The vast majority of homeowners in this country do not have a clear idea of how much their property is worth, according to new research from Zoopla.

The study found that eight in ten (78%) homeowners polled did not know the true value of their home, with many respondents missing out on potential gains by undervaluing their properties.

The property portal says that longer-term property price rises over the past decade mean that most property owners (64%) still undervalue their home, with many having far more equity than they realised and missing out on potential gains.

The majority of homeowners who undervalued their property did so by between £10,000-£20,000 (15%) or £20,000-£30,000 (13%). However, more than a third (35%) undervalued their home by £100,000 or more and nearly a fifth (18%) did so by a huge quarter of a million pounds or more, leading to an unexpected windfall for those who went on to sell.

When questioned as to what increased their home’s value throughout their ownership, a third – 33% – highlighted that the area had become more desirable and the same proportion (33%) said that work they had completed on the property had added value. Furthermore, 29% said that demand had increased for the type of property they owned.

Those who have owned their home for 30 years or more are more likely to have an accurate idea of its value (31%), compared to the wider average of 22%. This group tends to be more aware of fluctuations in house prices, checking the value of their property an average of four times a year.

Zoopla says there is also a significant regional variation when it comes to homeowners undervaluing their homes, with 81% of those in the North East saying that their home was worth more than they expected. Scottish homeowners are also highly likely to undervalue their homes, with 78% doing so, followed by those in the South West at 74%.

At the other end of the scale, those in Northern Ireland are the least likely to undervalue their properties, perhaps taking advantage of the 7.2% year-on-year increase in house prices reported in Zoopla’s latest House Price Index. Homeowners in the East of England follow, with just 44 per cent undervaluing their homes.

Regional variations in those who undervalue their homes

Source: Zoopla

For others, their home’s valuation has left them less happy, with 13% finding that their estate agent’s valuation was less than they hoped, on average by a very significant £46,866.

When asked why they had overvalued their property, nearly half – 49% – said that they assumed property prices had increased more than they had. Meanwhile, a quarter – 25 – said work completed on the property did not  add as much value as expected and 13% highlighted that the type of property they owned was less in demand.

Receiving less money than expected in the sale of their homes impacted 70% of those who overvalued their property, most commonly leading to them having to stretch themselves financially to afford their next home (25%). In addition, 14% said they would have less money than expected for their retirement and 14% said they had to cut wider spending to account for the shortfall.

Amongst those whose home was worth less than they thought and went on to sell, three in ten (28%) said they had disagreements with the estate agent on the asking price and instead insisted the property was listed for what they believed it was worth.

Of them, just 16% achieved their asking price. Instead, 74% accepted a lower offer or reduced the asking price to make a sale. This meant that it took an average 60% longer for their home to go under offer compared to for those who undervalued their home (45 days vs 28 days). Over one in ten (11%) said they did not  get a sale at all.

Daniel Copley, consumer expert at Zoopla, commented: “For most people, homes are their most valuable asset and most homeowners will need the money in future, whether that is to fund their next home or to free up money for retirement. It’s therefore surprising to see how few have a clear idea of their property’s value and are missing out on potential gains when selling their homes. It’s even more surprising when you consider how easy it is to get a quick and accurate valuation online on websites such as Zoopla.

“While for most it is good news and their home is worth more than anticipated, a significant number have not realised that the house price boom has slowed down and they are overvaluing their property. This can lead to issues agreeing on an asking price with estate agents. But as the data shows, those who go against estate agents’ guidance rarely get what they hope for, highlighting that going with their guidance is the best way to get a reasonably quick offer and secure a sale.”