Price banding and guide prices. What do they mean?
Q. Some agents these days seem to be using guide prices, or price ranges, or “offers in excess of” in their marketing. What are the advantages, if any?
A. The notion that there is a one-size-fits-all approach to property pricing is something of a fallacy. Much depends on the state of the market, the type of property and other factors – and it is part of the individual estate agent’s skill to judge those factors and advise accordingly.
For example, you usually find the “guide price” approach – or its close relative, the “offers in the region of” idea – being employed at the upper end of the market. That’s where you tend to find the one–offs, the very individual properties, which are notoriously difficult to value in the usual way because of the lack of realistic comparables. It’s a lot more difficult to judge market demand for a unique property in a unique setting, than it is for a nice bog-standard 3-bed semi – so, in such cases, agents understandably have to hedge their bets.
Conversely, in the more mainstream sectors of the market, neither of the above approaches are very popular, since they can simply give the impression that the agent doesn’t know what he’s doing!
As for “offers in excess,” some agents claim that in certain markets this approach can help generate higher levels of interest. One of its key advantages, so the argument goes, is that it tends to attract genuinely committed buyers – people who may already have found a buyer for their own property, for instance, and who are now looking at the market very seriously.
Personally, however, I’m not convinced. In my experience, this approach can be very off-putting – 1) because it clearly suggests that prospective buyers are likely to find themselves in a Dutch auction, and 2) because it just looks like greed.
Then there is price banding – and here too, I personally think they are a bit pointless. After all, human nature being what it is, why bother advertising a property at “£350,000-£400,000,” when no-one wants to pay more than the lower price!
No, when all’s said and done, my own feeling is that it’s almost always better to go to market with a clear asking price. Then you know where you stand – and so do potential purchasers. The trick, of course, is to get that asking price right – and that’s where a good agent comes in!
Paul Bonett F.N.A.E.A. M.A.R.L.A.