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How would you value estate agents?

Animation of an estate agent board

Anyone who has sold a house knows that a hefty part of the profit ends up in the hands of the estate agents. Is it money well spent, or are you left questioning whether their part in the sale was worth it?

While viewing flats recently I found that you may be stuck with an estate agent who can’t tell you who the garden belongs to, or who tries to argue that a full-size door in the floor is an interesting feature.

I couldn’t help thinking that someone is paying thousands for this service.

Which does beg the question – are estate agents worth it? It’s a subject that came up in a previous Conversation, when commenter C Duffy asked, ‘With all of the information on properties and valuations available on the internet I wonder really what value estate agents are adding – except arranging viewings?’

How valuations and fees fluctuate

Recent Which? research found that fees varied from 0.75% to 2.5% – and even for the same property fees could differ by thousands. If an estate agent does a brilliant job and sells your property for more then it could be worth those extra thousands, but you don’t have any guarantee of that.

We also found a degree of confusion about what properties were worth to begin with. Valuations are an art not a science so there’s nothing wrong with some variation.

In some areas we found that the valuation of a property varied very little, whereas in others there was a fairly big disparity. One property we looked at was valued at anywhere from £500,000 to £650,000. On others, the highest and lowest valuations differed by almost a fifth.

Should you go it alone?

So are some estate agents overvaluing properties? When I started a Conversation in February asking this, many people responded with a clear ‘yes’.

‘Asking prices are way too high, which is falsely keeping sellers’ expectations at too high a level,’ said John Ward – while Chris had some advice to offer others. ‘I suggest you use a smaller independent agent rather than a big chain,’ he said. ‘Smaller agents need a quicker turnover so will value more realistically.’

You may even decide you’re better off going it alone and selling your house yourself. While some people do a brilliant job of this, it can be slow and it’s not easy in a tough housing market. So for many of us, estate agents are probably going to continue to be necessary.

So, if the tables were turned and you could put a valuation on estate agents, what would you give them? Would you be interested in trying to sell your property yourself – or do you think estate agents are worth their fees?

Comments
Member

I was quoted in the intro to this topic so I thought I had better put some flesh on the bones of this Conversation in the light of some actual experience. [For readers in the process of selling (or buying) a property it’s worth following the link in the preamble to the February Conversation called “Are estate agents deliberately overvaluing properties” – it has interesting contributions from some estate agents who appear to have a professional and responsible approach.]

We recently decided to put our house on the market and invited four local agents to pitch for the job. Agent A was from the local branch of a corporate agency. Agent B was the head of a local independent estate agents with a good reputation in the area. Agent C was from the top local firm of auctioneers, surveyors, valuers and property professionals. Agent D was from the No 2 practice, again with professionally qualified staff in all relevant disciplines. The spread of asking price valuations was £50,000 – over 21% – in the order, from the top price downwards : D, A & B, C. They all suggested that negotiations would inevitably lead to a discount of £10,000 to settle on a selling price so that we should “realistically” expect to achieve around 95% of the initial asking price. We had our own idea of what our property was really worth and what would be the least that we would accept, as we do not have to move and will not undersell it. All the agents stated that the current state of the housing market made it very difficult to value properties with any confidence since there were so few sales of comparable properties on which to base an estimate; this was their defence against any criticism of their valuations.

We quizzed the agents about their performance, contact lists of prospective purchasers, viewing arrangements, use of media and property websites, brochure and marketing techniques, and profesional back-up through the selling process. Their commission rates were : A & B 1.75%, C & D 1.5%. We selected Agent D whose recommended asking price – the highest – was in line withour own estimate and expectations but we also considered that this firm’s professional approach and position in the market place was more suitable. The property was put on the market in mid-June and within two weeks we had accepted an offer at over 97% of the asking price. Obviously, there are a lot more hurdles to be cleared before we reach the home straight and it is difficult to draw any general conclusions from our experience – so much does, and always will, depend on timing and luck. But this does suggest that the highest valuation is not necessarily wrong and that the agent with the highest professional credentials can also be the worst.

Member
Michael Pemberton says:
29 July 2012

I do think there are a number of issues to consider. As a surveyor, I can see it from the estate agents view point. Whilst some of the percentages charged may seem high, the number of sales in relation to the number of properties marketted but not sold requires these costs to be covered.

However, whilst times have been difficult, there has been a tendancy for some estate agents (and by no means all) to artificially inflate the suggested asking price to get the property on their books. After a short period of time, the excuse to reduce the price is given that the market has worsened. Low and behold, the property is suddenly properly priced but the vendor is locked into a contract.

On the other hand, should we blame estate agents for trying to get a property on the market at the highest possible price provided that they achieve the highest possible price. It all comes down to the intentions of the estate agents; honourable or not. One suggestion might be to negociate a tiered fee percentage. The higher the price achieved, the higher the %?

Sometimes, prices are vendor led. They may need to achieve a specific price to enable them to afford to move on or avoid negative equity. Is it then wrong for an estate agent to privately advise a vendor that the price is unrealisic but they will give it a try?

From a surveying perspective, valuation is not an exact science and a recent court judgement has suggested that a margin of error of 8% is not unrealistic for a fairly standard house. Generally, a figure between 5% and 10% would be considered ok. This, on a £575,000 purchase could mean the actual value is between £517,500 and £632,500 – not disimilar to the valuation spread in the article.

Member
olivia peston says:
11 September 2012

We have recently sold our apartment in West London, used Several local estate agents for valuations then put the apartment on for sale with an online agent for a flat fee. It worked like a treat and I would recommend trying it to anyone. The savings are enormous.

Member
Simon Holland says:
17 December 2013

I am a self-employed property consultant, and you’ll often hear me talking about this, which is my current ‘hot topic’ – do estate agents offer value for money?

