Gazumping – What is it, and why does it happen?

imageThis often-used jargon term has fallen out of favour with the downturn, but when prices pick up it will doubtless once again become part of the vocabulary of buying and selling property.

The word describes the situation when a seller, having already accepted an offer from a buyer, then changes to accept a different, higher offer from a different buyer. Making a higher offer on a property that already has a ‘sale agreed’ is called gazumping: the unfortunate buyer who misses out on the home they had agreed to buy has been ‘gazumped’. This is not just bitterly disappointing – it can be very expensive, because the first buyer may already have spent hundreds of pounds on legal fees, mortgage applications and surveys. Their money – and ‘their’ new home, with the dreams and aspirations that went with it – are irrecoverably lost. They are back to house-hunting, poorer but no wiser, as it could just as likely happen again.

This, of course, happens more often in an upward market, when buyers are competing for desirable properties – although it can take place at any time if a ‘new’ buyer finds their dream home only after the original sale has been agreed, but before it has been transacted, or if a potential buyer suddenly finds a buyer for their own home, and so is newly in a position to make an offer.

How can it happen?

Gazumping is possible because there is no legal status to an agreement to buy and sell a home in England and Wales. It is only when contracts have been exchanged that a property sale becomes binding in law. Until that moment, the buyer and seller have nothing but each other’s word to rely upon, and either is perfectly entitled, by law, to change their mind and pull out of the deal.

Can it be stopped?

No. As an act of good faith, the buyer (or the estate agent) will usually ask the seller to take their home ‘off the market’, and to display a ‘sold’ or ‘sale agreed’ sign. Estate agents will stop promoting the property, and will usually stop taking viewings on the home. It’s sometimes thought that estate agents encourage gazumping, but in practice it is the opposite… agents are usually happier for an agreed sale to go ahead without complications. Gazumping undermines this, and can cause mistrust all round. For the agent, who earns a small percentage of the final sale price, the difference between the offers makes only a very small change in the fee, so there is little reason why an agency would want to encourage it.

But, however much an estate agent might not wish to see a gazumping bid, the agent is legally obliged to pass on every offer made to the seller. It is an obligation of the Estate Agents Act 1979 that an Estate Agent has to pass on every offer made on a property – even if it is already ‘sale agreed’. The agent may refuse to undertake more viewings, and may make it clear that the home is sold, but until that contract is exchanged, the agent has no choice if another buyer insists on making an offer.

That’s when it becomes really complicated. The estate agent is working for the seller, and is both legally and morally bound to give the best advice and service in the seller’s interest. The buyer is not the estate agent’s client. A gazumping offer will be higher – often significantly higher – than the original offer. Also, the new prospective buyer may well be in a better financial position – less dependent on a mortgage, or perhaps even a cash buyer with no house of their own to sell. The agent has to give the best advice to the seller, and sometimes there is a clear case to go with the new offer. Indeed, even if the agent feels that it is better to stay with the first agreement, the seller may be swayed by the prospect of more money. More often than not, the gazumping offer will be accepted, even if the original buyer has already incurred costs and set their hopes on their new home.

Is it wrong?

Legally, definitely not. Morally… that’s a hard question. Certainly the original buyer gets a very rough deal. But it’s also very hard to expect the seller to turn away a bigger, better offer. Many sellers do feel a personal or moral obligation not to break their original agreement…  but, if the gazumping offer is tens of thousands of pounds higher, that is a very hard decision to make. It’s not necessarily fair to expect anyone to sacrifice such a large amount of money just to keep to an informal agreement with no legal status. Remember, too, that both the new buyer and the seller get what they want, even at the expense of one disappointed party. But it’s clearly not a very nice situation for those negatively affected.

It’s interesting to note that in Scotland, where the buying process is different, the acceptance of an offer is the close of the legal process, so gazumping can’t happen. Perhaps it would be better to extend that system south of the border. But, until the law is changed, gazumping will be an occasional part of the picture when houses are bought and sold. Just don’t blame the estate agent!

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Seller’s Checklist – the top 10 things to think about!

1 .Are you sure you want to move? Are you really ready for it?

Moving house is a big deal. Do plenty of soul-searching, and know that you’ve not rushed into a decision, and that with time and detachment you reached the conclusion that the time is right. There may be times, later on when you wonder if it’s all worth the hassle… but if you have really thought about it beforehand, you can draw strength from knowing you considered everything with a clear head at the start. If circumstances don’t allow you this time, and you have no option but to make a snap decision to move, then that should give you the resolve you need to see the process through.

