Its similar to when builders underquote for a building project, and then hope to get a supplementary payment to cover the underquote so that they can make a profit on the job in the end; estate agents are working on an exactly similar, but opposite principle.
Estate agents expect to overquote, or exaggerate the value of a house to secure the initial instruction but then try and tempt the seller with lower offers; whilst at the same time hoping that market prices will continue to climb to overtake the initial over-optimistic pricing; and so mask their rather dubious tactics.
One obvious difficulty with this is that there can be no hope, whatsoever, of masking such tactics when market prices are falling!
The main trouble with such a business model is that the client is the one who suffers.
The result is slowness in finding any serious buyers at the prices initially quoted. Secondly, the fact that the prices eventually offered are frequently several thousand pounds less than what the seller was expecting, causes extreme difficulties for them when trying to close a deal on what they intended to buy.
It means, often, that they find they cannot afford what they intended to buy, or if they can, only by increasing the amount they have to borrow – sometimes to alarming levels.
Some buyers have insufficient information about the proper value for the house in question and so try and use the asking price as a guide instead. Those that are well funded often later realise they’ve offered more than they should have and some actually decide to withdraw, causing sales chains to collapse. This is an appalling state of affairs for those trying to move house, usually within a set time-frame.
With all the delay and uncertainty being created by these tactics, it’s simply time to re-evaluate the estate agents’ business model.
Its a pernicious (and wicked) misrepresentation (or betrayal) of the situation really going on out there!
Surely therefore, there should be an immediate trend downwards, in house prices, in order to restore market activity?
I can see that economic commentators mainly follow and report on market trends, soon after they occur. However, estate agents are forward-looking and should aim to be the first to react to such clear trends and thus keep the market moving, for the benefit of all the participants, especially the sellers.
Estate agents need to react to the circumstances quickly, if they are to be of use to their clients. As there are lots of sellers, this would be feasible but estate agents must advise on ‘price’ correctly. It is their job, to advise the seller on price, after all.
The best way forward now is to re-value everything to ‘current’ market value and thus get people moving.
Think of the extra work such restored market fluidity would bring for all of the trades involved, as well as getting our National workforce into the locations required for productivity. We are convinced that further delay will simply cause further damage to the whole UK economy.
In the last house price slump, those that borrowed excessively, lost out. Those that saved for later investment, were rewarded in the end.
Property Match (UK) is prepared to stand up and say we agree with Housing Minister Grant Shapps MP, who reportedly said In an interview with the Observer and later with the BBC, that he wants government policies to usher in a new age of “house price stability”.
This report may be read at:
BBC News article
He says:
“The main thing everyone requires for their subsistence is a roof over their head and when that basic human need becomes too expensive for average citizens to afford, something is out of kilter.” “I think the answer is house-price stability.”
In the last house price slump, those that borrowed excessively, lost out. Those that saved for later investment, were rewarded in the end.
An earlier article in the Property Match blog has more details on this reasoning.
Its now time we learned the lessons of the past and stopped walking into the same pitfalls that are clearly presenting themselves, once again.
For as long as agents bolster-up asking prices, owners are UNlikely to want to consider asking real market prices (and so cannot sensibly offer them either).
For as long as asking prices are bolstered-up, sadly, owners are not going to consider offering their property for sale at true current market prices.
More on how we think a turn-around may be quickly achieved:
CAP (Correct Asking Price) – by Property Match (UK).
Posted by: Property Match (UK): The modern way to market houses