Choosing The Right Agent - Why Taking The Highest Valuation Could Prove Costly

Valuing your property - Trinity Sales Wakefield

You hear it all the time. Sellers typically get three agents round to value their property. They each value the property based on the facts open to them and present this to the seller. Surely they should all come up with the same figure or at least very similar figures? If only it were true...

Unfortunately not all agents value a property based on hard facts, like recent sold price comparables of similar properties. What's more, not all sellers want to hear their property valued based on sold price comparables. Sellers want to hear the estate agent tell them the value they have in their head. Which of course may be different to what the market is actually willing to pay at that moment in time.

This leaves agents in a difficult position. Do they:

a) Value a property based on hard facts and risk offending a potential client if they think it's worth more? Or

b) Play safe and give a slightly optimistic valuation which they may or may not actually achieve but which is more likely to please the client?

This causes an ethical dilemma for the agent. Either they value a property based on their own research and local knowledge and potentially risk losing the instruction, or they value the property with rose tinted glasses and risk having a property that doesn't sell and an unhappy client.

Estate agents have a very powerful tool in their armoury to protect them against the risk of no sale. The sole agency contract. The sole agency contract is used as the standard method of client instruction in the industry. It gives an agent a set period of time where they can sell a property without risk of losing a client to a rival or the client backing out and selling without them. Generally this is 12 weeks (At Trinity it's 6 weeks) but I have seen contracts which tie in customers for 6 months plus!!!

Because of this agents have developed a system that wins instructions and generally still gets the sales. And it works like this:

  • Estate agents know they stand more chance of winning seller instructions by telling clients what they want to hear, i.e. a sales valuation which is on the optimistic side.
  • Agents know that it's very difficult for a seller to resist going with a higher valuation. It's rational for people to want to go with the agent who seems to be promising them the most money. Many agents therefore give optimistic valuations.
  • Once the seller signs the agent's sole agency agreement they have typically a 12 week period to sell the client's house and get their fee before the contract expires.
  • For the first 8 weeks there is not much pressure on the agent to deliver viewings and offers for the seller as they still have 4 weeks of safety left to agree a sale.
  • If a sale has not been agreed with 4 weeks to go, you'll likely start receiving contact from your agent suggesting that you lower the price. Agents know after 8 weeks of limited interest you're more likely to say yes as you are more desperate than you were 8 weeks prior.
  • Come the end of the minimum period the agent has either;
    Not delivered a sale, but has had the benefit of another property on their books and another for sale board for 12 weeks
    Delivered a sale typically significantly lower than their initial valuation and they still get their fee.

You can start to see why estate agents have such a bad reputation.

Now, we're not saying all agents do this, or that other agents never achieve full asking price offers for their clients in the first few weeks of marketing. And in fact, the above model is arguably perfectly suitable for sellers who are looking to upsize/downsize and are in no immediate need to sell, as it gives the seller the best chance to maximise the sale price and they haven't lost out.

However, for those persons who NEED TO SELL, using this model can be catastrophic. Why:

  1. It takes the average agent 14 weeks to agree a sale using this system (Rightmove).
    Not to mention the time to actually complete which still needs to be added.
  2. You could actually receive less than you should. Buyers now can see, using sites like Zoopla, exactly when a property was first listed, when it was dropped in price and by how much. All this is ammunition to buyers which makes them more inclined to put even lower offers in. Why? Because you're looking more and more desperate to sell.
  3. For properties which are empty or the client is paying an unaffordably high mortgage, the client suffers needless added financial hardship.

    We don't agree that this is right or justified. That's why at Trinity we have developed a system of selling property that removes these problems. To learn how it works please call and arrange your own free seller appraisal today.

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Published on 09 October 2014

Source Dominic Woodward

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