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Avoid the Valuation Trap!

Tue 12 Dec 2023

Matt Bacon, Head of Valuations

Pricing your home IS the single most critical factor in determining a successful sale.

The Valuation Trap is when an estate agent intentionally overvalues a property to win your business, anticipating that they can later persuade you to lower the price. This can initiate a cycle of price reductions, creating a negative perception among buyers, causing prolonged market presence, diminished appeal, and eventually resulting in a sale for significantly less than if priced realistically earlier.

The Irreversible Consequences of Overvaluation

Underestimating the irreversible damage caused by the initial overvaluation in the 'Valuation Trap' is a critical mistake. Trying the market at a higher price leads to necessary price reductions, and even relisting or making changes doesn't fully replicate the initial surge of interest in the crucial first week. Savvy buyers can uncover the listing's history despite these efforts.


Genuine Case Study (with another local agent)

Listed at £450,000. Reduced after week 1,2,3,4 and 6. Finally, a sale was agreed ar £360,000 (a whopping £90,000 less). But worse still, the sale had since fallen through.
The owners of this property appear to have been advised badly and let down by their agent.
 


The First Week on The Market - See Graph of Interest Below...

The first week is crucial for a property's visibility and best offers. In the 'Valuation Trap,' missing this initial interest makes achieving the property's true worth challenging, as depicted by the graph's initial surge followed by a decline that isn't recovered.

Potential buyers, driven by market research and their own due diligence, tend to bypass properties that deviate from a reasonable price range, causing a substantial loss of immediate impact and reducing the chances of a sale. 


The Benefits of an Accurate Valuation: Stimulating Demand and Competitive Offers

In contrast to the perils of the 'Valuation Trap,' a well-calculated and precise property valuation can catalyse a significantly different outcome in the selling process. When an estate agent accurately assesses a property's value, it leads to a much more favourable scenario for the seller.


Benefit 1: Fostering Competitive Interest

An accurately priced property attracts more interest and competition from buyers, fostering a dynamic selling process. With a fair valuation aligned with market value, your property is perceived as valuable and desirable, prompting substantial interest and competitive offers.


Benefit 2: Encouraging Multiple Offers

Recognizing your property's attractiveness and fair pricing, buyers are inclined to make compelling offers, potentially leading to a higher final sale price in a competitive market.


Benefit 3: Balancing Your Expectations with Market Interest

A well-informed valuation balances the seller's expectations and genuine buyer interest. Realistic pricing builds trust, credibility, and transparency, reducing the chances of prolonged negotiations and price reductions.

 

Choosing the Right Approach:

A reputable and competent agent, well-versed in local market dynamics, will conduct meticulous research. They should consider various factors to provide an accurate market valuation, ensuring you are reliably informed. You should expect to be shown:
  • Comparative Market Analysis:
    By examining the prices at which similar properties have recently sold in the neighbourhood, an agent can gauge the realistic value of a property and set a competitive yet reasonable price.
  • Current Market Conditions:
    Considering the prevailing trends in the real estate market and the economy, an experienced agent can adjust the valuation to align with the present demand and supply dynamics.
  • Property Condition and Unique Features:
    Recognising the distinctive aspects and conditions of the property can enable an agent to highlight its value proposition effectively, ensuring a fair and appealing pricing strategy.
  • Local Knowledge:
    A comprehensive understanding of the local area, including its amenities, schools, transportation, and upcoming developments, can further contribute to an accurate valuation that resonates with potential buyers.

 

Before selecting an estate agent to work with, we would strongly encourage you to ask the following questions:

Click on each question for more info...

1. Could you provide examples of similar properties sold recently in this area and their sale prices?

2. How do you assess the current market conditions and economic trends that might impact the property's value?

3. What unique features or aspects of this property contribute to its valuation?

4. Please explain how long similar properties have typically stayed on the market in this area and how their pricing strategies have influenced their selling time.

5. Do you consider the current demand for properties in this area when determining the value of this property?

6. What is your approach to setting the initial listing price, and how do you ensure it accurately reflects the market value?

7. Could you provide references or case studies of properties you have successfully sold in this area, along with their initial and final sale prices?

While you might feel awkward asking questions like these, remember this is probably the most significant financial transaction you will ever make. You’re also likely selling for an important reason, such as moving to a desired school catchment area, downsizing to fund early retirement, or selling a deceased loved one's property. All of which require the best price and a speedy sale. You must avoid a cycle of price reductions, a prolonged sale or, in the worst case, no sale at all.


I hope this Article is helpful to you. If you are considering bringing your property to market, please don't hesitate to contact me directly.  


p.s.  Are you curious about what your property could be worth? Find out in around 53 seconds. Click here.

p.p.s. Download our eBook on how to get the best selling price for your property by clicking here.