Pricing of property

chirp

How does the pricing of a property for sale work?

1) A big house on a big plot but not so well maintained and in need of some refurbishment (like new carpets and a new kitchen). Not so close to shops.

2) A smaller house on a slightly smaller plot but very well maintained and needing no refurbishment and also very close to shops (convenient location).

The distance between both houses is just less than a mile. But the smaller one is priced £20,000 more than the bigger one. How is this justified, it doesn't seem right. Ultimately, does the plot size determine the price of a house or the built up area and interior beauty and maintenance of the house?

InMyDreams

So buy the bigger house if that's what you think. People can ask for or offer what they like. Ultimately the ONLY 'justification' is what the right person is prepared to pay. That's what the house will eventually sell for. (With minor adjusting, possibly, but not necessarily, depending on buyer and seller circumstances such as how desperate to sell or how proceedable the buyer.)

harrup

chirp wrote: »

How does the pricing of a property for sale work?

1) A big house on a big plot but not so well maintained and in need of some refurbishment (like new carpets and a new kitchen). Not so close to shops.

2) A smaller house on a slightly smaller plot but very well maintained and needing no refurbishment and also very close to shops (convenient location).

The distance between both houses is just less than a mile. But the smaller one is priced £20,000 more than the bigger one. How is this justified, it doesn't seem right. Ultimately, does the plot size determine the price of a house or the built up area and interior beauty and maintenance of the house?

There is no set formula as in price per sq.m.

Houses do have a target demographic, though. FTB, moving-up, down-sizing, retirement, etc. The greater the concentration of potential buyers in a given demographic, the higher its price.

Taking your 2 examples above: house 1 ( the bigger one with more land) wouldn't be feasible for FTB, may fall just outside the catchment area for a particular school parents want to send their kids to, doesn't appeal to people down-sizing ( too big & too labour intensive as too much land).

Plus, given the uncertainty of the current housing market, and considering its refurbishment costs - which may well extend way above & beyond new carpets and a kitchen - the remaining pool of PB's might be very small.

Any house has essentially 2 prices - first, the sale price which is then followed by the "finished price"- i.e. how much it will cost on top of the sale price to make the house desirable/ feasible/ livable for the buyer. The larger the discrepancy between sale price and finished price, the fewer the people who will be interested in it and the lower the AP.

With the larger house with more land, the sale price might only be the beginning of a river of subsequent costs until it reaches it's finished cost. If HP were expensive but labour cost for refurbishment was cheap - not an issue. But since HP are high AND labour costs ( plumbers, builders, electricians,, etc) are also high, it will fall beyond the price bracket of the vast majority looking for a house in a certain price range.

ReadingTim

chirp wrote: »

How does the pricing of a property for sale work?

Arguably, it doesn't; but I'll be charitable and suggest it's an art rather than a science...

Better_Days

harrup wrote: »

There is no set formula as in price per sq.m.

Any house has essentially 2 prices - first, the sale price which is then followed by the "finished price"- i.e. how much it will cost on top of the sale price to make the house desirable/ feasible/ livable for the buyer. The larger the discrepancy between sale price and finished price, the fewer the people who will be interested in it and the lower the AP.

Very good way of putting it.

This is why it is a good idea to as far as possible narrow the gap between the AP and the 'finished price' by presenting a neutrally decorated & furnished property that buyers can imagine themselves just moving into without doing anything.