  1. Prepare your home to sell

Clean, tidy, pack away, touch up the decoration, clear the garden, polish the door-knocker. If you do this before the estate agents come round, you will show your home in its best light for the valuation. The agent can advise you on any additional presentational details to address if need be, but doing things first will help to cement your commitment to move.

  1. Find an estate agent

Start with some research. Ask friends or colleagues who have just moved for their recommendations of who to use (or avoid!). Visit a few offices and see how well you are treated. Learn about the different ways in which the different companies operate (there is lots of information in this guide). Choose three companies to give you a valuation – make sure at least one is an independent, local firm, and at least one is a larger, corporate firm. Visit the agents’ offices BEFORE you meet them, posing as a buyer (you may well actually be looking to buy locally..  but if not, go anyway). You need to know how well the agent will gather information from anyone that might want to buy your house from them. Quiz the agents in close detail when they come round. Once you are happy which agent you want, instruct them by signing their agreement, and get your Home Information Pack ordered immediately. Have two forms of ID ready to show the agent, because you will need to prove that the house is yours to comply with money laundering regulations.

  1. Order your Home Information Pack

You cannot begin to advertise a house for sale – even if you are selling privately – until certain key parts of the Home Information Pack are completed and available. Do this quickly, and as soon as you know you are going on the market.

  1. Sort out your financial affairs

When your sale goes through, your solicitor will receive a large sum of money. Where will this go? If you have an old mortgage to pay off, check if there are early redemption penalties. Calculate agents and legal fees – including VAT – so you know how much you will actually receive. Now is a good time to reconsider investments, pensions etc.

  1. Find a Solicitor

Strictly speaking you don’t need a solicitor until you have a sale agreed, although some solicitors can provide the Home Information Pack. But you will need one eventually, so use the time you have now to research a few local companies and pick one that suits you. Otherwise, when you find a buyer and need to know, it will all be in a rush.

  1. Keep focussed on the prize

When viewers start to come round, and you don’t know if the eventual buyer will be here next day or next year, it can be unsettling and stressful. Always concentrate on what you are trying to achieve in the long term. It will get better once it’s all done and dusted. Don’t lose sight of that. Selling is a means to an end.

  1. Consider your options and alternatives

It may be that the progress of your sale needs a little lateral thinking. If you planned to find a new home after you’d found a buyer, but then the perfect buyer has to meet an urgent deadline, perhaps you should consider renting for a short while so that the sale can go through. If the offers you receive are lower than you hope, but you have found your dream home to move to, perhaps you can make a lower offer so that the end result is the same. Maybe you don’t need to sell at all – you could remortgage as a buy-to-let, have enough for a deposit on a new place and let the new tenants pay the mortgage on your current home. Things don’t always follow an obvious pattern, and the more creative and flexible you can be, the more chance you have of getting the right outcome.

  1. Try not to worry

It’s very easy to say that! But always look to the horizon, the fresh start. Try not to take on too many other big decisions or new projects if you can avoid it..  the stability in other areas of your life will make it easier to deal with the upheaval of a move. If you have friends and family you can call on for support, this is exactly the time you want them around. Your estate agent and solicitor should be a calming voice of experience, for while moving home is rare and scary for you, these professionals have seen it all hundreds of times before. You are paying them for their service, so call them as often as you need.

  1. Project ahead and look back

The home you are selling will hold many memories and associations. Those are not for sale. Try and imagine a point in the future, looking back on this move. Your new house will not be new any more – it will just be your home. You take all your memories with you, but you will have a place of comfort and security from which you can look back and enjoy those memories. The stresses and strains will pass, and will be forgotten.

 

Home staging – Making sure your home looks its best!

As almost every property show on television will tell you, a little House Doctoring goes a long way… not just in getting a sale, but in getting a good price for the sale of your home.

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There are two considerations in how your home looks.  One is practical and financial,  the second is more concerned with the emotional decision of buying a new home.

 

On a pragmatic level, viewers do not want to see things that they consider to promise expensive or time-consuming work (unless the house is being sold as a renovation project!).  Half-finished DIY, holes in plasterwork, polystyrene ceiling tiles, missing doors or doors that don’t close, broken light switches, sticking locks, dodgy window-catches.  These are the simple things that many of us have in our own homes…  the little things that we have grown used to and don’t see as a problem, in fact often don’t see at all any more!

