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Estate agents who overprice properties cost sellers £4.3bn
Estate agents who routinely overvalue properties are potentially leaving many homeowners worse off as they can be forced to make huge price cuts in order to sell their property, a new Which? investigation has found.
Which? analysed hundreds of thousands of property sales in England and Wales between September 2015 and 2016, and found that one in five properties (19%) had to be heavily reduced - meaning the initial asking price was reduced by 5% or more before they sold.
We calculate that unrealistic and overinflated valuations could be potentially losing sellers as much as £4.3bn, and significantly slowing down the time it takes to sell a property.
Find out more:How to choose an estate agent - read our guide
When you want to sell your home, it may be tempting to choose the estate agent that values your property at the highest price. However, the results of our investigation suggest that while it may seem like agents are doing a favour by trying to get more for your home, the property can end up selling for much less than average.
We compared listing prices with sale prices for more than 370,000 properties sold in the 12 months to September 2016 to see which agents had cut the initial asking price of properties in order to sell them.
We found that an estimated one in five (19%) of all properties sold in England and Wales had to be reduced by at least 5% in order to sell, which we classified as 'heavily reduced' in value.
For properties that were not heavily reduced before selling, Which? found that the average listing price was £261,000, before an average sale price of £260,000. For properties that were heavily reduced, the average listing price was £266,000, before an average sale price of £241,000, potentially leaving the seller £20,000 worse off.
We believe that the practice of overinflating the price of a property when it is listed is potentially losing sellers £4.3bn a year.
What's more, this tactic could be slowing down the sale of your home. We found that heavily-reduced properties took on average 64 days longer to sell than all other properties.
Which regions saw the most heavy reductions to property prices?
There were stark differences in overvaluation across the different regions in England and Wales. In south east England and east of England, only 11% of properties were heavily reduced. In London, 13% of properties were heavily reduced, while 17% were heavily reduced in the south west. However, in both Wales and the north east, more than a third (35%) were heavily reduced.
We also found big differences at the local level. For example, in postcode district SA4 (Swansea), 46% of properties listed with estate agent Peter Alan were heavily reduced, compared with just 14% of those sold with another agent, SA Property. Peter Alan told Which? it works 'in the best interests of its vendors to achieve the best possible price.'
The chart below shows the average number of price reductions for each region in England and Wales along with the how the largest agent in that area performed, and the agents that made the largest and smallest proportion of heavy reductions to property prices.
- To see how your local agent compared, check out our guide on finding the best estate agent for more detailed analysis
How was London and the south east affected
London and the south east are where some of the country's most expensive homes are bought and sold. And while some agents were missing from our analysis of London and the South East, we found several agents that had heavily reduced more than a quarter of their properties, as the graph below shows.
Online-only agents
We also compared how online-only agents fared against their more traditional high street counterparts. Our research suggests that properties sold through online agents sold on average 38 days faster than traditional agents. Furthermore, while 19% of properties sold by traditional agents were reduced by 5% or more, for online-only agents that figure was only 13%.
- Check out our guide to online estate agents to find a detailed breakdown of how online agents performed.
What do estate agents say about this?
Of course, properties aren't just reduced because of overvaluing. Chestertons and Marsh & Parsons said that the referendum to leave the EU in June and changes to stamp duty affected the London market, while James Pendleton added: 'The agent is doing the customer a service by reducing [the property price]' to achieve the sale when markets are falling.
EasyProperty claim that it sells hundreds ofnew-build properties, the prices of which are set by the developer, and not themselves. Outof the easyProperty properties that were actually sold on behalf of private individuals, they claim to have reduced far fewer than is listed here.
Fine & Country said it 'often deals with cash-rich sellers happy to start at a higher value'. Countrywide, which owns Faron Sutaria and Watson Bull & Porter, said its properties sold for 97.8% of the listing price in 2016, adding that Watson Bull & Porter only sells on the Isle of Wight.
Proctors asked for more details of our investigation, which we provided. We haven't heard back at the time of writing.
Tips on selling your home from Which?
David Blake, Principal Mortgage Adviser, Which? Mortgage Advisers, said: 'When selling your home, make sure your agent can provide evidence of similar sales to back up the valuation. If the valuation is not realistic, you could end up losing thousands of pounds and wasting a lot of time.'
When you plan to sell your home, David says:
- You should get at least three valuations on your home and check what similar properties in your area have recently sold for.
- You should also keep an open line of communication between you, your estate agent, your conveyancer and prospective buyer, throughout the process.
- When you have found an agent, avoid accepting sole-agency agreements with long tie-in periods.
Find out more: Selling your home - read our guide to moving up the property ladder
- How much is my house worth? Use our interactive map to see house price activity in your area
- We've listed nine essential tips for selling your house quickly and effectively
- We've also listed seven reasons why your house isn't selling
