The price of a property plays a crucial role in the process of buying and selling a house.
Although it can be tricky to determine the right price for a home, its guide price can help navigate any buyer through the sea of numbers.
But, what is a guide price, and how and when is it used?
Let’s find out.
What Is a Guide Price?
A guide price in the UK is the lowest possible price the seller wants to receive for their property.
The guide price lets buyers know roughly how much they’re expected to bid and where they can begin negotiations (price-wise) when purchasing a property from a high street agent.
It also helps agents generate more interest in the property and trigger a bidding war.
Did you know: Guide prices can also be important when you want to flip a house.
When Are Guide Prices Given?
Guide prices are typical at auctions, but you’ll sometimes find them in property listings as well, usually when buying and selling a home from a high street agent.
In certain cases, a guide price on a property listing means that the property requires serious renovation work. It can be more common for fixer-uppers than new buildings.
How Are Guide Prices Given?
At auctions, the guide price can be a single figure within a 10% range of the reserve price, which is the minimum amount the seller is willing to accept for the property.
It can also be given as a minimum and maximum price range in which the reserve price falls.
How Is a Guide Price Set?
The guide price is essentially a combination of how much the seller wants for the property (at the minimum) and the agents’ valuation and study of the property values in the region based on the estate agent listings.
The seller can usually set a reserve price once the auctioneer determines the valuation of the property. In most cases, the reserve price reflects the seller’s motivation to sell the property and the amount they need to cover their mortgage and any other outstanding bills.
Once the seller settles on a reserve price, the auctioneer will set the guide price. When doing so, auctioneers follow the Advertising Standard Authority guidelines, which were updated in 2014, and dictate that:
- The guide price should either be a range or a single price figure that is 10% below the reserve price.
- The seller’s reserve price can’t be over 10% lower than the guide price.
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Do Guide Prices Only Relate to Auctions?
Although all auctioned properties have a guide price, not every property with a guide price is necessarily being auctioned.
Sometimes, estate agents set guide prices for listed properties to drum up interest in it. They advertise the property at a lower figure to boost bits and activity, which could lead to a quicker sale.
If you have any doubts as to whether or not a property guide price is going up for an auction or is to be sold through an estate agent, check its description. It usually includes information about the person that listed the property and whether the property is headed for auction.
Guide Price vs Asking Price in the UK
The guide and the asking price are similar but not quite the same.
Unlike the guide price, which suggests the possibility of movement on the vendor’s side, the asking price is the money sellers intend to receive once their property has been sold.
They might be able to sell it for more or less around that number, but they’re unlikely to move too far from it in either direction –which can easily be the case with the guide price.
Note that some sellers can set a higher asking price than others, depending on the circumstances. For example, if the market in a certain location is sluggish, a seller may reasonably ask for more money. Still, setting an asking price too high usually has the opposite effect.
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What Should You Offer When There’s a Guide Price?
Several factors come into play when making an offer for a property. How much you should (or can) offer depends on the situation.
For instance, if you are working with an estate agent rather than going through an auction house, you can make any offer you want.
Although you run the risk of offending the sellers by making an offer that is significantly below their asking price, they might accept the bid if they’re looking to sell quickly.
Most of the time, good deals sit around 10-15% off the initial number.
Related: What does under offer mean?
Keep in mind that when you’re bidding on a property at auction, the minimum amount you can offer is the set guide price. The guide price may drop if there is little interest or competition to prompt more bidding, but even then, the seller can refuse to sell if your bid does not reach or exceed their reserve price.
Should I Trust the Guide Price?
A guide price is not always based on the property’s current market value, so it’s best to look into the area where you’re trying to buy a home and compare prices.
Auction houses strive to stay within the bounds of a reasonable market value to ensure a sale success rate, but given that it’s an estimate of what the seller wants or needs to sell the property for, it’s worth taking a second look.
What If The Mortgage Valuation Differs From the Guide Price or the Offer Accepted?
If the value of the property is considered higher than what you’ve paid for it, then mortgage lenders will see that as a wise investment. However, if the mortgage lender believes that the property is worth less than the sale or even the guide price, you might need to renegotiate or challenge the lender’s valuation.
You may be interested in: Cost of house valuation
If you want to appeal a down-valuation successfully, you’ll need strong evidence on your side, including at least three similar and recent property sales. You can request help from both your estate agent and the seller.
Bottom Line
Guide prices play an important role in the selling and purchasing of property on the market.
They give buyers and sellers an idea of what a property is worth and help real estate agents spur interest in the property, and speed up the sale process. Guide prices aren’t always 100% accurate, but they provide a good starting point for negotiations.
Frequently Asked Questions And Their Answers
Can you offer the below guide price for the property?
That depends on the market, the location, and the seller’s motivation to sell the property. You could probably find a deal if you’re willing to buy in a less desirable area or find a seller that wants to sell quickly.
Why does an estate agent use a guide price?
Estate agents use guide prices to give buyers an indication of the price range they should expect to pay for a property. They also use them to advertise the property and generate interest in it, usually by setting a low guide price.
Is the guide price the starting price?
The guide price is usually the ‘starting bid’, but the auctioneer can lower it if there’s little interest in the property. The auctioneer may also start the bidding higher than necessary if they expect a lot of interest to save time.
What is a guide price at auction?
The meaning of guide price in property is the starting price and an indication of the property’s value at the time. This price is typically based on recent sales of similar properties in the same area.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.