There’s anger in the industry over an article in The Times which accused agents of overvaluing properties - although why this was happening was unclear in the story.
The accusation was based on an analysis of Zoopla listings showing how many properties had their asking price cut before selling.
The piece said the overvaluing took place in order to “mislead” and “dupe” sellers into paying high commission, but it omitted - or didn’t know - that commission is often paid on sale price rather than asking price.
If the point was to say the high valuations were to secure instructions, the article didn’t say so. Nor did it give much attention to market conditions, Brexit uncertainty or mortgage constraints obliging some vendors to drop asking prices.
Instead it described Foxtons, Chancellors and Hamptons International as the biggest culprits according to its analysis of listings and subsequent price reductions.
The accusation, predictably, provoked a Twitter debate with Anthony Payne, managing director at LonRes, saying: “The valuation of property is not a precise science, especially in London. There is no harm, in fact it would be wrong for an agent not to try and if there’s no success, reduce. In my book that’s called good proactive agency.”
Ed Mead, a former agent himself and now the head of PropTech firm Viewber, commented: “Most sellers would like to be ‘duped’ into paying a higher commission as it means a higher price achieved - or have I missed something?”
And Katie Griffin, former president of the National Association of Estate Agents, said: “Another estate agent bashing article - what about those vendors that think their property is worth more and want to list at a higher price?”
The article is behind The Times’ paywall but here it is for EAT readers:
Estate agent chains are overvaluing properties by up to a fifth in a practice that can mislead sellers into paying higher rates of commission, an investigation by The Times has found.
Analysis of more than 200,000 properties listed online reveals that overvaluations are rife, with the biggest agents the worst offenders.
The data suggests that agents with the highest commissions are over-valuing properties the most to attract homeowners.
The properties then sell at lower prices, but the agents take big fees.
Nearly two thirds of homes listed by Foxtons, the biggest agent in London, have to be reduced from their initial price before they can be sold, almost double the national average. Foxtons charges a commission of 3 per cent, which is more than twice the average.
When properties marketed by Foxtons had their asking prices cut, the average reduction was 10 per cent, or £56,000. Land Registry data on a sample of these homes shows that the sale price was lower still, falling 16 per cent or £85,000 from the original asking price.
The research shows that the ten agents that overvalue the most, including Hamptons International and Chancellors, charge twice as much on average as the ten agents who overvalue the least.
Sellers using the ten worst offenders will pay the equivalent of £5,500 on a £300,000 home compared with only £2,200 with the best agents. However, some agents charge upfront fees rather than commission, so sellers would have to pay irrespective of whether their property actually sold. Commission in most cases is negotiable.
The National Association of Estate Agents said that not all price reductions were due to overvaluing, although it admitted that some “unscrupulous agents” would try to win business by quoting a higher asking price. Mark Hayward, chief executive of the trade group, said: “It may be the seller requires a quicker sale.” But he added: “These figures do not put the industry in a good light.”
Agents say that price reductions are also a function of falling property prices, the Brexit effect and sellers demanding that their homes are marketed at unrealistic levels. Property experts said that sellers were being flattered into using more expensive agents.
Henry Pryor, a buying agent, said: “The scale of overvaluations is shocking. Some sellers are clearly being misled into choosing more expensive agents, but we need to remember that an asking price is not a valuation, it is just a marketing gimmick.”
The 200,000 properties analysed by The Times represent a snapshot of those on Zoopla that had been sold subject to contract in December. The vast majority were first listed last year, but some date back earlier.
The data shows that 32 per cent of properties were reduced and of these, the average adjustment in asking price was 6.9 per cent or £23,400. Actual sale prices are likely to be lower still.
Foxtons said: “We always price properties competitively in partnership with homeowners, helping them to get results that unlock what their property is truly worth. Data from surveyors and the independent consultancy TwentyCi shows that on average Foxtons is able to achieve a 6.3 per cent price premium after fees compared to our closest 20 competitors when the average house sale price is analysed. Foxtons is the best place to sell . . . despite a challenging London market where buyers are increasingly undercutting asking prices.”
Chancellors said: “We strive to get the very best price for every client and achieve record prices for the local area. We work closely with our clients on their marketing strategy and we are proud to say that we have achieved an average of 98 per cent of our clients’ asking prices so far this year and operate on a success-fee basis to achieve this.”
Hamptons International declined to comment.