One of the key roles of a good estate agent is setting the correct marketed sale price for your property.
A good agent should know the local property market like the back of their hand. They should be aware of the market trends as well as the supply of available properties and the demand from potential purchasers.
Armed with that information, the agent will know the best way to market your home to achieve the maximum price.
Typically, a home owner may invite three or four agents to the property to conduct a market appraisal to discuss the value of the property, and although the temptation may be to opt for the highest price offered, this is not necessarily the best option.
Overvaluing for Market Share
Agents also know this and will often suggest a high price to ‘test the market’ with a view to winning the instruction and perhaps reducing the price down the line. However, this is not a good practise as we’ll discuss later. It is also done to increase ‘market share’ so that agents can show their ‘best market share’ pie chart to prospective vendors at market appraisals to impress them – what it actually shows is that they have lots of properties that they can’t sell!
To further tie you in, many agents will invariably sign you up to a 12 or 16 week contract so they can try and convince you to lower your price down during this period. We have no such contracts at Professional Properties!
If the property is offered for sale at too high a price for the market conditions, then it may not attract any interest and will remain on the market and be stuck with the “there must be something wrong with it“ label.
As around 90% of property searches are now started using the internet and, more specifically, property portals (Rightmove, Zoopla and On The Market), it is important to understand the behaviours of potential buyers.
Buyers often use property alerts to notify them of new properties coming on the market within their specific parameters – area, price, bedrooms etc. This means that potential buyers will see the majority of new listings in the first 48 – 72 hours of a property being added to a property portal. If a property is deemed overpriced, it will often be dismissed completely at this stage rather than ‘saved’ for a later day.
Back to the issue of price reductions. Price reductions on properties for sale are very common and there are a number of reasons why market prices are lowered. However, it is important to look at price reductions from a buyers perception who won’t necessarily know the reason for the reduction.
The more times a price is reduced, the greater chance of it attracting the “there must be something wrong with it“ label – rightly or wrongly, this is the general perception.
Undervaluing for a ‘Quick Sale’
The opposite of overvaluing to win the instruction is to undervalue the property to get a quick sale. Your individual circumstances may require a quick sale, however, that should not be at the expense of missing out on potentially thousands of pounds on an underpriced property.
Why would an agent do this? The main reason for this is workload versus fees. Whilst a seller might make an additional £10,000 on £240,000 rather than £230,000, at 1.25%, the agent will only receive an extra £125 on the fee!
By achieving a quick sale, the property is off the books and they can move on.
There are several fee strategies that agents use; the usual percentage of the actual selling price, a fixed fee irrespective of the final selling price or an enhanced fee for achieving higher than the selling price.
To summarise; When you are having a market appraisal, ask questions on how the agent has arrived at the price that he/she intends to market the property to ensure that it is accurate from day one to avoid the potential issues we have described above.
If you wish to discuss any aspect of selling your property, please contact our sales team on 01332 300130