A property near this writer was put on the market recently, but although it has gained a lot of interest, it still remains on the market. Here’s the problem: compared to its neighbours, the property is overvalued by around 25%. So, how do you know when an estate agent has overvalued a property and what can you do about it?
Detecting an overvalued property
If your house is already on the market, the first indicator that it could be overvalued is if you are getting no interest at all or are getting a lot of people coming in, but are getting very low offers. A valuation is simply what the agent thinks someone might be prepared to pay, and if people aren’t willing to pay that price, the property is overvalued.
In some cases, overvaluing is due to an ignorance of the local market, but a local estate agent should always have a decent idea of what the market can bear. However, there are some agents who sometimes deliberately overvalue, and there is a pragmatic reason for this; If the valuation is substantially higher than anyone else’s, customers are more likely to go with that estate agent.
The estate agent gets the house on the market, and they collect their commission. A price reduction may happen, or they may be lucky enough to find someone who will buy the house at that price – although this may take a while.
Overvaluing is rarely about higher commission, because selling a house quickly is always better for an estate agent than waiting for a while and hoping to get the full commission. This is because the differences involved could be around 10% to 20%, which equates to a few hundred pounds. It’s better to sell 10 properties in 10 weeks at £200,000 than seven properties in 10 weeks at £250,000.
Typically, overvaluation means you end up spending a lot more time with your property on the market, and this can lead to frustration and delays – especially if you’re in a chain.
So what can you do to if you think your agent has overvalued your home?
Gauge your own property’s value
With any valuation, the first thing you must do is to check property prices in the area. Look at roughly equivalent properties to see what they offer compared to yours. The number of beds is a helpful guide, with a four-bedroom property typically being worth 8% to 10% more than a three-bedroom property. However, there may be other factors that make your property more or less valuable than others, including road name, precise locale and nearby amenities. For example, a house opposite a busy nightclub is always going to fetch less than a virtually identical one a few roads over in a much quieter area.
Next, you need to look at the condition of your house. Upkeep of a listed house with single-glazed windows and in need of significant repair is almost certainly going to be more expensive in the long run when compared to an identical house that has double glazing and is in good condition. Buildings listed on the National Heritage List for England need extra paperwork, and it can take a while to draw up the documents for full planning consent and to get permission from the council – and there’s always the risk that the council may deny the request. As a result, due to the extra costs required, the overall price should be significantly lower.
Don’t forget those little extras
In addition, parking can add an extra 2% to 3%, and in London, it can add significantly more. An acre of garden can add an extra 10%, and outbuildings also add value. All these factors should feed into your valuation, and you should adjust it accordingly.
Make use of online valuation tools
You can also use a variety of valuation tools online, although the accuracy of these can vary depending on what they are measuring. In most cases, they take a previous price and adjust it to allow for price growth in the area. Some don’t even take note of the upper limit of property in the area. Here at Yopa, we recommend Property Price Advice’s valuation tool.
Get a second opinion
It goes without saying that an accurate valuation is essential to selling your home, and that’s why we strongly recommend getting a second opinion from a local property expert. In fact, if you would like one of Yopa’s friendly local agents to provide a no obligation second opinion, simply click on the button below.
