Peter Hendry Blog
Wednesday 11th January 2012
Why have prices remained almost static whilst sales have dropped to a trickle?
The answer has to be price, price, price. Quoting the correct price when marketing a house is the key. This cannot be happening – but why?
Possibly the worst position estate agents could ever find themselves in, is having to do accurate house valuations instantly – on the hoof, having just viewed the house themselves (for a quarter of an hour or so) and without getting paid anything until the house might be sold by them!
Well, guess what? That’s exactly the position that estate agents have got themselves into, simply by trying to out-compete with other agents to win the sales instructions needed for their individual businesses to keep on growing.
Due to this problem, the present method of doing market appraisals by estate agents has resulted in the majority of houses not being ‘valued’ accurately enough.
This has resulted in there being no clear ‘tone’ of value across current asking prices these days. In other words, asking prices are all over the place. The effect of this is that both buyers and sellers have become confused and apprehensive.
It has long been known that asking the wrong price can actually put viewers off a house, from the very start.
Testing the market with a hefty price at the beginning of a marketing campaign is therefore the worst possible thing that anyone could be advised to do, but unfortunately, too many people are being advised (or think it might be OK) to do exactly this.
Even mortgage valuers, who are required to corroborate the resulting prices, agreed subject to mortgage, are generally able to reflect a little, and do some specific research in the office, before deciding whether the figure agreed upon is within ‘the range’ – or not.
It is ‘range’ rather than price because there is no ‘exact’ figure which can be applied to any particular house.
Instead there is only a range of prices within which a house should attract buyers in the current market, without the need for grossly excessive borrowing in order for buyers to be able to do so.
To sell efficiently, a house needs to be priced within the range-of-prices that currently apply to it.
My view is that this isn’t happening in far too many cases. It is this that is largely responsible for the decline in the volume of completed sales, and not the downturn in the economy per se.
People still want to move house, even in a downturn. It’s just the confusing and varied levels of asking prices that are hampering them from achieving this.
It’s generally accepted that the most important aspects that affect the market price of a house are location, type, size of property and condition or quality of build.
Well, I don’t know of any surveyor who could reliably assess all four of these criteria within a quarter of an hour’s visit – and do this correctly every time. There is therefore little or no chance that an estate agent could do this either.
Don’t forget, they also have to take into account all the arguments being put forward by the owner as to how much the house should be sold for, and they must appease the owner to get the instruction to begin with.
It’s now obvious that we’re asking too much of our agents these days.
To try and argue that there’s nothing going wrong in the housing market would clearly be to shoot oneself in the proverbial foot.
No. The problem is purely agent-created as explained above, and what’s worse, there’s no one doing anything to help them resolve the matter either.
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