Needs updating? For me this would probably mean there were artexed ceilings, no LED lighting, old fashioned fitted wardrobes ( and when those go the carpets need replacing too) an eighties style bathroom and/or kitchen. Our house was built in the 80's and one by one we are tackling all those things before we put it on the market in a few years time as the cost of doing them in one go is a lot of money for a purchaser to find. A young family (who would be most likely to want to purchase our house) would not want a house decorated in a style more suited to their grandparents. All in all our new kitchen cost £25k and the bathrooms and ensuites have to be another £7k or so each, plus a range of wardrobes to be replaced. We are doing this because we want to live in the house in a more modernised state but also hope that if we sell while the style is still contemporary we will find a buyer more easily.
We had our house valued a little while ago by a local agent with a god reputation. He brought with him the details for the last 5 houses that were broadly similar that had been sold in this area, we went through factors like details of location, decorative state etc. and he then offered a range between which he would suggest marketing our house.It was more or less what we had imagined it would be. I think agents need to be able to offer some evidence to back up the figures they suggest.
As someone said above a house is only worth what someone will pay for it, and one of the factors in whether to offer near the asking price or considerably less is the amount of work the purchaser will want to do to get it into a state that they find acceptable to live in.