How would you value estate agents?

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.

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.

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.

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.