How do we value a unique home?

Here in the Lake District, valuing a property is far from straightforward. There are so many factors to take into account, like the views, the historical importance and the calibre of the road.

Of course, unique homes in any location can be tricky to value, but how do you place a monetary amount, for example, on a property with lake frontage on Windermere, when there are only perhaps a hundred or so properties that share that privilege?

We were asked to visit a home near Grasmere that was on the market with another agent, but the levels of interest were disappointing. Let’s call it The Manor. The challenge lay in the fact that it was already on the market, meaning that the price was ‘anchored’. Not only had it been fixed in the homeowner’s mind that this price was achievable, but also it had left a digital footprint of its price online, via the portals and other sites.

So what could we do to value the property accurately?

Existing price  – let’s look first at the marketed price. Originally valued at £800,000, the owner had chosen to try a higher price, at £850,000. After three months on the market however, she reluctantly agreed to a price reduction and the property was re-launched at £800,000. We were asked out when a further three months had elapsed, and only two viewings had been generated at the new lower price.

Conclusion: the price is still too high.

 

Comparables – these are properties that compare in some way to our client’s property.  As The Manor is unique, trying to find any comparable houses in the area is tricky, but we did find three we thought would at least represent competition for The Manor:

Fell View        £595,000

Loughrigg      £647,000

Ash Close       £750,000

Conclusion: The Manor is not competing well and looks expensive by comparison.

 

Sold Prices – looking at precedent, in other words, what has sold before and the relative sale prices, can give an indicator as to the possible sale value of The Manor. Bearing in mind that a surveyor will also use precedent when making their calculations to report to a lender, these sold prices carry considerable weight. Any property that seems to attempt to break the ‘ceiling’ price of a given area will be considered a risk.  Looking at those properties that have sold around The Manor, five relevant sales had gone through in the past twelve months:

Wordsworth  £1,100,000

Oak Beck        £897,000

Beech House  £695,000

Briarswood    £615,000

Silver Birches £366,500

Conclusion: The Manor is not breaking the price ceiling for the area, as two properties have sold for more than its current asking price over the last year.

 

Price per square foot – this is not a commonly used valuation tool, as it doesn’t take into account any amenities (like an amazing view) or disadvantages (like a public footpath through the garden). However, it can be a useful guide to see literally how much house a buyer would get for their money.

We take into account any attached building, even if it’s a garage, but exclude any detached building, unless it’s an additional dwelling (eg a holiday cottage in the grounds).

Property Asking price Total floor area Price per square foot
Clover Nook £340,000 511 £665
Beechmount £650,000 1352 £481
1 Windermere Road £895,000 2077 £431
Stonefield £330,000 770 £429
Rothay Close £599,950 1450 £414
The Manor £800,000 2031 £394
The Orchard £599,950 1632 £368
1 Fell Road £1,750,000 5420 £323
Longlands £545,000 1853 £294
Meadow Foot £1,995,000 6858 £291
High Coppice £1,100,000 3936 £279
Treetops £850,000 3103 £274
High Fell £720,000 2886 £249

Average price per square foot = £365

Conclusion: At £394 per square foot, The Old Manor House has a slightly higher than average price per square foot, although only by 7%.

 

Online Instant Valuation Tools – these are relatively new to the UK, but becoming increasingly popular with homeowners looking for a quick answer to their question, ‘how much is my home worth?’

We use an online valuation tool on our AshdownJones’ site here – valuation.ashdownjones.co.uk – but we find that if yours is a unique home, the results are very unpredictable. So whilst it may be fairly accurate when suggesting a price range for a three-bedroomed semi in a row of similar homes, for The Manor, the valuation tool produced a value that was far below the £800,000 asking price. There are around eight online valuation tools in the UK, with new sites springing up frequently, but none of the current ones gave a valuation anywhere close to The Manor’s value.

Conclusion: Using an online valuation tool for The Manor is not a valid source of information.

 

In summary, the original valuation may have been about right, but because the house went on the market at £50,000 over that valuation, interest from buyers was a trickle, rather than a flood. Compounding the situation is the fact that even though the original estate agent valued The Manor at £800,000, they were probably anticipating an eventual sale price at £750,000 or even less.

The existing price of £800,000 represents a price per square foot of just 7% above the average, but the range of comparable properties is small, so the results may not be entirely indicative of the true price per square foot in the area. With a larger sample size, greater accuracy is assured, and The Manor may fall at a different point in this table.

The fact that the asking price for The Manor is not breaking the price ceiling for the area is very positive, but it isn’t competing well with the current range of properties on the market, albeit that there is only a small selection of houses for sale nearby.

On the plus side, The Manor has been renovated to a very high specification and now offers a far superior accommodation to any of its competitors. This fact alone really sets The Manor apart and a discerning purchaser who falls in love with the house may well be prepared to pay a higher price to secure The Manor.

 

So how did the story end for The Manor?

Coincidentally, he day after we went to see The Manor, a previous viewer put forward an offer of £725,000. Whilst this initial offer was rejected, eventually a price was agreed at £740,000.  At 92.5% of asking price, this wasn’t a bad result, although it’s only actually 87% of the original marketed price. Most sellers expect to attain better than 95% of their asking price, and we believe this is usually achievable with the right marketing strategy.

Unfortunately for the homeowner, the offer subsequently fell through and we were asked to market The Manor. Watch this space for the happy ending to this story!

 

What to do next: try out our valuation tool here – valuation.ashdownjones.co.uk and please tell us what you think of the results. Unique homes often get erratic results, but every time we get feedback will help us make the tool more accurate.

Then drop us a line at team@ashdownjones.co.uk or call on 015394 88811.

Sam and Phil

Sam Ashdown and Phil Jones, AshdownJones