Too many overvalued properties on the market
Estate Agents Overvaluing Homes to Gain Instructions ‘Helping Nobody’
Sellers are being advised to be realistic with their asking price if they want to attract buyers amid a slowing housing market.
The latest research by GetAgent.co.uk suggests that more needs to be done to stop the practice of overpricing homes to win instructions.
According to the estate agent comparison site, just 36% of all homes that have seen a price reduction in the current market have been listed as sold subject to contract (SSTC).
GetAgent analysed current market stock levels, looking at both the total proportion of homes for sale that have seen a price reduction in the current market, as well as the proportion of those price-reduced homes that have actually attracted a buyer.
The figures show that across England, an estimated 34% of total stock for sale, excluding homes already marked as sold subject to contract, have seen an asking price reduction since being listed for sale.
This level of asking price-reduced stock for sale remains fairly consistent across the market, with the East Midlands having the highest level at 37%, while the North West has the lowest level at 31%.
However, while an asking price reduction may be a common tactic in increasing buyer interest, the figures from GetAgent show that it doesn’t necessarily secure a sale.
Of all the homes listed for sale to have seen an asking price reduction across the market in England, just 36% had also found a buyer and been marked as sold subject to contract.
The South West was home to a slightly higher percentage, with 40% of all homes to have reduced in price finding a buyer, while in London, this proportion dropped to just 30%.
The co-founder and CEO of GetAgent.co.uk, Colby Short, commented: “It has always been clear from data that pricing a property inappropriately makes a successful sale far, far less likely. For a buyer, seeing a price come down makes the property seem less appealing and often leads to a lower selling price than if the property had been priced appropriately from the start. For a seller, these unrealistic expectations often mean disappointment with a result that may still represent a job very well done by the estate agent.
“Unfortunately for agents and vendors, vendors mainly select agents based on the valuation provided or the fee charged, which often leads to overvaluing of properties and ends up helping nobody. Using performance data to prove an agent’s superior quality allows the agent to build trust from the outset, price the property accordingly and charge a fair fee for the job done.”
The effect on the market
– There is a significant gap between the asking prices listed by sellers/estate agents and the actual sold prices of homes in the UK housing market. In March 2023, the average asking price on Rightmove was £365,357 but the average sold price according to the Land Registry was £289,818 – a 22% difference.
– The gap exists because sellers tend to list their homes at ambitious asking prices to try to get the highest possible sale price. Some estate agents also overvalue properties intentionally to win listings from sellers, planning to persuade them to reduce later.
– Listing a home too high can backfire, causing it to linger on the market for months. The longer it stays listed, the staler it becomes, often necessitating bigger price cuts and potentially selling for less than if priced accurately initially.
– For a quick sale at the best price, the advice is to list the home at an attractive, realistic asking price to generate a “bidding frenzy” among multiple interested buyers afraid of missing out.
– If lacking interest, sellers are advised to request a final sales push before reducing the price. Any reductions should be significant (e.g. 6.5% on average currently) to re-spark interest. Switching agents when reducing can also help with a fresh marketing push.
The key takeaway is that overpricing tends to be a self-defeating strategy, while pricing accurately based on market value generates the most competitive bidding situation to maximize the sale price.