Overvaluing scam?

Mike Cole

When a paper of the reputation of The Times makes their Saturday headline, “Estate Agents Dupe Sellers”, it’s reasonable to expect this to be a revelation based on quality journalism and not a populist headline grabbing for attention.

Sadly my view is it was the latter. That’s not to say the practise of an agent overvaluing to win business doesn’t go on, nor that it isn’t used as a way to help secure a higher fee, it’s just that it’s been going on for 30 years and its so transparently obvious when it’s being done that the homeowner almost has to be complicit in the process for it to work.

That may sound harsh, but really…

There is now so much evidence easily attained to guide owners as to what their house is realistically worth, that any skill in knowing that figure (valuing) has been hugely diminished in the last ten years. Any homeowner surely has a reasonable fix on where the value stands (accepting more unusual properties are trickier). They will then, in almost all cases, get at least 2 valuations, most probably 3. If a higher figure is given by one, without accompanying evidence, surely they’d start to smell a rat?

I appreciate being told a property is worth more than you thought, more than all the evidence suggests, more than the other agents told you, is alluring. However, if an owner ignores the evidence and agrees to pay a higher fee to the agent promising a pot of gold at the end of the rainbow – and then sign a contract with them that ties them to that agent for an unhealthy period of time – there has to be some responsibility taken by the homeowner too. 

An agent with a long tie in period surely highlights their lack of confidence in actually achieving that price?

It’s a practise that was used to establish Foxtons in the 80s and worked for them in a quickly rising market where the inflated price they gave at the time of the valuation, 2 or 3 months later may not look so inflated. If they kept the property on their books, they were on for huge fees. This was also a time when information about house price sale values was nowhere near as freely available, so the homeowner was much less likely to be confident on where the value lay. If The Times had written an article then, it would have had real substance. In my view, this weekend’s article was about 25 years too late.

There is an easy solution to this problem – if it is indeed a problem…

If homeowners never agree to give the agent more than 4 weeks Sole Agency, then the agent couldn’t afford to inflate a price because they were under pressure to deliver viewings and results from the start. If they couldn’t inflate the price, then they wouldn’t have this carrot with which to lure higher fees from the client. Problem solved!

For agents who think 4 weeks is too short to deliver, my experience is that if you’re doing a good job, creating interest, feeding back, updating marketing etc... then your clients stick with you. If you underperform or the relationship isn’t working out, then rather than play the ‘you’re tied in so tough’ card, it’s better for both sides for you to release them and move on without the grief.

My advice to homeowners; rather than haggle for fees and reduce the motivation for the agent, haggle for tie in periods and make sure the agent is under pressure to do what they promised. And be free to move on if they don’t.

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