Most people, in my experience, latch onto the marketing appraisal figure that the Estate Agent (i.e. the person trying to sell the property to them) has on their details. Below, in summary form, I’m going to give you 5 reasons why I believe you should ALWAYS disregard this figure.
The marketing figure is exactly that, it’s a figure that someone believes is an appropriate marker to start negotiations from, IT IS NOT A FORMAL VALUATION! There are many reasons why this number may be questionable sometimes, for instance who decided it was the correct Anchor (an Anchor is a negotiation term whereby the seller puts a price on something in the hope that the buyer will “Anchor” on it and as such negotiations start close to the Anchor figure rather then possibly much lower).The Anchor could have been driven by the Vendor who is determined, for whatever reason (for instance negative equity) to create it and hopes that if they market the property for long enough someone will buy it eventually.
Can work in a rising market, not as good a tactic in a falling one though. Anchors are exactly as the word suggests, a heavy object which can hold you back or tie you down. DON’T LET IT. Ignore the anchor if you can and try to establish the value of the property yourself from online systems, there’s a wealth of them out there, along with and possibly more importantly establish what the property is ‘worth’ to you. It may be worth more or less than the Anchor figure, only you can decide that.
It’s a fact in the industry that having a for sale board up (preferably a few) in a particular location can create the illusion of your being the local go to guy and as such others in the locality may well want to sell their house with you as well. What does this matter I hear you ask? Imagine your an Estate Agent who would like to get properties on the market in a particular location.
There may well be the opportunity to get a board up in a particular road by telling the Vendor that you can get them say £50,000 more than another agent. What Vendor wouldn’t take you up on that? In reality though it may be that the unscrupulous agent if they work this way, knows full well that the property won’t sell at that price but they also know that they would have at least 3-6 months before the Vendor realized it (i.e. no viewings).
By that time the agent’s objective is met, i.e. board up in the location and hopefully more business (valued realistically now) in the same area. I have to emphasize, such practices would only be carried out by a minority of agents and they would be, in my view, considered as very unprofessional or possibly worse.
Formal or informal
The market appraisal provided by the Estate Agent isn’t always derived from a formal methodology, as would be the case if the valuation was carried out by a Chartered Surveyor and Registered Valuer. The latter has to abide by very strict rules and guidance notes, considering various factors and having evidence which may well be questioned should the matter go to court.
As such the Registered Valuer will always work to this methodology and will do their best to provide an accurate Market Value which is considered independent of those involved in the process.
The Anchor figure/marketing appraisal figure referred to above has different weight and is wholly dependent upon the general market conditions. For instance in a buoyant market where properties are selling quickly and are in demand, then it’s possible that the sale price will often exceed the marketing figure as buyers are desperate to get on the ladder quickly.
Whereas in a falling market the opposite may well apply. There are various other factors which may influence whether you pay the full marketing price for the property and most of those revolve around what it’s worth to you, for instance is it near to a particular school, work, transport hub, family, park, etc. etc.
Remember though the golden rule in negotiations, i.e. there are no rules. You can decide to negotiate from whatever point you choose and that point is wholly dependent upon the surrounding circumstances as outlined above. My own view is that you should always try to keep the moral high ground in negotiations, e.g. don’t make things up, pretend something is wrong that isn’t or otherwise try to get the price down by deceit or other such tactics.
Negotiation is simple, decide how much you think the property is worth to you and offer less, you can always increase the offer later (assuming of course it’s not been sold to someone else first).
Historic Price Information
As mentioned above there’s a wealth of information out there these days, i.e. price paid information from Land Registry, etc… TREAT THIS WITH CAUTION and ensure you do your research as well.
For instance, what condition was that property in when it last sold?
Did it have huge garden and was sold higher than others in the road due to the development potential, which has since been lost as the land has been sold off separately?
Was the sale between family members or otherwise tainted in some way?
In essence there’s a multitude of things that may have affected the historic sale price, use it as guidance and do your research. Being armed with facts and figures is a fabulous starting point in a negotiation, but not if its found upon closer scrutiny that those facts are incorrect and the figures are too high for some reason.
These are merely my thoughts and the above should be taken as guidance only, not all and I can’t say for certain any, agents act as outlined above as such practices are by default kept under raps. Any that do are the exception and would I’m certain be frowned upon by reputable Estate Agents, i.e. those whom are members of a particular Trade Association or similar.
For legal reasons I state the following: This article is saying what could happen rather than what does and is not intended, whether by expression or implication, to be taken literally and used to form an opinion on one or any Estate Agent. You should always seek the advice of a suitably qualified Chartered Surveyor before making any decision in respect of buying, selling, leasing or otherwise dealing with property.