Estate Agents Overvaluing will Cost You Dearly

Are you gullible? I ask this as there is an increasingly growing trend amongst some estate agents to heavily overvalue property, in a poorly conceived logic of simply getting property onto their books at whatever cost.

One of the worst examples I have seen recently was a property with a guide price of over 30% more than what it should have been. Reading this you would think that this is ridiculous an you’d be right. However the seller fell into the trap.

How do agents overvalue?

So why are some agents doing this? This revolves around a combination of factors including a shortage of properties on the market currently, a tougher marketplace and agents increasingly under the cosh to hit their targets. Their thinking is to over-flatter the seller with a gargantuan guide price and often lock them into a lengthy contract or with a hefty withdrawal fee. The seller is now secured into a downward spiral of continually dropping the guide price until a balance is found in the market and they finally agree terms.

What does this mean for buyers and sellers?

However this dropping of a guide price has consequences and often sellers walk away with much less money and more stress, than if they had put their homes onto the market at the right level in the first place.

Buyers are incredibly well researched and they will not waste their time coming to view a property if they feel that the seller (and agent) are taking them for fools. The seller may say behind the scenes that they will negotiate down from their exorbitant price, however one can’t state this in any marketing materials. No viewings, means no discussions about offers. In addition, the property has usually built up a sizeable digital footprint, as all the property websites record and openly share information such as how long the property has been in the market, number of price reductions or even the number of previous agents. None of this is beneficial if you are trying to sell for best price.

It comes across that these estate agents are either out of their depth or more worryingly acting against client best interests. Alternatively they are thinking the vendor and buyers in the market can be duped. Either way you cut it, it’s not good. The seller then changes estate agent, the market sees this and then goes in for the kill.

If we use some reverse psychology for a moment and put the property onto the market for what it is actually worth or even at a tantalising price to entice buyers, then what will happen? You will have buyers queuing around the block, crossing over on the driveway with each other and having a punch-up in the front garden about who is going to secure the property. Which scenario would you rather have as a seller?

How should agents value a property?

The golden rule to remember is that agents are not valuing, they are marketing hence the term ‘market appraisal’. How can the agent get the right quality buyers across your threshold and achieve the best possible price is what it’s about. What the agent thinks the true value of a property is can somewhat be put to one side, as they’re not the only ones writing the cheque – the buying public are.

Sellers take note…

So… my advice to the unwitting sellers, just be careful what you wish for. If it sounds too good to be true, then it probably is. Whilst we would all love our homes to be worth millions, if the market doesn’t see it that way, then you are a sitting duck. To the rogue agents out there – please keep doing what you are doing, as you make me look good!