When it comes to marketing a property and attracting buyers, the price you value the property at is key. If you want to sell your home privately with an online estate agent then this must be realised. Preparing your home immaculately and having the best photos, floor plans, description and exposure on all the major portals is obviously also a pre requisite for a successful sale. However, if the property is over priced, then it is less likely to attract serious interest from potential buyers. Alternatively, an under valued home will be likely to attract considerable interest from buyers and likely lead to a swift sale, but will clearly not extract the maximum value out of the property.
When it comes to the valuation process, the default option for vendors in the UK is to obtain a number of valuations from local high street estate agents. The vendor will then choose the agent who seems the most professional, as well as the one who believes they can achieve the highest selling price. The majority of vendors still lack the confidence to value their own home and find a degree of reassurance in using an agent to do this.
It’s important to know though that an estate agent’s valuation may not always give an accurate reflection of a property’s true value, as they have their own motives when conducting the valuation. This is why the Sell My Home team are so keen to encourage you to value your own property using our guide (it's not that hard!).
One shouldn’t overlook the fact that high street estate agents work towards tightly defined targets every month. They operate under immense pressure to win new business, especially when there is little stock on the market. Therefore each new instruction is highly sought after, and the agent has an obligation to do everything within their power to impress a potential new client wishing to sell.
This can be achieved through a number of methods. Being professional, polite and knowledgeable are ways in which the more successful agents will prosper. But for all of them, the valuation is a vital stage where they can gain an advantage over their agent competitors.
Winning the instruction at all costs
The common problem with the high street agent business model (payment on completion) is the tendency to over value properties (“I must win the instruction). Any vendor who is told that their home is worth more than they expected is likely to react favorably.
And herein lies the problem. The vendor will have signed a fixed term contract with the agent, believing they can sell at the agreed asking price. When the property is achieving little interest in the first few weeks, the agent will inevitably suggest that the asking price is reduced, and the vendor will usually duly oblige, often disappointed that they won’t achieve the price they had been assured of after all. All of sudden, expectations are lowered.
And why does this bother the agent?
For the agent, reducing the asking price and ultimately selling a property for 10% less than they originally valued the property at has little effect on them. Their typical commission is usually 1.5% of the sales price, so on a property valued originally at £300k but which ultimately sells for £270k, they are only losing out on £450. A hit they would happily take in order to win the instruction in the first place.
So the moral of the story is this. High street estate agents aren’t all bad. They just have targets to meet like any business, and the consequence is;
Their motives don’t always align to that of the vendor
Propertysnake.co.uk is a useful website that details every property that has been reduced in price. Even in a bull market like today, there are still an alarming price reductions being made.
This video interview from the authors of the best selling book ‘Freakonomics’, provides a useful insight into the not so hidden motives that estate agents have; http://goo.gl/iszAU