Property: You want how much?

Your home may be your castle, but don't put too high a price on its charms.

Plenty of sellers regret turning down first offers, but few can be kicking themselves as hard as the owners of one Chelsea house. It has just sold for pounds 50,000 less than a price offered two years earlier, which was something of a miscalculation given the current, buoyant market.

All the buyer knew was that an offer at the full asking price was rejected, and he was left wondering who was pulling the strings. The agents, Druce Residential, found themselves caught between instructions from the owners abroad and frustrated buyers. Philip Woolf, from Druce's South Kensington office in central London, says he knows the house as well as his own and describes it as a bit like the Tardis: small on the outside, 3,000 sq ft inside.

Over a two-year period, 247 people viewed it. "It went on the market at pounds 750,000 and after a few months we had an offer at that price. The owners thought the market had moved and wanted pounds 100,000 more. We got an offer of pounds 850,000, but the owners faxed back and said they now wanted pounds 1m. Needless to say, nothing happened until the vendors suddenly said they needed to sell quickly and would be guided on price. It sold for around pounds 800,000."

While the event might seem to offer some comfort to all those people who find themselves outbid at every turn, it bears out what estate agents have been saying, that buyers are prepared to pay a premium but they want a ceiling on their expenditure.

The high opinion sellers tend to have of their own homes, coupled with local gossip about prices is, however, far less likely to be the reason for settling on an inflated price than the valuation of agents, according to Woolf. "Vendors often assume that an agent who makes a high valuation believes the property is really worth that, when in fact they are just eager to be given the instruction."

If a property has been hanging around for close on six months, it is a sign of a pricing problem. If the same agents have had more than a few places on their books for a while, or have advertised them numerous times, your suspicions are well founded. Margie Coldrey fell for this marketing ploy and still regrets it: "It took me a year to sell a flat I could have sold in a matter of weeks. After I put my Kensington flat on the market with John D Wood for pounds 220,000, friends told me it was too low a figure. I had my doubts, but turned down the offer of pounds 215,000 and took the advice of other agents who priced it at pounds 260,000. No one was interested and I sold it only a few months ago -- at pounds 220,000."

She says she knew that her flat had certain drawbacks which presumably did not apply to others of a similar size and location. A difference of 10 per cent could be explained by any number of reasons, such as an exceptionally large sitting room, but any more than that should set alarm bells ringing.

For the frustrated purchasers, getting to the truth of who exactly is holding out for a higher price is difficult. The seller is the client and the agent is bound to get the best possible price. A problem that seems increasingly to be popping up in the buyers' path is the status of the asking price. A couple who have been househunting in Hampshire recently have twice had their immediate offers of the full asking price rejected. They are now wondering whether to revise their search altogether, since there is little point in looking for property priced at the maximum they can afford. They figure if they look at places pounds 50,000 less, they might be in with a chance.

Giles Lawton of John D Wood's Oxford office would advise them to look in the 20 per cent price band above and below. That would include vendors who are chancing their arm and properties that need work. "At least half the properties we are selling at present are going for more through competition. It is important that all buyers feel they get a fair chance."

He said that if a vendor wanted to market a property for more than the firm had advised, providing it was within reason, they would give it a go. "If a property was clearly overpriced I might suggest that the buyer made an offer. They should not write off a house that's been around for a while." The first flush of serious offers are often the best a vendor can hope for.

There are risks in waiting for the market to catch up with expectations. Giles Lawton says it is not unknown for a property eventually to sell for less than the original figure - something the Chelsea owners have discovered for themselves.