What Does Guide Price Mean When Buying a House?
A guide price indicates the minimum amount that a seller wishes to receive for their property. This price is determined by professional valuations as well as considering the local property market.
In this guide, we’ll take you through everything you need to know about guide prices. This will allow you to make an offer on a guide price property with confidence.
When are Guide Prices Used?
Guide prices are usually applied to auction properties, but they can also be found on ordinary listings. The guide price usually dictates the minimum amount the seller wants to receive from the sale.
The guide price is determined by various factors including the market conditions and local area.
Is a Guide Price Just for Auctions?
A common misconception is that guide prices are only provided on auction properties. This is not the case as you can come across guide prices on ordinary listings as well.
When dealing with auction properties, the guide price will be what the auctioneer predicts the property will be sold for. This tends to be higher than the reserve price, which is taken into account when calculating the guide price.
On ordinary listings, sellers will use the guide price as an indication of what they want. Depending on what kind of guide price is provided, the seller may be open to negotiation.
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How Are They Set?
The guide price provided will typically be the minimum price point that the seller is willing to accept. They may have received an estate agent’s valuation as well as looking at similar properties. This determines what guide price is a suitable and realistic option.
When dealing with auction properties, the auctioneer will conduct a valuation and recommend a reserve price. The reserve price tends to be lower than market value to drum up interest.
Read more about Buying a House at Auction with a Mortgage
Guide Price vs Asking Price
When you view a property listing, you’ll either come across a guide price or an asking price. While these terms are sometimes used interchangeably, they are different.
Asking Price
An asking price is used when the seller has a specific figure in mind that they want to receive from the property sale. Typically, sellers who submit an asking price are not open to negotiating as much as those who submit a guide price. If there is a lot of demand, some buyers will offer over asking price.
Guide Price
A guide price refers to a price the seller provides as an indication of what they would like to receive. This means that there is more chance for negotiation. The seller might choose to list a guide price as a tactic for encouraging potential buyers.
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Can I Offer Under the Guide Price?
You can submit any offer you want. However, there is no guarantee that the seller will accept. Most buyers will offer below the guide price. However, if the seller has established that the guide pride should be exceeded, it is unlikely they will accept a lower offer.
The good thing about offering under the guide price is that it opens the door for negotiations. If you have a seller who is looking for offers in the region of the guide price, they will likely respond with a counteroffer.
How to Make an Offer on a Guide Price?
When making an offer on a house, there are various factors you need to consider. Not only will this ensure that you are prepared in terms of research, but it will also show the seller that you are an interested purchaser. Here is how you should make an offer on a guide price:
Type of Property
Firstly, make sure that the property is being sold through experienced estate agents rather than at auction. This will mean that you can make an offer at your own pace. Most buyers will offer around 10% under the asking price. This is known as a cheeky offer.
Type of Market
Another factor to consider is the type of market. If it is a buyer’s market, you will have the upper hand as there are more properties on the market than buyers. However, if it is a seller’s market, this means that there are many potential purchasers.
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Mortgage Valuation Lower than Guide Price
When you apply for a mortgage, the lender will conduct a mortgage valuation on the property. This determines how much the lender is willing to give you. If the market value of the property exceeds the mortgage valuation, there should be no issues. However, if the mortgage valuation dictates that the property is worth less than the asking price, you may struggle to find a mortgage lender.
In these instances, you can attempt to renegotiate the price or challenge the mortgage lender’s valuation.
Read more about What is a Mortgage Valuation?
What Does OIRO and OIEO Mean?
When looking at property listings, there are certain terms that you are likely to come across. The most common terms you will see are OIRO and OIEO. Here is what they mean:
Offers in the Region of - OIRO
This means that the seller is likely to negotiate around the guide price. This encourages more potential buyers and shows that they are willing to accept a lower sum.
Offers in Excess of - OIEO
This means that the guide price is the minimum amount the owner hopes to achieve. The seller will not accept less than the sale price.
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Finding a Conveyancer
Once you have had your offer accepted, you will need to hire a conveyancer. At Compare My Move, you can fill in our comparison form. We will connect you with up to 6 licensed conveyancers, allowing you to compare quotes and save money on your conveyancing fees.
