, a mortgage valuation will be carried out on behalf of their lender to assess how much the property is worth and how much the buyer can borrow.
If the mortgage lender feels that the property is worth less than the agreed sale price or the guide price, then your buyer may need to renegotiate to a lower offer or challenge the lender’s valuation if they still wish to proceed with the sale.
It should be noted that challenging a lender’s valuation requires presenting some strong evidence. An example of this might be using three recent and comparable property sales from the local area as evidence.
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How is a guide price decided?
Guide prices are set in accordance with the property’s current market value, while also taking into account things like the wider economy and the local housing market climate.
The agent and the seller will need to weigh all these factors up as well as the minimum price that the seller is willing to accept.
Thinking of moving this year? Contact your local Whitegates branch for expert advice and guidance.
