Hi,
We put our house on market in March 07 a bit like your situation to build another house. We said we'd give it a year and we did - dropped E100,000. You will get lots of advice from people on the forum but if your house is in an estate - you can judge what price to go for but other than that every house, location are different. With us it wasn't worth while going to build in the end as we were given over inflated prices by 4 different auctioneers that were not achievable. Lots of people came and loved the house, gardens etc but were not able to back up bids etc. It was a stressful time but it wasn't to be for us and I am glad now. If you keep your price competitive but don't forget building is only the start of your house, you have to finish it and landscape in time. Best of luck - I do hope it works out.
Angela59