To strangers, walking around your home for the first time, these can appear like huge obstacles that are impossible to look around, blocking their view of any potential the house might have for them.  As an agent, it can be extremely frustrating to know that a particular buyer would be ideally suited to a specific house, but that they cannot get past the minor visible jobs that need doing.resizeimage (3)

Indeed, it can be easier to sell a home that needs a new kitchen and bathroom, than one which needs a few broken tiles replacing and a good clean: a new suite is a job for a professional and a tangible improvement to the property, while a minor repair and a bit of bleach is just ‘work’.

The second consideration for presenting your home has more to do with how people think when they make a decision to buy a place to live. Buying a home is an emotional decision as well as a practical and financial one – indeed, you may have bought the home you are now selling because it ‘felt right’.

In order to decide that the house is right for them, a buyer needs to imagine living there.  That, in effect, is what ‘feeling right’ means…  it is an instinctive recognition that the viewer can see themselves living happily in that house.

Now, nobody can make someone buy a house they don’t want.  But it is possible to stop someone recognising a house that would ‘feel right’, if that home’s potential is buried under an avalanche of possessions.

The golden rule of all home-staging shows is: de-clutter!  In effect, the reason for this is simple.  The heavier impression your lifestyle has made on the house, the harder it will be for the viewer to imagine their own life there.  If a room is full of furniture, it’s hard to imagine it empty.  But if a room is empty, it’s easy for a buyer to mentally arrange their own furniture into the space.

This idea works at every level.  The less furniture you have, the more possibilities the buyer can see…  unless you have a very clever and minimalist arrangement, in which case you might be highlighting possibilities, not reducing them.  The fewer ‘personal’ items – family photographs, pictures, etc – that you have, the easier it will be for the viewers to imagine their own valuables and treasures in place.

Tidy rigorously, clean thoroughly, and then start getting ready to move.  Pack away your precious things.  It will make your home easier to sell, and it will help to prepare you for leaving.  It may have been a wonderful home to you, but you are moving on now.  Try and reconcile yourself to the idea that your new home is in the future, and that, for now, this house has become the place you stay in while you prepare for that new home.

Try to present each room in a functional sense.  If you’ve turned the spare bedroom into a kid’s playroom, made the dining room your stamp collecting den, and put the dining table across the lounge..  sorry, but put it back!  ‘Dress’ each room to show what it’s for.  Dining rooms need a dining table.  Double bedrooms should have a double bed… or, at very least, be arranged to show that one would fit easily enough.  It is no longer about how the space worked for your lifestyle… you now have to show how these same rooms can work for someone else.

It’s even worth considering a little redecoration, especially if the house has a very strong colour scheme and personality.  New people will bring new tastes, and the popularity of magnolia and cream is not that people love those colours, but that they are a blank canvas for new buyers to colour in as they choose.

Home staging can be time-consuming, and packing up possessions can be emotionally hard. But it’s free, and it needs to be done at some point anyway, so you may find it makes it easier to reconcile yourself to the move. More to the point, it might well make you money in a higher offer, and the work you put in may be why your house is chosen in preference to the others on the market.

 

Kerb appeal

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Kerb appeal is the buzzword to describe how attractive a home looks to a prospective buyer driving past to check out the area.  Not every home has sculpted gardens and manicured lawns.  Indeed, many town central properties open directly onto the street.  Even so, do not underestimate the importance of the look of your home from the outside!

First impressions are vital.  Often, indeed, those first impressions are made by house-hunters scouting the area they would like to live in.  It might not even be someone who has booked a viewing.  At very least your home’s exterior shouldn’t put people off.  At best it should encourage them to want to view the inside.

Clean your windows.  Clean off any peeling paintwork.  Consider repainting doors and window frames.  If there are any minor repairs needed – reattaching television cables, minor repairs in the wood work, etc – then doing these should be a priority.  If the garden is messy, tidy it.  If need be, have it cleared.

You must try not to convey the impression that your home is either hard to maintain, or badly maintained.  These suggest problems and expense, and will put someone off the idea of living there.  Equally, if the exterior looks good, then potential viewers will be encouraged to think that the whole house is well looked-after.

