Property pricing is an emotive topic. We know, we deal with it every day!
Our homes tend to be our most prized asset and it’s natural to think that our choice of house, location and all the improvements we’ve made are our best decisions. The challenge is, when the time comes to get your property valued ready for the market, each estate agent your approach is likely to give you four different valuations.
So how do you make sense of what the ‘experts’ think?
Since the dawn of estate agents, it been the practice of some to inflate the figures to win the instruction. This makes a certain amount of sense. If you have four different figures, rarely do we think that the lowest one is right! Why wouldn’t you choose the estate agent that thinks they can get you the most? Well, as the saying goes, “Beware the bearers of false gifts & their broken promises.”
It’s easy to think that the agent wouldn’t do this as it makes little commercial sense to have a register of over-priced property as it will not sell - and traditional agents still work on a no sale no fee approach. But, there are a couple of very easy reasons why this tactic could work.
Firstly, if the agent consistently over values, they’ll keep getting instructions. If they keep getting instructions, putting boards up and filling their website with properties, then they must be the market leader, right? If they’re an online only estate agent, taking an upfront fee and not a commission, this is the perfect strategy. Their reward is for the instruction and not the sale. In fact, selling your property creates extra paperwork and distracts from getting more instructions!
Surely this doesn’t happen, you’re thinking, it doesn’t make sense and isn’t sustainable. You’re right and it isn’t. Hence there is a second part to the over valuing approach - the price reduction. You’ll be told that they’ve given it their best shot and it’s time to adjust the price (always downwards) so that they can either go back to any previous interest or make the price reduction significant enough to appeal to a fresh batch of buyers.
Don’t get us wrong. Price reductions can and do help. Certainly if there is a change in situation which means realigning the price, but to start dropping once, even a second time or more just because it was too high in the first place is a hard marketing place to recover from.
Property is like any commodity, it has a shelf life and the point at which it is new and fresh to the market is always going to be its best time to sell. The more time spent on the market it’s as though your home becomes in some way ‘tainted’.
The other aspect of this is, that if you’ve done your some sums on achieving this higher figure, then you’re going to feel a sense of loss if you have to reduce or take a lower than expected offer. Whilst most of us are sensible enough to know that the money was never actually really ours, that feeling of being compromised doesn’t fade.
So, what can be done to make sure that the valuation for your property is the right one?
1. The key answer to this is to make sure you understand how the agent justifies their figure. Almost all valuations undertaken are based on comparable sales. In a rising market it is valid to seek slightly more than an equivalent property which has just sold. However, few properties are identical in all regards (there could be a number of differing factors not least size, condition, aspect, location, etc. and the skill of the valuer is to select recent and relevant transactions and then analyse and adjust the price at which these sold to more closely match the property being valued.
Ask the estate agent for details of the properties on which they are basing their assessment and to explain why they are relevant to yours. In this way you will more clearly establish the logic and sense (if such is evident) as to how the valuation for your property is justified
2. Don’t be too taken in by the phrase “We have lots of applicants on our books who would buy your property.” Unless you live in a brand new home, how can they possibly know without the applicant viewing and being given the asking price, whether or not they would buy it. And what about the wider marketing campaign to make sure you are attracting all potential buyers?
3. Decide which agent you feel you’ll actually get along with. It’s going to be a few months from start to finish so you’ve got to be sure you can work with them.