We often hear the comment that estate agents are responsible for the market values of property. Are they, and if not, then who is?
Estate agents have absolutely zero influence over market value. For that matter neither do property sellers.
In fact, what a seller thinks their property is worth, and what an agent may think it is worth, is irrelevant. That’s the truth. Sure, sellers may have a figure they would like to sell for and may not sell if they don’t achieve their price.
And yes, estate agents, through their experience, may have thoughts on what the market value is. But it is only the buyers that have any influence over the market values of properties. Why?
Buyers will pay for a property what they think it is worth. They will base their calculations on the market value of a property by comparing a property to other properties that are on the market and compete with it, and properties that have recently sold.
When put in a position where they need to compete against other buyers for a property they will be moved to pay their maximum – but what they pay is market value. When they do not have to compete they will offer lower than market value.
A property will sell when it is listed in the correct price range that attracts the correct buyers to the property.
To illustrate, if a property worth R 1 million is listed at R 1.3 million, the buyers that come to view it will expect to see a property worth between R 1.2 – R 1.3 million. When they see a property worth much less they don’t even offer on it, because they aren’t in the market for a R 1 million property. So they vote with their feet and view other properties that do offer what they are looking for.
Sellers sometimes tell agents that they will list high and consider lower offers. Our research at Harcourts shows that buyers will look in a range generally up to 7.5% more than they are willing to spend. So, if priced more than 7.5% above market value you are simply attracting the wrong buyers who are shopping for a different property, and they won’t make an offer.
We can’t control the market. We can only listen to the market and act accordingly. Experienced estate agents can provide accurate research indicating what comparable properties are for sale, and have sold. Use this information to set a realistic list price to attract the correct buyers.
Gone are the days when estate agents walked into a property and gave a seller a “thumb-suck” price – or so they should be. That would be like a doctor diagnosing a patient without learning what’s wrong with him.
Professionals will give you the facts. Use them to meet the market, attract the right buyers, and sell for the maximum.
Principal of Harcourts Platinum, and Director of Harcourts South Africa
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