In this series we’ll call Industry Insights, we’re publishing detailed articles intended to empower and help sellers navigate the home moving process in the best way possible.
To kick off we will discuss some of the tricks and tactics estate agents use that are very much NOT in your interest as a seller.
We do just want to say that whilst we are all aware of the reputation the industry has, not all estate agents are bad, and this isn’t a series of articles in estate agent bashing, as some are truly brilliant, but sadly sometimes even the nice guys can be dragged into these games to ensure their business survives.
Trying to separate the good from the bad and navigate this opaque industry is a difficult task, especially during the emotional home moving process, so in this series of articles we’ll expose the most common tricks and tactics used by agents to empower you and help you make the best decision for you and your family.
We offer some actionable points for you too, so you stand the very best chance of coming out winning!
Overvaluing your home to win your business.
Unfortunately, inviting an estate agent into your home for a “valuation” rarely results in you getting an actual accurate valuation, instead it’s a sales pitch to win your business and rarely at this stage are agents honest about where the value of your home really sits.
If you are seduced into marketing your home for more than it is actually worth this can prove quite costly and be frustrating for many reasons, here are just a few we’ve seen over the years…
You will sell for less money had you launched your home on to the market at a realistic price in the first place.
You will be heartbroken when you lose that amazing house you wanted to buy but you couldn’t complete your chain to secure it
You will have wasted time and emotion in looking for houses to buy that you ultimately couldn’t afford, as you based your budget on a fictitious price for your sale.
You may miss out on crucial deadlines, like school admissions etc if the process takes longer than it needed to.
Now, before we dive into this, it’s worth highlighting that there can be times where it’s hard to give an accurate value (especially if you have a unique home), as there are a lot of variables within the market, many or some of which your agent may not fully understand or be aware of, however, when you are consulting a “professional” and if they are charging you a fee or commission it is reasonable for you to expect them to have the required skill, knowledge & care to fully understand all the variables that can affect your result and they should be able to give you a relatively small range in where your value lies at your initial valuation meeting.
There are many estate agents reducing the prices of 30-40% of the properties they list, which proves that there is a strategy at play, in using the tactic of overvaluing to win your business and thus extract a commission from you.
Perhaps even more shocking is the fact that even the better performing agents, on average, only actually sell 50% of the homes they list, which is another topic we will discuss at length in the future.
Now quite understandably we all want to have made a huge profit when selling our homes, and this is where agents will use the oldest seduction technique in the book to sign you up – overvaluing, so it’s important to be savvy and aware that this technique will be used by many estate agents.
Firstly, it’s crucial to understand there is a correlation between the length of time your home is on the market and the price you achieve, with the more time you spend on the market correlating to a much lower sale price.
When you first launch onto the market you have a brilliant opportunity, as your home is fresh, it’s top of the listings and everyone is being alerted to it, so your exposure is at it’s peak! The risk here is in wasting this opportunity and this mass exposure if you price too high, as this will lead to your home then becoming over-exposed.
The click through rate (the number of clicks that your ad receives in relation to the number of times your ad is shown) of your advert will always diminish over the first few days (as there is only a finite amount of buyers looking in your area, once they have seen your advert the number of views your advert gets will naturally diminish), so this initial period is crucial in capturing the right buyers attention. If this opportunity is played correctly you will get multiple buyers bidding over your home, thus achieving you a mega price, but also giving you a choice of buyer which is also key, (as your buyers position and attitude / motivation should be considered as important as their offer but is often overlooked) played poorly and you will over-expose your home and alienate buyers some of which will buy other homes or some who will wait for you to reduce your price.
Now, it’s important to consider how our buyers think and behave, so if we put ourselves in a buyers shoes, it isn’t hard to get to grips with prices quickly, mainly as we all have the internet, and rarely would we offer on the first properties we look at, so we will quickly get to grips with prices and the market. It’s also worth remembering buyers are busy and people tend not to waste their time by looking at homes which are priced too high, especially as most agents have a trend to reduce the price of their properties as we have seen.
Another thing to be considerate of is – if you’ve been on the market for more than a few weeks is you lose your exclusiveness and buyers aren’t then compelled to offer you strong money for your home. Also, if there are clearly no competing buyers for your home at this stage in time, what is encouraging your buyer to offer a strong price? Not much! Buyers want what others want and buying a home that had strong demand leaves them safe in the knowledge they bought well and their investment will grow.
Another strong factor to consider is during your first days of marketing “fear of loss” amongst buyers is a big thing, this fear is a strong motivator for a buyer to secure your home at a strong price, but only happens over the first few days of marketing as once you’ve been on the market for a few weeks it is clear there are no competing buyers, and no one wanted your home, this gives anyone who is actually interested the upper hand in a negotiation and thus weakens your position.
An intelligent agent should be discussing a marketing strategy about how to obtain you the very best price (a topic we want to do justice so will be covered on it’s own in the future) and putting it on at an unrealistic price isn’t going to achieve you a higher price (or give you wiggle room in negotiations), instead it’s going to alienate the right buyers at the right budget and leave you sitting on the market over-exposing your home.
Be mindful that when getting valuations almost all agents play this game of overvaluing and those that are truly honest with you may be discounted from your shortlist for not being ambitious enough or you may feel they misunderstood the market for your home.
Get three or more exact comparable properties from the agents that have ideally exchanged contracts (and are not just under offer) to prove the valuation the agent is suggesting and push them to utilise a sliding scale fee to demonstrate their confidence in their valuation or ask them for a zero week contract. An agent who is confident in their valuation, advice and strategy will be happy to work on a sliding scale fee that penalises them if they do not get the price they promise, also if they’re happy to not tie you into a 12 week contract then that is another demonstration of their confidence and should be looked at favourably.
In summary, don’t squander the opportunity you get when you first launch on the market and resist the temptation to believe the agents on the valuations you get without testing them for comparable evidence and pushing them on their terms, as you may end up being a sitting duck selling for far less than you would have if you priced it accurately in the first place.
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