My argument is that in a world where the internet has made house pricing information readily available, and social media has brought us all closer together and more inter-connected than ever before, do we really need a human being acting as a middleman in a property transaction?

I firmly believe that largely, the answer to this question is a resounding NO! However, there are some way that a local estate agent CAN add value, if they wish to do so.

Here is a short list:

1. Provide detailed, in-depth and specialist local knowledge. This could include schools, council tax bands, broadband speeds, whether the property can get Fibre Optic broadband, detailed maps and travel times to and from local towns, train stations, local landmarks and town centres. They must live in the area, and be prepared to be quizzed about it by potential buyers!

2. A property sourcing service for registered buyers, which will benefit new sellers as there will be a ready made pool of qualified buyers ready and waiting to view their property when it comes to market, or ideally before it comes to market.

3. A transparent referral service to peripheral suppliers ie mortgage brokers, energy assessors and solicitors. Currently, many agents make commission for sending clients to their preferred network of suppliers, whereas if they SOLD trust, transparency and ethical practice, they may be onto a winner with a much improved local reputation.

4. Offer flexible agency agreements, no tie periods and allow sellers to also list their home with another agent or ‘for sale by owner’ as well.

5. Make excellent property particulars, full of detailed floor plans, room measurements, and mail them out to their waiting list. They should also have them to hand when showing potential buyers around the property.

6. Advertise your property extensively on ALL online portals, as well as in their local press, as many buyers may now search online, but many also buy the local paper!

7. Have a modern, distinctive and attractive ‘for sale’ board, not one that is weather worn or laying down in next doors garden!

8. Have office opening hours outside of 9-5:30pm! This is a big one – calls can be diverted out of normal office hours so that the agent doesn’t miss a potential lead for your property. They could take out a 24/7 telephone PA service for the same reason. Perhaps they could open on Sundays, and use this time to update vendors on enquiry levels and the progression of their sale?

In my opinion, 2014 will call for a certain breed of estate agent to rise above the rest. They will need to be ready, willing and able to be proactive, to go the extra mile for their vendors and to deliver results. Otherwise, public opinion that they simply DO NOT offer value for money will continue to swell, especially as more online estate agents come to the market place and ‘for sale by owner’ websites such as http://www.MyOwnEstateAgent.com grow in the coming years!

Opportunity is out there, but so is the competition. Please feel free to contact me for further information or comment.

Simon.

Member

I go along with all of your comments Simon. We looked at a lot of property before we chose our new home and generally felt that the estate agents, by not giving us as potential buyers the kind of information we needed, were not doing the best for their clients who would be paying thousands of pounds for their services.

Many agents seem to have a total objection to producing a floorplan but these are one of the most useful things a prospective purchaser needs at the initial selection stage. For the Council tax band, many agents now say “check with XXX council” but give the wrong local authority! For modern houses, agents often have no idea when they were built, or who the developer was. As for the photographs, they are usually inadequate and you soon learn from actual viewings that the rooms not pictured in the particulars are a disaster.

If I were an estate agent I would progressively compile a private database of every street in my territory listing every property and include as much information as I could gather about the construction date, previous asking and selling prices and dates, which agents handled it before, whether there were any special features or problems. Most of this is easily accessible on line from the property websites – all it requires is a little updating every day of properties currently on the market and a monthly trawl of the Land Registry lists to get the actual selling prices. This information would enable agents to give a better service to their clients as well as to assist buyers. A good agent would also produce a little handbook for the town or district packed full of useful information.

Another recommendation I would make to estate agents is to turn up on time for viewings, know the property and its layout in advance, and give people time to have a good look round.

Obviously, any property will sell if the price is right but agents have a terrible tendency to market bad, dirty, smelly and shabby properties as if they were in tip-top condition and priced accordingly. If the description doesn’t say “well presented” expect the house to be a tip! Perhaps trade has been so bad over the last two or three years that agents feel they cannot turn away any business, but we were shown properties for which any self-respecting agent should have declined the instructions.

In my view, agents have taken their eyes off the ball of selling houses lately since they are making a decent living managing landlords’ lettings. Unfortunately for them, people are increasingly questioning their value since they charge much more than the solicitors but take very little responsibility. It’s only because their fees are settled almost invisibly from the sale proceeds that there is no general reaction to them – if sellers had to write out a cheque to their estate agent for several thousand pounds it might make them wake up and question what they were getting for their money. I think ‘sale by owner’ will really take off as the property market picks up again so long as there is a good route to the market place. At present, no website can compete with Rightmove on coverage, speed, filtering, links, and tools, although several others like Primelocation and Zoopla are now getting much better and faster, but access to them is entirely controlled by estate agents and a seller going solo is at a disadvantage without the spread and reach of a major website.

The buyers of our previous home in Norfolk came from western Wales and did most of their property hunting on-line. We did most of our initial selection on line to save making wasted journeys – perhaps we missed a few good buys, and we occasionally went 30 miles to look at what turned out to be hopeless cases, but the future of house-hunting is through the internet and if agents don’t soon get the hang of it with a lot more detail and useful information then they wil become redundant and obsolete.

Member
Simon Holland says:
17 December 2013

Likewise John, I totally agree with all of your points. I have seen the mistakes ‘amateur’ agents make from the ‘inside out’ of the industry! Another one is turning up for viewings with the wrong keys, no alarm codes…shall I go on? I could write a book on the tips, tricks and tactics estate agents use to manipulate people. I believe strongly that ‘for sale by owner’ is the future, the technology and appetite is already here, the sites just need to follow suit and get rolling asap. I personally don’t like any of the agent led listing sites, they’re all so one dimensional and lack any real creativity, unless there is the odd ‘high end’ listing where the agent has actually gone to some effort.