Agents warned on overvaluing properties
Talking recently to a group of trainee estate agents, all new to his group, Tony Clarke, managing director of Rawson Properties, said that they must at all costs avoid the temptation to try to please property sellers - and possibly secure a mandate - by valuing the home too optimistically.
"This type of action invariably leads to a loss of reputation. Make it crystal clear to clients (i.e. sellers) that if they appoint an agent because he or she has valued the home higher than their rivals they will almost certainly be making a mistake - perhaps the biggest possible mistake that a home seller can make."
On most sales, said Clarke, two or three agents will usually give values fairly close to each other. If another agent then quotes higher the chances are either that he does not know how to value or is trying to secure the mandate by "telling the client what he would like to hear".
"Twenty years experience in property marketing," said Clarke, "have shown that the market and the banks dictate prices - and that buyers are usually acutely aware of comparative value. If an agent values out of line with others, my advice to clients is: do not trust him."
The tendency to overvalue, said Clarke, can be enhanced by the seller's suspicion that the realistic but low estimate may be suggested because the agent wants a quick sale. However, says Clarke, successful agents build their reputations on achieving good prices, not on quick, easy sales.
If the seller insists on a too-high price, Clarke told his agents it is probably wiser to walk away from the deal. If you do not you could spend six months failing to obtain and meet the list price - and then have to persuade the seller to reduce his price.
"In eight cases out of ten," said Clarke, "when this happens the agent will be accused of incompetence or lack of effort. Overpriced sellers very seldom admit their mistakes - and they may well find that their home has picked up a stigma as a result of being on the market for too long - buyers will suspect there is something wrong with it."
Sellers, said Clarke, should also be reminded that the agent who is prepared to discount his commission - sometimes quite radically - is usually a poor performer and a poor negotiator. This, he said, probably means the he lacks the skills and toughness to negotiate a fair price on the seller's home. Good agents never discount their fees," said Clarke.
Sellers, added Clarke, should also be made aware that agents operate in exceptionally tough conditions. They have no basic salary at all and none of the corporate perks like insurance, medical aid, holiday pay and a travel allowance.
"Every hour of their day is valuable to them and, if a seller wastes their time, he is doing them a huge disservice."
Asked in what way a seller or a buyer can do that, Clarke said that they may try to milk the agent for information without any thought of giving him a mandate.
This information, he added, may be used to launch a private sale.
"In these situations," said Clarke, "the DIY seller, in my experience, usually comes to grief: he finds that he cannot operate successfully without the agent's market knowledge, negotiating ability and contacts - nor can he usually mount an effective advertising campaign."
Rawson Properties Press Release