Sometimes we hear sellers say that agents price properties low and drive prices down. That raises an interesting question: Are agents responsible for affecting the market values of property?
The reality of pricing is that it’s the market that determines market value. The market is made up of the buyers. What the agent thinks a property is worth is irrelevant, unless the agent is also a buyer and is considering making an offer.
It always amuses me when we speak to sellers and they tell us that a certain agent said their property was worth this or that. What really matters is what a buyer thinks it’s worth.
When an agent advises a seller on setting the listing price they will need to look at market facts. Sadly, what a seller needs for his property, or what it cost him, has no bearing on what it’s worth.
In addition to this, an agent will show a seller other comparable properties that are listed for sale – this represents the competition. Buyers will, in most cases, also look at these competing properties and then make a comparison.
Once the agent and the seller have identified a market value range, then the seller will determine what the list price should be. Simply put, if a seller wants to sell then he needs to price as close to market value as he can. The higher he is over market value the less likely a buyer will be to make an offer.
The bottom line is that buyers will determine the market value, not estate agents. If buyers feel the property is listed too much above market value they simply won’t view the listing, and they definitely won’t offer more than they believe it’s worth.
It’s a proven fact that properties that are correctly priced from the beginning of the marketing process sell more quickly than properties that are overpriced. In addition to this, properties that sell quickly sell for more than those that are marketed for a long time. So the closer you are to market value the more you will sell for.
Whilst agents have no control over market value, they have a significant bearing on how close to market value you will sell for. Their marketing and the service they deliver impact on this.
So, when a seller is unhappy with the market valuation of their property – don’t shoot the messenger. A professional estate agent has a duty to show you the market facts and guide you on determining market value – by they have no influence on what the market value is.
There is a market out there that is bigger than any of us, and it’s influenced by world economies, interest rates, the banks’ ability to offer finance, and sentiment. Unfortunately the agent’s influence on market value is non-existent. But they can influence whether or not you sell for market value.
Principal of Harcourts Platinum, and Director of Harcourts South Africa
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