This, indeed, doesn’t just extend to your own home.  It might be that your neighbour cares a good deal less about the appearance of the garden than you do.  A nearby home with a front garden resembling the wild grasslands of the Serengeti, or an entry into the ‘thistle grower of the year’ awards, will do nothing to improve the value and saleability of your own home.  Telling the neighbour to sort out their garden might not win you any favours, but offering to do it for them could be greeted with enthusiasm.  It might take you a couple of hours’ work, but if it adds a thousand pounds to your sale price, it will be the most profitable work you do this year!

Get ahead of the game

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Once you have made the decision to put your home on the market, you have the chance to put together all of the information that you will eventually be asked for when you come to sell.

It is now against the law to market a home for sale without a Home Information Pack (HIP). You will almost certainly need a professional to arrange this, as the pack needs an Environmental Performance Certificate (EPC), as well as other legal documents. This will have to be addressed before your house goes up for sale.

But there are other useful documents, too, some or all of which you may be asked for by a potential buyer. The more things you have ready, the quicker a sale might go through…  so the less chance there is of a prospective buyer getting cold feet.

Besides, finding things before you need them is much better than not finding them when you do! In particular, try and dig out the following:

CHECK LIST

  • If you live in a leasehold property, find the lease, the details of the management company, and the costs of the service charges.
  • Find any guarantees that may exist on work done to your home.
  • Find any planning consents or buildings regulations approval information about extensions or alterations made on your home
  • Find a council tax bill showing the band and cost
  • If you have any of the documents from your own purchase of the house, these might be useful
  • If you have instructions for inbuilt appliances, alarms, or the heating/water systems, find them
  • If you have the installation dates and details of the installers, even if they are out of guarantee, this can prove very useful
  • Make a list of the items you intend to leave. There is a Property Information Questionaire that has to be completed as a part of the Home Information Pack, so think about it before you out the house up for sale,
  • Make a list of the utility suppliers – gas, electric, water, telephone, cable, satellite, broadband, satellite. Having bills to show is even better.
  • Find your buildings insurance details
  • Make a note of the location of the water stop-cock and the electricity fusebox

 

Going on the market

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So, you’ve chosen you’re estate agent…  what next? This article will help you prepare for the practical stages of getting your home on the market.

Home Information Packs

It is now a legal obligation to have a Home Information Pack (HIP) for every residential home sold in England. The basics of this must be available before a home can be marketed, even if you are selling privately without an estate agent. You will almost certainly need a professional to put the pack together for you – most estate agents and many solicitors can do this, as well as a number of independent companies. The cost of the pack varies, but expect to pay between £200 and £300 for an average home.

One compulsory element of the HIP is the Environmental Performance Certificate (EPC). This involves a qualified inspector looking at such things as your heating system, loft insulation and double glazing, and evaluating both the current condition and potential upgrade of the energy efficiency of your home. Fortunately, the HIP provider will be able to arrange this for you as a part of the deal, but as your home can’t be advertised until it’s done, the sooner you can make the arrangement for the inspection, the better. Getting the HIP is the first thing you have to do, and getting the EPC is the first part of the HIP. 

Creating Property Details

The property details that the agency creates will be the principle source of information for most viewers.  It’s not just those buyers who enquire directly that will be sent a paper copy of the particulars…  almost all automated estate agency systems also send the same information to the internet.   Getting the details right, then, is an important part of marketing your home.

Estate Agents are also under very stringent legal obligations to be accurate in their details, so expect and excuse the amount of time it takes to get things right.

Measuring, Photographing and writing descriptions

The agent will need to measure the property, and to take both internal and external photographs for the marketing brochure.

If you haven’t already, tidy your home for the camera!  You will know at what times of day the front and back of your property gets the sunlight – so make sure you tell the agent.

If there are any special details or characteristics of your home, do tell the agent.  The estate agent may not know that your bath-taps are engraved from sterling silver, or that the kitchen worktop was hand-carved from Dartmoor granite.  If you have guarantees or certificates to show the date and quality of renovations or extensions, have them ready, so that they can be mentioned in the particulars.

All buyers welcome any reassurance of quality.  If a prospective buyer sees two identical Victorian terraces in the same area for the same price, but one has a 10-year guarantee against woodworm and a 20 year guarantee on a recent re-roofing, then guess which one will sell first??!  Guess which one is less likely to make the full asking price?!  So, any information you have about the construction or interior of your home should be giuven to the agent before they write their descriptions.

