What is a Guide Price?
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. You can come across guide prices when looking to purchase properties at auction or on the open market.
It’s important to note that a guide price is not necessarily the market value of the property. Some sellers will list a guide price well below market value to encourage a bidding war among buyers.
In this article, we’ll be taking you through everything you need to know about guide prices. Whether you are looking to purchase a property on the open market or at auction, you’ll be able to do so with confidence.
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.
What is a Guide Price at Auction?
Guide prices are most commonly seen on auction properties. 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. The reserve price is often seen as a starting bid and must be within 10% of the guide price, according to the Advertising Standards Authority.
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.
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 looked at similar properties. This determines what guide price is a suitable and realistic option.
You will need to hire an Auction Conveyancing Solicitor if you are successful in securing the property.
Read more about Buying a House at Auction with a Mortgage
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How are Guide Prices Used by Estate Agents?
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. Estate agents may also provide advice on setting a guide price. They may suggest a single figure or a range, depending on the market and property type. Sellers can utilise their estate agent’s expertise and knowledge of the area.
If it is a seller’s market, estate agents may recommend setting a low guide price. This is because it can cause a bidding war among buyers with the hopes that the winning bid will be above market value.
Guide prices set by estate agents are often used for properties in need of renovation. While properties in need of repair are popular at auction, some sellers don’t want to take the risk. By putting the property on the open market, they can control what offer they accept.
Read more about How to Choose an Estate Agent When Selling Your Property
Guide Price Jargon
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.
Price on Application - POA
High-end properties may have POA in lieu of an asking price. This provides an element of exclusivity and privacy if the owner is in the public eye.
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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.
Before making an offer on a house, make sure you consider the type of property and market. For example, if it is a seller’s market, offering below asking price is not as likely to be successful.
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 lender’s valuation dictates that the property is worth less than the asking price, you may struggle to secure a mortgage. This is known as a down-valuation. In these instances, you can attempt to renegotiate the price or challenge the mortgage lender’s valuation.
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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.
