Property Tips by Chartered Surveyors from the Haynes House Manual series
Overvaluing residential property is now rife – and is causing major problems
The Financial Times recently published an eye-opening article by David Johnson about the current frenzy of overvaluing that’s causing major problems for buyers and sellers alike.
New evidence points to the problem of overvaluing being out of control across the residential property market and lays the blame primarily at the door of estate agents.
The number of estate agent branches across the UK competing to win business has increased in recent years to over 25,000. Even in a small town there may be ten or more agents on the High Street all trying to out-do each other.
This has created a highly competitive environment where marketing gimmicks, including aggressive overvaluing, have become widespread in the battle to persuade prospective vendors to list their properties for sale.
And seducing sellers with the promise of a higher sale price is often the simplest way to beat the competition particularly for less professional estate agents.
This certainly isn’t good news for vendors. After the initial ‘sugar rush’ has faded sooner or later there comes a painful realisation that inflated asking prices often lead to long drawn out selling periods and seller fatigue. Paradoxically this can ultimately result in the property selling below its true market value. When a house or flat isn’t generating much buyer interest the estate agent may eventually advise reducing the sale price, often more than once.
The trouble is, each of these price cuts is recorded and published on major property websites such as Rightmove.co.uk. So when would-be buyers see a record of price reductions, they often wrongly assume that a serious problem has blighted the property. Sensing blood, they may be tempted to try and cut desperate sellers down even more on price.
Major problems can also occur with mortgage lenders who rely on accurate RICS valuations carried out by qualified Chartered Surveyors who use comparable sales evidence to validate their opinion of market value.
The net result of this mismatch between agents’ and surveyors’ valuations is often disappointment in the form of an official ‘downvaluation’.
This can then cause sales to collapse because mortgage lenders base their loan-to-value ratios on the lower valuation figure, which can mean buyers struggle to proceed as they can no longer borrow enough to raise sufficient funds to pay the agreed price.
The Financial Times article goes on to advise that “It’s natural for every vendor to seek a premium price when it comes to selling, but it pays to take a beat. More vendors should get a RICS valuation, an internationally recognised framework that ensures valuations are compliant with ethical and regulatory standards. At the time of valuation, vendors should also ask for comparable sold prices — not asking prices. These can also be found on property portals or the Land Registry website.”
See Rightsurvey.co.uk for a quick guide to valuation and survey prices
Check out our other posts for more info that will help you pay the right price for the right property.
We would always recommend using RICS certified surveyors in every instance – don’t get caught out, get instant quotes for RICS surveyors here.
Ian Rock’s Rightsurvey property tips are taken from the Haynes House Manual series.
