Sellers end up pay­ing price when agents over-value homes

Yorkshire Post - Property - - PROPERTY - Tim Blenkin

IT’S a fa­mil­iar re­frain, and one which all res­i­den­tial agents have come across, par­tic­u­larly in these dif­fi­cult times. A po­ten­tial ven­dor is dis­ap­pointed in the val­u­a­tion put on his/her house and is seek­ing an agent who will pitch the ask­ing price at a higher level, on the ba­sis that of­fers will come in be­low the guide price and then ne­go­ti­a­tions can be­gin. Af­ter all, no-one be­lieves that it is pos­si­ble to ob­tain a fig­ure above the guide price – do they? Two sto­ries il­lus­trate the pit­falls fac­ing the un­wary.

Prop­erty A is a five be­d­room fam­ily house. I first vis­ited the owner in 2006, about a year be­fore the peak of the mar­ket and es­ti­mated the value at £850,000. In the event he de­cided not to move. So we scroll for­ward to Fe­bru­ary of 2011, five and a half years later, and I am in­vited out again. This time my val­u­a­tion must take ac­count of a very dif­fer­ent mar­ket, mort­gage dif­fi­cul­ties, and a short­age of cash buy­ers. I tell the owner £800,000 is a suit­able ask­ing price and he seems to ac­cept the ad­vice.

It comes as a dis­ap­point­ment when he asks an­other agent to han­dle the sale – but agents know we can­not win them all. The rea­son be­comes clear when it ap­pears on the mar­ket in March priced at £975,000. Af­ter al­most a year on the mar­ket, and three price re­duc­tions (dur­ing which time an of­fer of £800,000 is re­jected out of hand) the ven­dor re­sorts to rad­i­cal mea­sures: he ad­justs the price a fourth time to £795,000 and meets with a mea­sure of suc­cess, with an of­fer close to £750,000 from a buyer will­ing to com­plete in Fe­bru­ary.

So, yes, you can “al­ways come down”. But should it take a year to sell a de­cent house, and should the sale price be al­most 25 per cent be­low the ini­tial guide price? Or, to put it an­other way, should the agent have mar­keted this house at 30 per cent over its true value?

Prop­erty B is a five-be­d­room vil­lage house, and this time I am di­rectly in­volved. The owner and I agree that £850,000 is the cor­rect guide price. The house is launched in June 2011 and soon a buyer is found at the price asked.

But the buyer gets cold feet and with­draws from the sale, to be re­placed by an­other who bids £825,000, “cash in the bank”.

Our due dili­gence re­veals that he does in­deed have ac­cess to funds, but of course hav­ing ac­cess to funds does not nec­es­sar­ily en­tail us­ing those funds, and this buyer also, in that time-hon­oured York­shire phrase, gives back word in early Oc­to­ber.

What to do? Well, I have promised my client that I shall have him out by Christ­mas and he asks me to “think the un­think­able”. This re­sults in a dra­matic re­duc­tion to a new ask­ing price of £750,000, at which knock-down price a cash of­fer is im­me­di­ately re­ceived, although dis­ap­point­ingly com­ple­tion can­not be ar­ranged in the old year. I tell the buyer that we shall re­spect his re­quest not to of­fer the house to other buy­ers, but he must ex­change con­tracts in three weeks, be­cause all the nec­es­sary “legals” have been com­pleted. I get a brusque lec­ture about how long these things take and am put back in my box.

Three weeks duly elapse and the house is still un­der wraps as per our agree­ment. No sign of a con­tract, how­ever, as sur­veys, elec­tri­cal re­ports and elab­o­rate pre-con­tract en­quiries take their toll on the own­ers. Then: bomb­shell. The very first buyer re-emerges, of­fers £800,000 and un­der­takes to ex­change con­tracts in 48 hours. The con­tract is with­drawn, redi­rected, and the buyer is as good as his word. Com­ple­tion takes place in De­cem­ber, the owner is out be­fore Christ­mas, and the price ex­ceeds the ask­ing price.

What then is the les­son? Sen­si­ble pric­ing gets re­sults; fool­ish over-val­u­a­tion usu­ally ends in tears; buy­ers want a deal and will stu­diously ig­nore a prop­erty which does not rep­re­sent value. And do I think any­one will ob­serve these truths in 2012? Ask me an­other!

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