Estate agents are increasingly overvaluing properties to gain listings in a challenging market, according to instruction generation tool Spectre.
The PropTech service, which was launched by Agent Software, says that continued overvaluing of properties could have financial implications for consumers and a negative effect on the public’s perception of estate agents.
Tricky market conditions – which could be responsible for some agents overvaluing properties to secure much-needed instructions – have been well-documented in recent months.
According to recent research from Moore Stephens, 153 estate agencies have gone out of business in the past year with more than 7,000 showing signs of ‘financial distress’. Meanwhile, HM Land Registry recently reported that the official number of sales recorded in England in March was down 9% on the previous month and almost 22% down on the same month in 2017.
These challenging conditions could be put down to a combination of increased government regulation, business saturation, commission fee erosion and the rise of online and alternative competitors.
“We work with thousands of agents across the country and the feedback we’re consistently getting is that in a competitive and challenging market, some agents are overvaluing in order to get the instruction from the vendor,” says Heather Staff, co-director of Agent Software.
The problems associated with overvaluing properties for vendors are clear. A lack of buyer interest due to a high price could mean a property is left on the market for much longer than is necessary, while the subsequent need to reduce the price could put vendors on the back foot when it comes to negotiating.
“These factors combined mean that property sellers whose homes are overvalued could end up selling for significantly less than if the property was marketed at the right asking price from the beginning,” explains Staff.
“This scenario represents a financial cost and loss of time for consumers as well as a negative impact on the agent’s final commission fee.”
If an increasing number of consumers have the negative experience of an agent overvaluing their property and this impacting on their eventual sale, it could damage estate agents’ public reputation.
“The vast majority of agents value properties correctly and offer fantastic customer service, but it’s those who don’t that cause problems for the industry as a whole,” says Staff.
She suggests that agents should resist the temptation to follow suit when faced with a competitor who is regularly overvaluing. Instead, they should recognise the value of second instructions, which tend to command a higher fee and sell more quickly.
“Vendors are increasingly aware of their ability to switch, particularly if they feel misled by their existing agent. The key is to keep in touch with them, so that when they do decide to switch, you’re front of mind.”
Spectre is a hugely successful auto-prospecting system which processes data on all properties currently on the market within chosen areas. These properties are then monitored, with Spectre identifying the key moments when a vendor is most likely to consider switching agents.
The tool, which helped more than 1,000 agents win fees of over £25 million last year, then automatically generates tailored letters depending on the vendor’s circumstances (e.g. price reduction, end of sole agency agreement), allowing the agent to contact active prospects at just the right time to gain the second instruction.
“Our aim is to give agents the best possible chance of getting the second instruction thanks to smart automated marketing. If agents in your area are overvaluing, Spectre can help you to target these properties to win the instruction and market them more effectively if the vendor does decide to switch agents,” Heather Staff concludes.