Caution : Selling your property with Estate Agent? Property Value & Agents Motivations – understand the conflicts

If you are thinking of selling your property, you will most likely appoint an Estate Agent to act on your behalf. Importantly you need to understand Estate Agent motivation and the conflicts that exist. To enable you to deal effectively with this, the one thing you need to know above all else, how much your property is worth.

If you are actively managing your property you will have a reasonable idea of what it is worth. But you are still probably going to need to do some work.  Importantly, do not let anyone else tell you how much your property is worth. The reality is your property is worth whatever someone is willing to pay for it. 

You should absolutely speak with an estate agent or multiple estate agents about their view on price.  But remember, agents do not have the same motivation as you:

  • Your motivation – to sell your property at the highest price possible
  • Property agent – to sell your property as quickly as possible and to make sure it is sold

Why is this important? Because they don’t have the same objectives as you, they cannot – because if you don’t sell they don’t get paid.

How do estate agents deal with selling?

The way in which agency works is the same the world over.  Agents must do two things. First, they must try to win an instruction, or a listing, to sell a property. The reality is, it makes no difference what else the agent says and 9 out of 10 times the vendor will instruct the agent who says they can sell the property for the highest amount – that is just human nature. 

Estate Agent Motivation

So, what do you think an estate agent is going to say to you, the vendor? They are going to tell you one of two things:

  1. Tell you the highest number possible that you want to hear, or
  2. Just say I am not sure we can get your price? But I will give it my best shot

Post instruction, the estate agent will spend most of their time back tracking with you to get you to agree a sale price of less than what was agreed at the outset. This process is typically called vendor conditioning.

The estate agent gets a percentage of the property value so the more they get the higher their commission, yes.  But in reality if you look at the numbers, for the estate agent the options are:

  • Sale price of £525,000 @ 1.5% = commission of £7,875
  • Sale price of £500,000 @ 1.5% = commission of £7,500
  • No deal = commission is £0

If the estate agent achieves a 5% increase in price, the increase to the company is £375. However, if they don’t sell, they get nothing.  The estate agent has a completely different driver to you. How could you blame them, the equation simply makes no sense. 

Estate agents have two motivations: 

  1. Winning a sale instruction
  2. Selling a property 

How to do deal with estate agents when selling

As an investor, the best thing you can do is to ensure you know how much your property is worth. The best way to do this is to view value the same way as property valuer would determine property value. Valuers typically use three approaches to determine the value of a property, we cover these in our article How Surveyors determine property value.

Important notice:  Proptech Pioneer and its associated companies seeks to provide investors with guides, information and tools, but we cannot guarantee this information to be accurate or perfect.  You use the information at your own risk and accept no liability if you rely on this information.   Proptech Pioneer is not a tax advisor, accountant, conveyancer, lawyer, financial advisor or mortgage advisor.  You should seek independent advice from independent professionals before making any investment decision