By Simon Joyce.
I was video chatting with a friend of mine a few days ago who has recently sold his house over Nottingham way.
We were discussing the sales process and what sort of service he received from his agent and it transpired that the first agent he used couldn’t sell the property despite them having it on the market for around 12 weeks. He also informed me this was despite two price reductions from the original asking price. It was originally marketed for £265,000, then reduced to £259,000 and finally to £255,000.
He withdrew the property from the market for a couple of weeks and then instructed a new agent who marketed the property at the same price as the previous agent after their first price reduction; £259,000. It took a few weeks, however, the property was sold for the full asking price. My friend also told me that the second agent was very reluctant to reduce the price as this often puts potential buyers off.
I’m always up for some research that may help both us and our vendors sell their home more efficiently, so off I went…
The Second Agent Scenario
According to Rightmove, the UK’s biggest property portal, 6 in 10 of properties actually sell with the second agent instructed by the vendor. This obviously begs the question ‘Why couldn’t the first agent sell the property?’
The experience that my friend had offers some explanation; it’s the initial asking price that makes all the difference.
Even today, some of the biggest corporate agents still pay commission to their listers (the person who values the property) based on listing the property and not selling it. Some even pay sales negotiators on achieving price reductions!
Listers who are incentivised in this way are so focused on simply getting the property on the market and not on actually achieving a sale. It becomes an addition to list more properties than their competition thus creating overvalued properties that are simply too expensive for the market.
What happens then is that the property doesn’t sell and the agent is dis-instructed. The lister has already had his commission on the original listing so doesn’t give two hoots!
The next agent comes along and the property is marketed for a much more realistic value based on the knowledge they now have from the first agent’s failure to sell.
Report after report shows that this scenario results in homeowners eventually end up getting less for their property and it takes a lot longer to sell meaning they might not get the home they originally wanted.
Again, statistics from Rightmove show that vendors are twice as likely to find a buyer for their property if the original asking price does not change!
A recent analysis of over 300,000 listings between 13th May and 31st July shows that by 10th September, 63% of those which did not have their asking price reduced were marked as Sold Subject to Contract.
During the same period, of all properties that had at least one asking price reduction, only 32% were marked Sold Subject to Contract.
Properties that do not have their asking prices reduced are selling 26 days quicker than those that have had at least one price reduction.
Rightmove reports that in the current market, it typically takes just 21 days to find a buyer if a property’s asking price is not reduced. Conversely, for properties with one or more price reduction, the time to sell increases to 47 days.
Some 16% of properties currently listed on the portal have had at least one price reduction since May, down from 18% during the same period last year.
The average size of a price reduction sits at 5%, down from 5.2% during the same period in 2019.
Price reductions on properties for sale are very common and there are a number of reasons why market prices are lowered – it isn’t always because the price was too high in the first place. However, it is important to look at price reductions from a buyers perspective who won’t necessarily know the reason for the reduction.
The more times a price is reduced, the greater chance of it attracting the “there must be something wrong with it“ label – rightly or wrongly, this is the general perception.
Agents are Here to Serve
Agents are here to serve the homeowners and local community, not win a constant game of who has the biggest market share of properties for sale. So, if you do have an agent round showing you irrelevant pie charts, show them out quickly!
Good agents and top listers have vendors coming back to them when they look to move again because they see the game of estate agency as a relationship based business instead of a transactional type business.
Remember, an estate agents two objectives… to get the highest possible price for a vendor and in the quickest and most efficient timescale possible. We are here to serve others, not to make our graphs and pie charts look good.
If you would like any advice on selling your home, please contact me on 01332 300130 or 07977 235545.