Make sure you mention, too, all the local facilities and amenities nearby.  The agent will know about some of it…  the general area, the nearest shops, and so on… but it’s possible that there will be some local details that only residents are really aware of.  If there is a neighbourhood watch scheme, or a hidden alleyway for the rubbish bins, or a residents’ only parking bay, or a weekly visit from the mobile library…  any and all of these details and more might persuade the perfect buyer to arrange a viewing.

What should you include with the sale?

This is an often-asked question, and the final answer will vary from house to house.  As a general rule of thumb, if it is built-in, include it from the outset and say so in the details.  Integrated ovens and hobs, or inbuilt bedroom wardrobes, are good examples of things which should be left and should be mentioned.  Carpets should almost always be included – apart from anything else, they won’t necessarily fit a new home, and unless they are extremely expensive will be damaged by removing anyway!

You may consider mentioning other items, too..  but remember that if it’s written into the particulars, then it is legally considered part of the sale.  The likes of blinds and curtains are usually cut or fitted to the dimensions of the windows they serve, but their inclusion in the details makes a commitment to leave them with the house.  Equally, bulky items like freestanding white goods – especially dishwashers and washing machines – don’t always take well to being moved, and it may not be worth having older items moved…  but again, having them listed in the details is a commitment.

It’s generally better, with these kinds of item, to leave them out of the written details, but also to have decided in broad terms what you might leave behind.  This can be very important in negotiation, because of the very strong psychology that affects people in a bargaining situation.

People are very reluctant to give ground unless they feel they are getting something in return.  If you receive an offer for your home which is lower than you are prepared to accept, an outright ‘no’ can sometimes close the door on further talks, especially if the buyer has put forward what they consider to be a genuinely fair amount.

But if you are in a position to add more ‘value’ to the sale – by offering to include all the curtains and blinds, or even the white goods – then it is much easier for the bidder to justify an increased amount of money.  You may only be adding in things you’d have given away anyway, and the increase in bid might be far more than the value of those goods, but in negotiating terms both parties feel that the other side has made a compromise, and that both sides are working towards an agreement.

So, in general terms – if it’s fitted, include it; if it’s not, don’t mention it but be willing to consider using it to make a deal.

The one exception to this would be if you are selling a rental property, or if your home is in an area where investors are the most likely buyers.  Then, if you can leave furniture, consider including it in the details.  Investors are often very happy to buy a home that can be let out straight away.  Even in this situation, though, if you are unsure, leave it out of the written details, but let the agent know that you would consider leaving furnishings for the right buyer, and at the right price.

Do the details make you want to see the house?

The property details are important.  The description of your home should paint a picture and create an emotional response, giving a person who has never seen the inside of your home a real sense that it is a place they might enjoy living…  or at least, that it is somewhere they’d like to find more about.

Agents who overlook this, and who write nothing more than ‘window to front aspect, radiator, tv point’, and really letting their clients down.

Signing off – don’t delay!

Once the agent has created their details, they will send a copy to you for approval.  Read them carefully and check that you are happy with them.  If there are factual errors, correct them.  If there are descriptive points that you feel under-state or miss out the best aspects of your home, then let the agent know, and do so as soon as you can.  The agent will want to be marketing your home as quickly as possible, and may already have begun sending information out, so the earlier you get in touch, the better it will be for you!

Viewing arrangements

This is another important aspect of the marketing that you should discuss with your agent at the outset.

When can viewers come around?  In general terms, the more time that you can make your home available for viewing, the better.  Your perfect buyer might work nights, or have young children, or live a long way from Exeter.  It’s possible they will only be able to visit at times that most people would find inconvenient, or most agents would be reluctant to work.

Who will conduct the viewings?  Any agent that doesn’t offer to accompany every viewing should be ruled out from the start, even if you don’t feel you need accompanied viewings, because it suggests that the agency isn’t willing to work hard enough for you.  Some agents may refuse ‘out of hours’ viewings on principle: this again throws real doubts on their ability to provide a commitment to service in all other areas, too.

If you are in any doubt, get the agent to do all the viewings.  Estate Agents are usually confident and competent at showing strangers around a house.  An agent will be more objective than the owner, and viewers understand this: while the owner might exaggerate features or downplay problems, a good agent will give their best, honest assessment when showing someone around.

