Estate agents who deliberately over-value properties in order to win instructions are effectively committing fraud according to a prominent industry figure.
Russell Quirk - who is founder of property PR firm Properganda, as well as a franchisee of Keller Williams and the former chief executive of Emoov - says he is sure some agents accidentally over-value properties through error or lack of experience.
But in an article on social media he suggests that many deliberately do so in a way which the public would not accept elsewhere - and he says some agents’ behaviour when it comes to valuation is akin to a restaurateur telling a customer that the menu only gave a guide to prices or an accountant giving a client the wrong information on their tax liability.
“In all of these scenarios we would kick-off. We’d play up as to how we’d relied on the advice of the professional and had budgeted accordingly … Yet, estate agents get away with such inaccuracies each and every day” Quirk says.
And he goes on to say he’s being generous with the word ‘inaccuracy’ because many agents intentionally use over-valuation as a tactic.
“It’s done on purpose and is, by my reckoning, tantamount to fraud” he says.
And he adds: “The definition of fraud is the act of attempting to gain through deception and via deliberate trickery. Therefore telling a prospective property seller that they should expect to achieve £450,000 when £400,000 is the real number, is as dodgy as a timeshare salesman on a beach in Tenerife.”
If a vendor is locked in to an agent through a sole agency agreement, and the house doesn’t sell at the ‘inaccurate’ over-price, Quirk suggests the following scenario is played out.
“Given the keenness for many people to actually sell and move home once they have listed their home for sale, the only answer to their eventual frustration at not having sold is to reduce the asking price of their property and always fuelled by the ‘new advice’ of the agent that turns to such anecdotes as ‘the market is quieter now’ and ‘it’s a bad time of year’ and so on. The owner reduces, begrudgingly, and the property sells once it’s been reduced enough but, of course, the marketing sweet-spot has been missed and the listing was looking pretty stale in the end so it probably sells for less than it would have done if it had been priced properly originally.”
Quirk concedes that The Property Ombudsman’s code of practice states: “market value must never be misrepresented” and the Consumer Protection from Unfair Trading Regulations outlaw “false or misleading information to consumers.” But he insists these are easily evaded by agents if they wish.
To avoid this problem proliferating, he calls for the Estate Agents Act 1979 to be updated “to specifically outlaw the over-inflation of residential property valuations for the purposes of gaining listings by deception.”
You can see his full article here.
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Nothing new here apart from a 'sensational headline' - the stock in trade of publc relations experts everywhere. Yes, it was intentional.
Slight problem with this suggestion is that it would criminalise optimism as well as incompetence, plus it would be rather difficult to enforce, it would inhibit the many while allowing the bold dishonest few a field day. In other words, if a change like this were to be enacted it would have the opposite of the intended effect
It’s a bit like telling your crowdfunding investors that your business is worth £100million when it’s actually worth Jack, then halving the value after they have pledged.
When three different RICS surveyors working for three different companies can give three different valuations on the same property, doesn't this make Quirk's statement look bloody stupid?
Mark. Thanks for your comment. I’m not talking about tiny variations in opinion but purposeful, significant over valuations that are orchestrated to specifically coerce sellers to list with that agent. There’s a big difference between what I’m highlighting and what you’re saying. And we all know it goes on
Houses don't come with a 'Recommended Retail Price' sticker. A house is worth what someone is prepared to pay for it. No more, no less. Property valuation is a difficult and subjective process, and at the end of the day, a potential vendor is at liberty to accept or reject any agent's valuation.
Asking prices are also often led by the vendor and these comments do not reflect this.
Russell Quirk: I'm not talking tiny variations neither. From my days underwriting both for major high street lenders & third party packagers to our own agency today I've seen RICS valuers differ by 10-20% on the same property on repossossion reports and valuation reports. So yes it goes on, but it's not just estate agents looking for the instruction. But hey, it got your PR agency in the press again, so welldone you.
Fraud is a criminal offence, its unclear from the argument proposed by Russel Quirk where the criminality lies.
The agent owes a duty of care to his client in Tort. An over valuation which leads to a loss could therefore result in a claim but requires, proximity, duty of care and actual loss all to be present. Very often it is but the general public are unaware of the legal possibilities.
There may also be an implied contract term in equity within the agency contract that the agent should not act against his client's interests by frustrating a sale by advising of a value so high as to prevent a reasonable opportunity of a sale. Andrew Ireland MRICS
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