Clients who over-rate the value of their properties
It’s been said before - but it has to be said again because the practice still, it seems, is prevalent throughout South Africa: estate agents are still finding that some of their colleagues are only too willing to give a too high valuation in order to get a mandate. In nine cases out of ten this is a clear indication, says Lanice Steward, MD of Anne Porter Knight Frank, that either they do not know the value or they are cynically out to eliminate competition for the mandate.

“One of the tough truths regularly faced by estate agents is that there will always be some sellers who are inclined to shoot the messenger bearing unwelcome news rather than to accept the facts,” says Steward. “These clients will deliberately ignore sound advice and then go for the agent who gives them unrealistic over-priced valuations, sometimes as much as 20% above the true market value. They are still, thank goodness, a minority, but there will always be one or two clients who will not listen even to the most experienced agents and who will listen to a complete charlatan simply because the latter bears the news they want to hear.”

When a ludicrously high valuation is given, says Steward, it almost invariably happens that some three or four months later the agent is called in, castigated and told that he or she has failed.

“The mandate will then be given to an agent, who will probably persuade the owner to list at a market price, possibly claiming that the unsuccessful efforts of the previous agent have driven away potential buyers.”

The reluctance to accept a rational price valuation initially, says Steward, is often the result of a lack of trust in the agent. He or she will be suspected of lowering the price to get a quick sale.

“This,” says Steward, “is very seldom the case in reputable agencies. Apart from anything else, the difference in the commission paid between a high and a realistic price is usually negligible.

“On a R1,5 million home, for example, the agent operating on a 5% commission will get a R75 000 payout, R37 500 going to the agency. If the property were sold at R1,8 million the commission would only be R15 000 higher.

“Bearing in mind that most agents work as part of a team of two or three, this means that the ‘loss’ to the agent would be around R3 750. It is clear, therefore, that very few agents would risk misleading a client for so small a sum, especially as all of them know that their reputation will be tarnished if it is proven once or twice that they have overpriced.”

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