This is just good business sense, because if the agent says something that turns out to be misleading or wrong, not only are they stepping close to breaking the law, but they also undermine a future sale should they be ‘found out’…  and, of course, the new buyer is moving into their area, so the agent knows their future reputation is in the hands of the new owners just as mach as the old ones.

If the agent is conducting viewings for you, it’s probably better to be ‘out’.  The viewers will be less inhibited, and might ask more open questions, and stay for longer.  Plus, of course, the more people in the house, the more crowded it will feel.

For second viewings, though, it is a good idea to be available, if the agent thinks it would be of assistance.  By the second viewing, the house-hunter is already showing serious consideration of a property, and they are more likely to have direct questions about living in the house…  utility bills, local taxes, the immediate neighbours, and so on.

Some sellers are occasionally reluctant to give the agent a key.  Don’t be.  Agencies all have systems to ensure that the keys are not obviously related to any given property, and all agencies have insurances in place.  Nothing bad is likely to happen while an agent has your house-key, but even so you should be reassured that the agency’s own policies will add some further protections above and beyond your own insurance policies.

One thing you should clarify, though, is the arrangements by which viewings are confirmed, and especially what the agent should do if they cannot reach you.  Viewings should be confirmed 24 hours in advance or more.  Let the agent know what to do, though, if they try and can’t reach you.  Is a message sufficient?  Should an unconfirmed viewing be cancelled, or should it go ahead??  Address these issues before they arise.  If you can, give the agent permission to go ahead if ever there’s doubt.  Also, it is not unusual for people to call in and ask to view that day.  Be clear, once more, what the agent should do in this situation.

When waiting for viewings to take place, please understand that not everyone is on time… and occasionally, it might be the viewing before your home that is late.  If the agent can let you know that they are running behind, they should, but it’s not always possible if one is showing clients around non-stop.  Alternatively, the people coming to your home might be seeing several different properties, and could linger in any of them (or alternatively reject them from the front doorstep!)  So, consider all viewing times as contingent, because (as with any appointment-based system), a single interruption to the schedule might move everything around a little without notice.

Finally, if a viewing is booked with you, but the person doesn’t show up, please don’t be too hard on the agent!  Sometimes, sort kind of person that doesn’t keep an appointment, is not the kind of person to give the agent advance warning.  Chances are that the agent has waited some time to see if they are coming, and has called to ask if they are still on their way.  This can have a disruptive effect on other viewings later in the day, so it might be that the agent doesn’t have the chance to tell you that the viewing didn’t happen until much later.  It can be frustrating, especially if you’ve cleared up or gone out especially, but it’s not something that the agent should be blamed for: they will be as fed up by ‘no-shows’ as you are!

Viewing feedback

Having people look around your home is one thing: finding out what they think is another altogether.

An estate agency business must regard this as a key part of its role.  It does two things – it identifies issues about the home in question, so that the agent can let the seller know what, if anything, needs changing.  It also updates the agent as to what their buyers are looking for, so bringing them closer to their own market.  Any agency that doesn’t chase feedback after it’s viewings is letting down buyers and sellers alike…  so ask your agent how their company ensures that viewings are followed up!

Most sellers are keen to know what people thought of their homes after each viewing.  The one difficulty that agents have, though, is actually getting the chance to find out.  Following up viewings is vital, but do bear in mind two things: first, that not everyone can be reached at once, and messages often have to be left; and second, that very few viewers that didn’t like a house ever actually return calls to the agent to tell them so.

In theory, events should happen as follows:

  1. Viewing takes place
  2. agent gets feedback from viewer
  3. agent tells seller

In practice, what very often happens is this:

  1. Viewing takes place
  2. agent leaves message with viewer
  3. agent leaves second and third message
  4. no response is effectively a ‘no’ but there’s nothing to tell the seller
  5. seller feels the agent doesn’t keep them informed

Sellers get frustrated, sometimes, if they feel and agent isn’t passing on feedback…  but in practice, it is frequently the case that there is no feedback to pass on, which itself is an indication that the viewer wasn’t interested.  Neither agent nor seller wants a succession of calls saying ‘still nothing to tell you’.

Establish that your agent has a good system in place for taking feedback and passing it on.  But, if you’re sure this is the case, give some leeway to the agent to call you only if and when there is a need to.

