6 Jul 2011
Despite on-going publicity on the subject and regular warning articles in the property press, there are agents who will deliberately inflate their estimate of what a property is worth so as to secure a mandate. Often in the process they will eliminate reputable competition who have estimated realistically.
This sort of behaviour can be countered by sellers and buyers doing more "homework" on the consequences of overpricing for all involved. They should tap into their agent's area knowledge by asking questions and going to show days at homes for sale. It should by now be standard practice for a person considering buying a home to find out ? what the current owner paid for it; ? what date this transaction took place; ? what price similar properties in the area are selling for; and ? what time is being taken to sell such properties." This information can be accessed through the Deeds Office and through PropStats (for a small fee in the latter case). It should be backed up and complemented by direct enquiries to other agents in the area. Any agents in the running for the mandate should be asked to justify their estimate by quoting the price of other recent sales on similar properties and giving other relevant information. There is no room for emotion or sentiment here. The agent should be able to show scientifically exactly how he arrived at his estimate. Many sellers will go to the market with an initial price that they have knowingly put at 10 to 15% above the market value. This then gives them a chance to test the market and see what bids they can attract. If, however, within a "reasonable period" (which can differ from area to area) the property is not attracting interest, they should either remove it from the market or drop the price. Those who do not face reality, who continue to hang on to a high price, will all too often lose out seriously. Any property that "sticks" (i.e. is on the market for over six months) without finding a buyer will pick up a stigma. Even those who are attracted to it will ask, "What have I missed here that makes other buyers so wary?" In that situation they will either walk away or they will seriously discount their offer. Those clients who do insist on a scientific comparative market analysis will find that some agents just cannot produce this in an acceptable form. Often they see themselves as sales people, not statisticians, and dislike being asked for this information. Such agents should, however, accept that in today's market savvy clients will not deal with an agent who relies solely on his golden voice and his sales skill - they want a professional who knows his business - and, especially when, as I have indicated, they have made use of today's "tools" to examine the market for themselves. *Lanice Steward is the MD of Anne Porter Knight Frank.