We must focus on the PROCESS, and not on the outcome. Being scared by what we need to do to achieve the outcome, just defeats the whole process.
There has to be a way of keeping the housing market fluid, even when there are successive stalls in the main economy. It differs from the main economy in that it is merely bricks and mortar on land, in exchange for cash.
My proposal is to bring in CAP (Correct Asking Price) and replace estate agents’ market appraisals altogether.
Instead of market appraisals, quality house price valuations should be provided by estate agents (whether paid for or not), so that all agents could compete on service quality alone and not on who exaggerated the current price the most (as happens now).
The way to achieve this is to place a responsibility on all agents to have to buy any houses they fail to sell at their stated valuations - this option would be exercised by the owner alone. (The idea would be, that it should be open to the owner to exercise their option after 3 months (or 12 weeks of agent marketing).
This proposal is the only change necessary to correct our faltering housing market.
The result would be that prices would become more realistic, and then stabilise. The number of sales in the market would start to increase, because people would be able to move at prices which are relative (and therefore relevant) to what they are also trying to buy.
True competition would then ensue, and be maintained.
It should be stressed that the minimum effective sanction against agents, for not carrying out proper initial valuations for clients’ houses going on sale, must be to pay the price stated at that time. Anything less would be ineffectual.
Finance for agents having to buy houses they failed to sell, is already available through specialist lenders like Goldentree, the specialist short term property lender who lends, at short notice, to agents buying properties on spec.
This burden of responsibility would, in fact, only penalise agents that continually over-value clients’ houses, while at the same time, the change would help to keep the housing market turning over.
An additional advantage of this is that the burden of costs between vendors and purchasers would be more evenly split, with the vendors having to pay something to get their house marketed as well as having a duty to price the property sensibly.
Purchasers would be responsible to pay to have building surveys of the house(s) they might be interested in buying as well as financing the mortgage valuation, paying the mortgage fees and possibly an independent house valuation, if thought necessary.
Let’s consider the advantages:
If agents valued confidently, bench-mark prices (with scope to gently increase) would be reliably established for all usual types of houses and in all locations.
Where more than one offer is made on a property, the agents could simply negotiate between the parties (just as they do now) to obtain the best offer for the property.
This would be competition, based purely on the value of houses, operating for the the first time ever, in Britain’s housing market.
The situation at present is that too often, highly exaggerated prices are quoted, causing a lengthy delay before perhaps one unsuspecting buyer comes along. If they need a mortgage, often the building society loan valuation then comes in at a considerably lower figure; causing difficulties that sometimes result in the sale falling through altogether.
The disadvantages? None that I can see.
In an effort to get these ideas more widely adopted, the author invites an appointed representative of the estate agency sector to enter into face-to-face discussions; with a view to identifying and possibly increasing, the common ground that may exist between us on this specific topic.
For more information on CAP (Correct Asking Price) techniques go to: Full Reasoning:
This sales concept is original to Property Match (UK).
It was first published in The Times Newspaper in December 2010 and has been further refined since then.