 

When and why agents over-value

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One of the most common – and most harmful – problems that Estate Agents create for their clients is ‘over valuing’ a home.  In other words, the agent assures you they can sell your home for a really high price…. which in practice is higher than anyone is likely to pay.

Why is this harmful?

Because it means your house is on the market for a long time without selling.  Potential buyers might have visited, but they have used your house a the comparison to buy other houses…  they might like your place, but they can get a similar house cheaper elsewhere.

Worse, to find a buyer you’ll have to cut the price…  by which time, many buyers will know your home has been on the market quite a while, and will be suspicious that there’s something wrong with it.

Even worse than that, if buyers realise your home has been on the market for ages, they are much more likely to make a low offer, figuring (rightly!) that you’ll be getting more worried about ever finding a buyer.

So, an over valued house will take much longer to sell, and might well sell for less money, than one that is realistically priced from the beginning.

So Why Do Agents Do It??

The simple reason is – because they are desperate for you to choose their agency.  Many sellers choose the highest valuation…  it’s perfectly understandable, because we’d all like to get as much as possible when we sell!  And if an agent assures you that he or she can get more for your home than the next agent, well, it’s very tempting to believe them!

Add to that, many people will choose the middle valuation from three…   but people rarely choose the LOWEST valuation…  so many agents will tend to be overgenerous, hoping to be in the middle, because they don’t want to be the bottom valuation.

How agent’s commissions make this problem worse!

No estate agents will stay in business for long if they can’t persuade sellers to use them…  so in some respects its understandable that agents are keen to secure an instruction…  but many agencies make the problem worse by paying agents commission for getting instructions, regardless of whether the home sells at that price.

This means that the agent who visits your home has a personal financial incentive for ‘winning the business’, but not for getting the price right.  In other words, there’s a strong reason for the agent you meet to promise a really high price…  it might be persuasive enough to get the instruction and the commission, and it doesn’t matter financially to that agent if you end up selling for much less!

Some agencies even make matters worse still… by offering bonuses to staff members who persuade buyers to cut their price.  For the agency, a cheaper house is easier to sell, and the agency wants to sell things as quickly as possible.  But for the customer…  that’s YOU…  it means an even stronger incentive to win your business by promising a sale price that the agent knows you won’t get, meaning even more commissions when you have to reduce the price later. 

How to avoid agents that over-value

First – do your research!  The section in this magazine on ‘How Agents Value Your Home’ should help you through this.

Second – ask the agent to justify their valuation by showing you their research.  If an agent’s valuation seems high, demand to know what their evidence is for suggesting that their price is achievable.

Third – ask agents to explain EXACTLY how their commission structures work.  Knowing an agent gets commission if you sign up with them doesn’t necessarily mean their opinion is wrong…  but it’s important to know all the factors that might affect what they tell you.

Last – if one agent values much higher than others, ask them to explain what their company does that the other agents’ don’t do..   and then watch out for answers are just hot air.  Most buyers find homes online, so a very strong internet marketing presence will give one agent a real advantage over another. But having lots of ad-space in the local paper makes no difference – what does it matter if an agent takes out 6 pages in colour instead of 1, if your home is just one of 24 houses on each of those pages?  Having two offices in town does help, because it means that an agent will pick up prospective buyers from different suburbs. Fulfords, Bradleys and Underhills are the only companies currently with two offices in Exeter.  But having offices in other towns is totally irrelevant…  as if people buying in Exeter would go to an estate agent in Tavistock to search for property!

Think very carefully if the explanation you get sounds right… of course you want the highest possible price, but over-valuing is not the way to get it!

Summary – avoiding the trap of over-valuation

Don’t be tricked into going with the highest valuation, unless you are absolutely certain it is not an over-valuation.  Understand that all agents are under some pressure to err on the higher side of their opinions, and most agents have commission structures that encourage over-valuing.

Do your own research, so you know roughly how much your home might fetch in the current market.  Demand to see the agent’s own research, and insist they explain and justify their valuation.  Ask them how their own commission works, so you understand their motives.  If an agent does value highest, it doesn’t mean they are wrong…  but ask them to explain why their agency thinks it can get a higher price than the others, and work out whether their ‘reasons’ stand up to scrutiny!

Selling your home is a big decision; the more information you have to begin with, the more likely you are to make the best decisions when it comes to choosing an Estate Agent.