What is a guide price?

Many of us have probably come across the wealth of property-related programmes broadcast on various television channels - Location, Location, Location, which looks at available properties for a particular budget, Escape to the Country, which aims to find a suitable property that's on or under the participants' budget, and Homes Under the Hammer, where prospective developers find a property at auction to fix up and hopefully sell for a profit.

While these programmes are entertaining, with their primary objective being to buy a property at the cheapest price possible or to sell one at the highest, there are almost certainly some terms used that might be causing confusion when it comes to the point of actually buying or selling a property.

For instance, what does the term guide price mean? How does that differ from a reserve price? What differences are there between those and the asking price? And is there a difference between guide price of and only offers over?

The first thing to understand is that they are all very different in their intent.

But, to ensure full clarity, we will take you through the terms so that you know what you're looking at when buying or selling a property through traditional high street or online agents, or through the property auction market.

When the price of a property is published with the term guide price beside the amount, this will either be by a specific figure or expressed as a price range, which determines the minimum figure at which the property-seller (or the estate agent on their behalf) would be prepared to sell the property.

When buying through an estate agent (either on the high street or online) the term guide price is the figure (or less frequently the price range) that is published against the property's details.

When it comes to an auction, the guide price confirms the level of the reserve price,which has been determined by the seller. In other words, those buyers attending an auction will know where to pitch their bids, since there is no point bidding lower than the guide price because it won't be accepted.

For an auction, as set by the Advertising Standards Authority (ASA), the guide price will appear in the auction publication either as a single figure (that is set within 10% of the reserve price) or a higher and lower bound within which the reserve price is placed. To protect the seller further, the ASA also makes provision for a strict boundary for the guide price, where it is no more than 10% below the seller's reserve price.

For those familiar with auctions (through regularly attending one or via the many television programmes devoted to such sales), it is clear that the reserve price is the level below which the bids will not be accepted. Or, put another way, it is the minimum that the seller will accept to sell the property to a bidder.

Because it is unusual for the auctioneer to publish the reserve price prior to an auction, the preference is to provide a guide price, and this is usually expressed as a range of prices.

The asking price is the precise amount that the seller wants to receive from any buyer. This can be used to set the guide price (and reserve price if the property is heading to auction). Of course, the figure is not necessarily rigidly set, because it might be open to negotiation.

The term offers over is really a subset of the guide price. But while the guide price provides greater room for movement for the seller below the stated price or range, with a sale that states only offers over an amount will be accepted, the expectation is therefore that the lower limit is completely rigid.

While it might seem a little overwhelming when you first take a step into the world of buying and selling a property, this set of definitions should give you some helpful guidance to get you on the way.

When you are ready to get into the housing market, you should be aware that prices have been set with a combination of what the seller expects to receive for the home, the knowledge of the local area and similar properties, and a clear understanding of the local market and associated prices.

Therefore, you should take some relief from the published guide price that has been set by the estate agent or auctioneer. This will give you some direction as to what would be a reasonable offer or bid for you to make. That notwithstanding, if you consider it likely that a lower offer might be accepted, it's always worth approaching the seller, although don't be surprised if your offer is rejected.

When you approach a lender with a request to take out a mortgage loan to assist in your purchase, they will almost certainly want a mortgage valuation report against the property, to ensure that, in the event of issues arising, they will be able to recoup their financial outlay.

The problem comes when the valuation by the lender is less than the amount that you've agreed (either through the standard route or via auction), which may result in them turning you down for the loan.

Therefore, you need to be very clear on what amount you can bid or offer to purchase your desired property. 

And you might want to consider ordering your own Property Valuation to provide you with evidence to support your position that you can then present to the mortgage lender for reconsideration.

If you need guidance on the conveyancing for buying your next home, even if it's through an auction, you'll need the best, high-quality service at a competitive price.

That's where you can rely on the experts at Homeward Legal! 

Call  to get your conveyancing quote started, or to discuss your concerns with your plans to purchase.