October 6, 2022
The real estate market is already competitive and complicated, but things become even more confusing when you’re faced with all the terms and expressions used in the world of property.
One such term is ‘guide price,’ so to make things easier for you, we’ll explain what it means, when and where it’s used, and why it’s important for buyers and sellers alike. Keep reading!
The Guide Price Meaning Explained
As a prospective homebuyer, you’ve probably come across the expression ‘guide price’ and wondered what it actually represents. In the following sections, you can find everything there is to know on the topic, so keep on reading to understand the meaning of guide price once and for all.
What Is a Guide Price?
The guide price represents the seller’s minimum expectation for the sale of their property. Although the property sale may end with a higher or lower offer, the guide price is a good indication of the price range in which the seller is willing to negotiate.
In some cases, the guide price is expressed as a single figure, but you’re sometimes given a guide price range (e.g. £450,000–£500,000). However, remember this is just a guide, and you can offer an amount you believe reflects the property’s worth—estate agents are obliged to present all offers to the seller, even those lower than the guide price.
How Is the Guide Price Determined?
Your knowledge of what does guide price mean would be incomplete without understanding how this price is determined. In short, the estate agent considers the state of the market and current property values, plus the minimum price the vendor wants to achieve for their property. Based on this, estate agents set the guide price on property listings.
When Is the Guide Price Used?
The term ‘guide price’ is most commonly seen at auctions, although it can sometimes be seen on regular property listings. However, if you see a regular property listed with a guide price, keep in mind these properties are in need of repairs in most cases, and the guide price will be quite low.
But what is guide price at auctions? Well, if used at an auction, the guide price is set by the auction house and it usually serves as a starting bid that doesn’t always match the final sale price.
What Is the Reserve Price?
If you’ve seen the term guide price at an auction, it’s likely you’ve encountered the term ‘reserve price’ as well. This signifies the minimum amount for which the property can be sold, which is agreed upon between the auctioneer and the vendor.
The reserve price isn’t disclosed at the auction, but the auctioneer isn’t allowed to accept any bids lower than the reserve price. But what is the meaning of guide price in such situations?
Well, after the reserve price has been agreed on, the auctioneer can also determine the guide price. However, the guide price needs to be within 10% of the reserve price, i.e. not more than 10% lower than the reserve price.
Why Is the Guide Price Important?
Now that we’ve defined the term guide price, you may still wonder what is its significance. Well, it’s important because it gives prospective buyers an indication of where they can start the negotiation. So, it’s definitely one of the essential questions to ask when buying a house.
When considering the guide price and what to offer, keep in mind agents sometimes list properties with a guide price to attract interest and ultimately drive the price up. At times, it’s difficult to determine an exact price for a property, and this is where the guide price becomes essential. To sum up, a guide price is a good starting point, but it’s not set in stone—properties often sell for more or less than the guide price.
|DID YOU KNOW? Between 2% and 2.5% of residential properties in the UK are sold at auction. The numbers from 2020 show that out of the 651,987 homes sold in England and Wales, 15,009 were sold at auction.|
|Guide price is a seller’s minimum expected price for the sale of their property.|
|The guide price is most commonly used at auctions, although it can also be seen on regular property listings.|
|Guide prices are negotiable, and they’re either expressed as a single figure or in a guide price range.|
|The reserve price is the lowest amount a property can be sold for at an auction.|
Can I Offer Less than the Guide Price?
Saving for a house should allow you to buy the home of your dreams, but looking at the guide price, you may realise you can’t afford to buy the property at the listed price. However, before you give up, you can get a mortgage in principle to see how much you’re eligible to borrow and calculate how much you can offer for the property based on your loan eligibility and on your savings.
Another thing to keep in mind is that the guide price meaning is less important in an unstable real estate market, so make sure to do your research—look at competing property prices and consult an estate agent.
How Much Below Guide Price Should I Offer?
If you’re interested in a property sold at auction, you can’t offer less than the guide price, unless the auctioneer lowers the starting bid or the property doesn’t sell at the auction.
However, if you’re interested in a property sold on the open market, you can offer less than the guide price. As a general rule of thumb, you can offer 5% less than the guide price, and in some cases, vendors may accept offers that are as much as 10% lower than the guide price.
So, what does guide price mean when buying a house if no one is willing to meet it? Well, if no one is willing to pay the amount listed as a guide price, the vendor will have to settle for less—remember, a property is worth as much as prospective buyers are willing to pay for it!
|DID YOU KNOW? Buying a property at an auction is riskier than buying one on the open market, as you need to provide a 10% deposit for your bids. If you have the winning bid, you’ll have to complete the purchase, or you’ll lose the 10% deposit and risk a lawsuit.|
Guide Price vs Asking Price
Buying a house in London, or anywhere else in the UK for that matter, can turn into a long and complicated process. Arguably, one of the most common sources of confusion when buying a property is the difference between the guide price and the asking price.
Well, although these two concepts are quite similar, there’s one significant difference—the asking price is fixed and non-negotiable, while the guide price is negotiable and can fluctuate.
Another difference is that the guide price is more subjective, while the asking price is determined based on more objective factors such as the location and age of the property, as well as supply and demand.
The important thing to remember about guide price vs asking price on the UK property market is that you shouldn’t enter negotiation if the property is listed with an asking price—the seller won’t budge!
|DID YOU KNOW? Sellers are responsible for paying certain costs of a house sale, which include estate agent fees, the EPC cost, capital gains tax, moving costs, and certain other expenses that may arise during the sales process.|
Although guide price is a real estate term often used at auctions, it can sometimes cause some confusion.
Hopefully, after reading through this guide, you understand what the guide price is and why and when it’s used in real estate, and you know the difference between asking price vs guide price.
If bidding at an auction, you can’t offer below the guide price. However, if you’re after a property on the open market, you’re free to offer 5% to 10% less than the guide price.
The guide price is often used as a rough estimate, and even offers below that amount can be accepted. On the other hand, ‘offers over’ signifies the vendor will accept only offers above the specified amount.
As the name suggests, the guide price is merely a guide—you can count its accuracy as somewhere in the 10% range, plus or minus.
Usually, the guide price meaning is exploited by estate agents to attract interest in their property listings and entice more offers from prospective buyers.
If you don’t want to meet the guide price, you can offer 10% less and try your luck with 5% less if that offer isn’t accepted. The good news is you can always start with less and make a better offer if the first one is rejected.