This follows the storm that the research released on Monday by instruction generation tool Spectre generated on Twitter.
The PropTech service, launched by Agent Software, has showed that continued overvaluing of properties could have financial implications for consumers and may affect negatively the public’s perception of estate agents.
However, many brokers did not seem surprised, implying this is often standard practice.
Estate agent trade association NAEA Propertymark chief executive Mark Hayward (pictured) told Mortgage Solutions that a prime example of an unregulated market is when unscrupulous agents inflate property prices to obtain an instruction to sell a property.
He said: “Professionally regulated agents would not risk having their ability to practice revoked with this sort of behaviour as it shows very little care for the consumer who has invested time, energy and money to find their dream home. This is not an issue of law, as it is already covered by the Consumer Protection Regulations, but rather of professionalising the industry.
“Until Government addresses this, more people could lose out on their dream homes. Choosing the right estate agent is crucial to the successful sale of your property. Working with a professional agent who has an in-depth understanding and appreciation for the local and regional market place will ensure your property is marketed effectively at the correct price to the right buyers.”
Overvaluing properties is not new
However, Jonathan Clark, mortgage partner of Chadney Bulgin, said an estate agents’ willingness to seemingly over-value properties is not a new problem.
He said: “Most of us that have been in the business for some time will have come across it regularly. Too many of us are obsessed with property and therefore property values. Who can resist a quick look in the estate-agent’s window to check the price of our neighbour’s house, that invariably has a smaller plot and is in far worse condition that ours that has just gone on the market?
“Agents will often prey on this and flatter us with inflated values in order to get your property on their books, signing you up to a 12-week contract and then ringing you up after just two weeks to inform you that they will need to drop the price if you want to sell it.”
It is not a brokers role to advise clients what their house is worth
Craig Parkinson, mortgage, protection and equity release consultant at Continuum, said: “I have had clients as recently as this week advise that they are reducing their property to £425,000 when it was on the market six months ago for £500,000.
“Clients have an emotional attachment to their property and will usually always think it is worth more than what it truly is, that is fine in a buoyant market, we are however, not in that. The only true way in my opinion to get a fair valuation would be for the client to pay an independent valuer to value the house who has no emotional interest in the property, like the client, and is not looking to make money from selling the property, like the agent.
“It is not a brokers role to advise a client what their house is worth, we have too many ‘hats’ already, and it is certainly not something we are qualified to do. Clients can do their own research into what their house is worth on Zoopla and also looking at what similar property near them has sold for. Also, using an estate agent’s calculator that some of them have on their website is of very little use. When I used this myself, the property differential for what It could be worth ranged in brackets by £200,000.”
David Hollingworth from L&C Mortgages pointed out that an estate agent needs to create a balance, looking for the best price for the vendor which is its client, and by the time customers come to some brokers, it is likely there has already been a negotiation between customer and vendor.
He added customers usually make offers after looking around for several months.
“This research is to compare property prices. The broker’s job is not to suggest the best property on the market, this is a customer’s primary job. Brokers can only suggest what is available on the market in order to make sure clients can get the most affordable mortgage with a non judgmental approach.”
Property is a long term view
Andrew Montlake from Coreco, suggested that brokers should only be dealing with firms and brands they are happy to be associated with and have done their due diligence on.
“As with any sector there are some excellent estate agents around who do their best for their vendors without trying to force up prices unnecessarily. It is very difficult for brokers to advise on the correct value of a property as we are not qualified to do so, but a good broker will discuss the general market with a client and help to guide them where possible, offering advice on how to make an offer on a property that is affordable to the client.
“People have to remember that valuers are acting primarily for the lender and will look to protect a lender’s interest if they have to sell the property in the event of repossession. In some cases a more realistic valuation will help a client negotiate a lower price, but in today’s market where certain areas are in high demand some people are prepared to pay over the odds.
It should also be remembered that property is a long term view. People are buying a home to live in and we should stop looking at property as a simple commodity to make money on short-term.”
Several brokers working for estate agents refused to be quoted, after Mortgage Solutions asked for responses to the article about estate agents overvaluing properties to gain market listings.