Understanding the difference
Valuation is a broad term and an industry minefield. Misinterpretation widely occurs between homeowners and ‘valuers.’ Before starting to calculate how much you can afford for an onward purchase its important to recognise there is a difference between a ‘marketing price’ and a ‘property valuation.’
When considering selling, the first step for most homeowners is to arrange for several local agents to pop around for an hour to talk about the house, individual marketing process and their thoughts on the value of the home. You need to know what you are going to sell for so you can also speak to mortgage companies about affordability on the purchase – so often problems can start here as many potential sellers will misinterpret the recommended marketing (or listing) price as the valuation and apply those figures to their ongoing maths. When those higher figures aren’t achieved then the dream home we set our hearts on is potentially no longer affordable – because most of us stretch ourselves as far as we can.
To be fair, many Estate Agents won’t explain the small print because the easiest service to sell is the one that promises the highest figure. So it’s understandable where the confusion might come in, but it can leave homeowners thinking their home will achieve a lot more than a buyer is likely to offer.
There are also different methods and guidance to ensure the property gets a fair amount of interest. However, from a buyers point of view they much prefer clarity in the price the owner is asking for their home.
…..and we’ve all seen properties marketed at a price that makes the eyes roll! Some agents market properties at extraordinary prices.
When it comes to estate agent valuations there should be 2 discussions about price:
- The upper and lower figures that buyer’s are most likely to be willing to pay or offer (a valuation window)
- The recommended marketing price to try and deliver as close to the upper valuation as the market will allow
With those 2 figures, most homeowners can make an informed decision as to how best to proceed with marketing their home.
Pay close attention to the ‘most likely’ willing to pay. Property valuation isn’t a science – but equally, it shouldn’t be a figure plucked out of the air either. We base this ‘most likely’ figure on the evidence we have of current buyer energy, recent sold properties and prices achieved, the property conditions and desirability both internally and externally, the road, location and distance to services and schools etc – these are the things we can use to recommend a marketing price with. But there are variables out of our control, and that constantly change, that can have a genuine effect on what price you might finally achieve. A simple example; the weather.
We believe that the marketing price should be an optimum figure based on the above considerations to achieve as much interest as possible. This should give your home the best possible chance of achieving the best price from a buyer.
Be aware that one of the easiest ways to get someone to sign on the dotted line is to tell them they will achieve a price over and above what any other valuation has mentioned. This is exciting and flattering, but is very rarely the case. The majority of buyers are far from naïve and will do their research before offering, probably viewed other properties locally and will have a contrast of relevant information as to why your home will be the one for them. If one agent is telling you they will sell your property for 10% more than anyone else, they are probably just trying to get you to sign their terms, rather than providing you with an accurate figure that represents the most likely price achievable based on the current market conditions.
You also need to look out for any ‘marketing cost clauses’ buried within the contract. Lots of estate agents will provide professional marketing at no cost. However, some will either have an option to pay for upgraded marketing (instead of someone in the office popping over to take photos on their phone) or will suggest it is included within their fee, but if you change your mind about selling you will be liable for the agents ‘marketing costs.’
The last thing to consider is the fee itself. Fees vary from agent to agent some agents offer a no sale, no fee contract, whilst others will charge you regardless. You’ll tend to find the most motivated agents will be the ones who are instructed on an all or nothing basis aka no sale, no fee – after all what could be more motivating than knowing you will only get paid if you deliver the goods! The fees themselves vary considerably depending on the agent and you will find the old adage of ‘pay peanuts, get monkeys’ still rings true. That’s not to say that paying a fortune to an agent will yield any better results. Ultimately, a reasonable fee for a job well done tends to leave everyone with a smile on their face.
What to do now?
If you are considering selling, try and arrange for 3-4 agents to visit and make sure you have some variety. A mixture of corporate and independent is always helpful if you want a complete overview of the options available and a comprehensive view of what is happening in your local area. Whatever you do, before you sign, check the reviews (thanks Google & Facebook.)
Written by James Nicol
Stanfords Forest Hill