It's A Number Game
Let me start with a story. About 4 years ago a member of my staff went out to value a home in the town centre. A couple of days after the valuation he called the homeowner and asked what had been decided. “Well” said the rather angry homeowner “I won’t be giving it to you, you got the price wrong”. My colleague was bemused, “have you sold the house already then?” he asked. “Well no” said the homeowner. “So at the moment we don’t know if I was right or wrong then!” On this occasion the house was sold for what my colleague valued it for , some 3 months later unfortunately not by us , you don’t always get rewarded for being right !
A homeowner can often be forgiven for getting very confused about what is going on the property market. One minute there is a slight improvement then there is a slight decline, there is light at the end of the tunnel then the world is going bankrupt! Unfortunately Estate Agents don’t always help themselves. Most agents know that you don’t always get the prize for being right but you might get a prize for telling someone something that you think they might want to hear. This “bidding “ for property – where the agent who gives the highest valuation gets to try and sell the house – is wrong on several levels and is a throw back to market that existed before the credit crunch of late summer 2007. In those days you could value a house for more than you thought it was actually worth and hope that the market would “ catch you up” a lot of the time you got away with it sometimes you didn’t .
My statement may seem self evident after all what is the point of raising someone’s expectations only to dash them? The answer is because that is exactly what most of the home selling public want the Estate Agent to do! A home is the biggest investment most ordinary people ever make so it is natural that they would like to think that they have made a good buy at the time they bought and that any improvements they have made have only enhanced the property’s value. For most of the past 30 years they would have been right to make such an assumption and there will be a time when such an assumption will be right again but for now it is one of the contributory factors to a slow property market. Bear with me while I try to explain. The property market is the ultimate free market because there is no monopoly of buyers or sellers therefore any one property is only worth what a buyer is willing to pay for it. The price can be wrong in either direction, if a house goes on the market and there are 2 or 3 buyers fighting over it in a matter of days then the price has been pitched too low. If a house sits there for 3 months with hardly any viewings then the reverse must be true. It is not an exact science. With me so far?
If we look at the market in 2011 the statistics point to very little movement in the realised value of property –the actual price the property was sold for- nor has there been much movement in the volume of property sold and yet all the statistics show that the number of property coming to the market has rocketed. So clearly there is a desire for people to move and yet only 50% of those properties that come to the market actually end up selling the rest go through the marketing cycle only to be removed at the end. From the estate agents point of view this is an incredible waste of resources. As most mainstream agents work on a no sale no fee basis they will know that 50 % of their marketing costs are wasted. From the homeowners point of view there is the stress of keeping a home spotless – no mean feat with young children- plus the angst of raising your hopes that you are about to move only to gradually be worn down by the lack of interest.
Many agents play the numbers game , the more houses you have on the market more chance you will sell some, the homeowner is a willing accomplice , after all what have they got to lose it is the agent spending the money ? The problem is that it is gives people a false sense of value. Sellers spend lots of time looking at what price houses like theirs are being marketed for on property portals and estate agents websites and assume that because the house on for x it is worth x. But just because the house was on £ 495,000 doesn’t mean that is what it sold for. In these straightened times buyers are far more wily, they check websites like net houseprice.com to check the actual sale price of a property and in a fairly flat market it is very difficult to persuade a buyer that a house has gone up when all the hard evidence suggests it has not. The moral of this story is, just because the agent says it doesn’t make it so! Ask them to justify their opinion with hard evidence of properties they have sold, you are far more likely to end up moving if you do!
We, at Michael Hardy are always delighted be asked to value properties and we won’t just tell you what you want to hear!”
