Estate agents battle against a bad reputation at the best of times but some in the profession really don’t help themselves, their clients and, ultimately, the housing market by inflated market appraisals in order to secure the initial instruction.
While the practice exists across the country, some quick calculations on a sample of homes in the top slice of the market in our area show that the difference between the advertised guide price versus what the property actually sold for, sees reductions ranging from 11% to a staggering 32% in one case, with most pitched around the 20% mark.
This differential signifies bad practice by some in a profession where the best of us are trying to fulfil our obligation to give expert – and that means realistic – advice to clients, whether they be purchasers or vendors.
Vendors feel in a vulnerable position in the current market and, of course, it’s only natural that they want to hear a guide price which cheers them. Ultimately, it’s the vendors’ call which guide price they agree to but is it right to leave a property languishing on the market for months because of a knowingly-inflated market appraisal? Albeit that, ultimately, the agent knows that in a few months time the price will have to be adjusted downwards.
It’s not enough that it’s morally and professionally wrong but it’s also ineffective and, unhelpfully, creates a log jam in an already sticky market.
Perhaps, the way agents’ fees are calculated - the percentage of the ultimate sale price – means those who overprice at the outset are really basing their calculations on what they know they will achieve down the line when they have to reduce the price to secure the sale. It’s a sale after all.
For such agents, the initial guide price makes the vendor feel good and once an instruction is secured not many vendors change agents. Much like the reason why many of us never switch bank accounts when we know we should, it’s an additional hassle to change agents. This leaves vendor and agent locked in a loveless marriage of convenience, after a relationship that promised the world when they first got together.
However, for those agents striving against this impediment of overpricing and for vendors who are being given bad advice, there is hope.
The Office of Fair Trading (OFT) has put out to consultation, guidance in which the practice of “recommending an asking price in the market appraisal that is unrealistic given current market conditions (in order to gain an instruction)” is referenced as an example of breaking the law.
Breaches could mean a criminal record with, at Crown Court level, imposition of unlimited fines or up to two years’ prison sentence.
Food for thought for the culprits then, and seasonal cheer for vendors who are really serious about selling their property in 2012.