THE EFFECTS OF OVER-VALUING PROPERTY

Are Agents over-valuing helping towards the slow down?

Valuing properties aggressively to gain instructions is a well-known tactic used by many estate agents and is a hotly debated topic within the industry. Many agents believe that if they aim high with a property price estimate they will both win the instruction and hopefully gain a higher price for the vendor without impacting how long it takes to sell. What divides many estate agents is whether this tactic really works.

One thing is agreed among agents; it can be a risky tactic; a quick trawl through Twitter will reveal frustrated vendors who have realised that the original valuation they accepted for was too high. Vendors dislike having to drop their price to gain a sale because they feel it is potential money ‘lost’ even if, in reality, the property is merely finding its real market value.

On the other hand, it is widely accepted that pitching a property at the upper limits of its market value to a prospective vendor works. Most homeowners, faced with three valuations, will pick the agent offering the highest one. Other factors come into play, of course, including an agent’s personality and the agency’s reputation, as well as their ability to demonstrate local sales success.

But does taking valuations to the upper limit to gain an instruction actually work for a vendor in the long run?

Zoopla’s listings data suggests that over-valuing a property can increase the average time to sell a house by between one and 38 days across all regions of the UK. Looking at the figures for each city, the greatest impact of over-valuing can be seen in London and the South.

Last year fairly priced homes in the capital took 19 days on average sell compared to 71 days for homes that had been over-valued – approximately three times longer. This pattern is repeated in many other cities including Birmingham, Nottingham, Bristol, Manchester, Liverpool, Leeds, Sheffield, Leicester and Norwich.

Over-valuing can also affect final sales price. In four key regions, listing at a more realistic asking price achieved a higher sale price than a property that had been substantially over-valued.

“There is a huge temptation for estate agents to over-value in order to get an instruction, but both the Zoopla data and my long experience working in the housing market shows that, although it may be a short-term win for the agent, it creates ill will among vendors by increasing time to sell. All too often, this forces vendors to drop their asking price in the long run,” says property professional Phil Spencer.