Sam's Word 1: Beware inflated expectations and valuations

Sam's Word

One of the most frustrating parts of an Estate Agents’ work is losing an instruction to market a property due to a competitor misleading the prospective vendor on price. As the market becomes more competitive, particularly with low levels of stock and activity, this practise is becoming more prevalent. Often the same old brands are responsible. Over valuing a property, or inflating the price, usually serves to have an adverse affect on the successful marketing, as opposed to achieving the strongest possible price. Furthermore, it can lead to inflation in the road where the property is situated, meaning prices are mixed, which can confuse property owners and buyers. It also leads to closer scrutiny from surveyors working on behalf of mortgage companies. This is likely to weaken actually achieved prices.

Buyers are savvy

In some cases with properties in sought after areas or those that have unique features, it is possible to fetch ‘what somebody is prepared to pay for it’, but those occasions are rare, particularly in a choked market. Most buyers now have access to land registry ‘sold prices’, plus a wealth of supplemental information from the web. To put it simply, buyers are more ‘savvy’. Valuations correctly provided should be based on actual sold prices within the proximity of a quarter to a half a mile in a built up location, taking into account any additional features; such as configuration, extensions and quality of specification. This is, incidentally, how surveyors reach their conclusions in reporting back to mortgage companies, so it’s likely the property will be down valued if ridiculously inflated anyway. This is half the reason why surveyors and Estate Agent opinions are so far apart and they’re two separate professions that often will not share the same view.

Reputable Estate Agents provide realistic valuations

Reputable agents that act professionally will prove the validity of the prices they estimate, but in some cases, no matter how much evidence is produced to a prospective vendor in support of a valuation, that prospective vendor is more than likely to vote instructions with their wallet first. They will instruct the company that tells them what they want to hear, that their property will achieve the high price they desire, rather than that something lower is in fact realistic to achieve a sale. The experienced, knowledgeable and honest Estate Agent is losing ground to competitors unfairly on this basis. Corporate Estate Agents are often blamed for encouraging vendors to sign up to sell properties at an unachievable price, due to targets set or commissions paid for achieving volume of instruction.

Waste of time

Usually once the instruction is made and the contract is signed for the agent promising a high and , there is no chance of getting the opportunity to sell the property as it should have done without lost time. The agent who has won the instruction can spend wasted viewings during the early process and weeks then even months later suggest a price reduction to achieve the sale. It happens week in and week out. The party that truly suffers is the vendor, who can experience delays that can seriously hamper their own progress. They could lose a dream property they are pursuing and it can cause miscalculation of finances, which can affect their personal financial position.

Time to share

The practise has been annoying throughout my career, which has compelled me to write this blog. Whilst recently the topic has come to mind due to working on a property we valued strongly at £1.1m. The actual value that might have been achieved with reasonable negotiation was around £995k, but £1.1m was still a distinct possibility. It was a fair valuation and we set it to win the instruction. Another agent quoted a far less realistic £1.4m, whilst slating our agency in the process for being independent and not having the specific tools to find the buyer in any event. Well, I don’t see any difference in our capacity to market the property, although they have 20+ branches throughout London. We use the same, if not more, number of Internet property search portals and it’s rare that multi-branch, inter-linked offices share applicants/buyers! We also happen to be very good at what we do and have excellent local knowledge and connections, and we know how to pitch a property to suitable potential buyers.

Mystified

Recently, I was left mystified when our Sales Manager received a telephone call from a vendor that he had visited two weeks before requesting a viewing. He presumed she was not on the market, but she was, with another agent. Enquiring as to why he was not instructed, he was told the vendor had received three valuations, but she had decided to go for the middle one. Ours was the highest, by an additional £5000.00. The vendor received an asking price offer on the second day of marketing and regretted instructing the middle agent.

Help yourself, before we help you

Ultimately there is enough information now available to give you a grasp on the value of a property on-line. Allow an hour to research it before inviting the (experienced, knowledgeable and honest) agents in, to ensure you maximise the price and save valuable time.

**New Office of Fair Trading guidelines are being introduced to govern the aggressive marketing tactics of Estate Agents, which will hopefully arrest misleading practises experienced by the general public. This is another step towards cleaning up our industry, which we hope will make for an altogether more pleasant experience when it comes to selling your home.

Sam Samuel, MNAEA CRLM,  March 2013