"There is no point being Honest"
Quote: Estate Agent, London
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How do estate agents value a property?
We had the most fascinating conversation with an estate agent today. We were talking about the values of property. I asked how the estate agent valued the property when someone wanted to look at selling their house or rental property. The estate agent's reply was interesting.
He advised that they didn't really value the property but went with whatever the owner thought, sometimes even adding a percentage of money to the figure quoted, upwards of course. The main aim, he said, was to get the properties onto their books, as without any houses on their books to sell they would not have an estate agency business.
He said it really didn't matter whether they were priced correctly or not because then once they had them on their books and signed up for a 12 week agreement they could start working on the clients, if they so wished. If they felt the clients were reasonable, able and willing to change the price, then they would put the property on at the price the person recommended initially (known as a vendor price), whilst explaining to them that the market conditions, etc, were good, not good or whatever, and unfortunately because of x, y or z their property was unlikely to get to this value, and they would generally re-educate them over the next 12 or so weeks to a price that they thought they could sell the properties at.
So, one way or another, the property does actually come onto their books at the right price eventually. He said although they do lose some properties in this process generally it is a win - win situation for both the client and the estate agent. It is an interesting thought also that in a rising market not valuing the property properly would have an increase in value using this method and in a downward market it would have the opposite affect.
Staying on the estate agents books
Having said all of that, the estate agent advised that he always tells the story about how surprised he was to get an offer on one particular property, as this encourages the people to stay on their books (and not move to the books of another estate agent) and gave an example where a property was on at £690,000 and they had an offer of £640,000, which eventually did not go ahead. They went back to the owner advising that they thought it was a one-off offer. The owner wanted to stick at the original price, but gradually over the next year they brought the price until, eventually, it went under the £500,000 stamp duty level. They then recommended taking the house off the market and carrying out a few minor cosmetic things and putting the house back on the market via an open day and sealed bids. Low and behold, they had two offers above the original asking price. The moral being that it only takes one person to offer a higher price for a property and it being worth it.
Do estate agents have morals?
Whilst we are talking about morals, the estate agents view was interesting, when I commented that, surely they are not valuing the property if they are just going at the price the owners say. He quite rightly corrected me and said that he doesn't have to value the property, the surveyors value the property and that all the estate agent has to do is, what is known as, a market appraisal (although many estate agents and the general public know it as valuing the property). This is the value around what he thinks a property will sell at. He then made the comment that there is no point being honest in relation to valuing, meaning that there is no point in telling the owner what he thought it was worth, because, as he said, one of the other big estate agents would come in to tell the owner that it was worth what he thought and they would lose the instruction, with it being taken on by a different estate agent. To be honest, we could actually see his point and understand the business rationale behind it.
However, it does pose the question, is the estate agent valuing or just telling you what he knows you want to hear?
You may be interested in our other articles about Estate Agents:
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