Selling extended house for less than purchase price: how will buyers react?

[Spotteddaisy]

Grateful for any advice please re house selling.
We are not strangers to house selling as have moved 5 times in the last 15 years, (but in the same area) We have always made a small profit on the house sales to put towards the new property.

In Autumn 2023 we moved to Dorset, 10 mins from the coast.
Detached 4 bedroom house with a plot of just under an acre. In a lovely village, good schools etc nearby. Previously lived in Hampshire.

We have extended the house by rejigging the layout and adding a big dining/family room downstairs. We've made other improvements too like insulation, adding solar panels etc.
Had a couple of estate agents out last year to value it who said to market at £850k. But we have been on the market since last June with no offers at all. We have now reduced the price by £100k and changed agents at the end of last year.

We have had a few more viewings with this agent but still no offers. Which obviously means it's the price. So we asked our agent what we can do as we're aware that properties still on the market after 9 months don't look good.

He said we should drop the price to £695k. We are not sure what to think about this (my DH is fuming)as we bought the house for more than that 2.5 years ago and have spent a substantial amount on the extension and improvements. Surely anyone who has done their homework and looked up house prices etc will see that we bought it for more then added an extension so to then list it for less just makes it look really dodgy? I don't think the market has decreased so much in less than 3 years that we would have to list our (bigger, improved) house for less than we bought it for?! I know that ultimately no one will care what we've spend on it but the fact that it's now bigger than it was must count for something?

We really aren't enjoying it here and now need to move to somewhere cheaper and to be back nearer to family. This has all been a massive costly mistake and I feel so guilty. The fact that we could end up in negative equity is just stressing me out even more. We've never made a loss on a house and ploughed all of our savings into this one. We were so full of hope when we moved here, but it's all just been awful.

As a potential buyer what would people think about a house being listed at less than it sold for not even 3 years ago, even after its been extended?

Yes immediately which I find surprising as many are relatively cramped accommodation with small gardens. Usually very high standard fittings though. But where I live is less than an hour on the train to London, it’s a historical cathedral city and on the South Downs so we get quite a few London folk moving out.

Makes sense, the builders there will be like flies on a very large and lucrative jobbie.

Thank you everyone for your feedback.
I started this thread a fair few months ago and we potentially have 1 person interested in the house but I'm still extremely fed up with it all so I'm turning off notifications for now.

For what it's worth we have added/amended photos, changed agents, enquired with developers,planted 20 trees in the garden, shown/not shown pictures of the new builds/solar panels/ cemetery depending on various opinions and advice and dropped our price by over £150k. So not really sure what else we can do. There are no nasty spirits or energies here either (I've had all that checked out too!)
We've had over 25 viewings so it's getting interest.
But for now I'm trying to put it out of my mind and concentrate on other things as this has been a year of stressing and I can't continue like that.

Re Garage planning
It will be out of date now and as you have extended it could impact further permissions

They'd have to apply again anyway as it’s out of date

Good luck.