Remembering who you work for

The peculiar practices in some markets can often leave us thinking that companies don’t always have their customers in the forefront of their minds.

This seems a strange thing to say but we see it day in, day out. Product/service led companies create something and then try to push it onto a market segment they think will benefit from it. They have an agenda to sell as many widgets, insurance policies, after care plans as possible and work diligently to achieve that objective.

Take the residential property market. Estate agents are contracted by a property owner to sell a property for the best possible price. Normally on a % commission of the final selling price, it stands to reason that it is in the agent’s interest to secure the best possible price. In most cases they have also advised on the price they property should list for.

But this is rarely the case. In fact, rather than working to achieve the best possible price and a win-win for themselves and their customer, some work their contact list, encouraging interesting parties to view and then make any offer below the price requested.

This is reinforced by the advice found on the nation’s favourite property TV shows, dedicated property channels and websites, where there is now a prevailing tendency towards never offering the full asking price.

The lesson: Remember who you work for. Don’t act like an estate agent!

Why? They don’t have their customers – the sellers who write the commission cheque – foremost in their mind. They chase the fast, easy buck, they rail road people into viewing properties they don’t necessarily want to view, and they create the disconnect between asking price and offer price.

Harsh? Maybe. But grounded in experience. Have your say?

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2 responses to “Remembering who you work for

  1. There was a chapter on this in “Freakonomics” I seem to remember: essentially it argued the marginal effort required to secure a full asking price offer was not worth the candle to an estate agent who would have to work twice as hard for a £5k fee than for a £4,500 one.

    IMO this argument credits estate agents with more power than they have as the market decides the property value, not the agent (and the surveyor and/or mortgage company will torpedo the deal if this the buyer agrees a purchase price which is more than a few % out based on recent transactions of comparable properties locally) , the agent merely oils the wheels by inroducing the parties to each other (usually via Rightmove or similar these days rather than by hitting the phones), looking after the logistics, and soothing frayed nerves where neccessary.

    Generally speaking nobody ever pays a full asking price either (apart from in 2006-7 style bubble markets I guess) average transaction price (and therefore true market value) is historically not much over 90% of asking price in the UK (and probably lower in these times I’d guess). You can check historic data on this via houseprices.co.uk if you want to see for your own area.

    The disconnect of transaction price vs asking price stems from two factors IMO one agent related, one not. 1. Anybody spending a six figure sum and not negotiating as hard as possible is a fool. 2. The real competition between agents is when they are being instructed, not when they are selling properties they already have listed – if 3 agents come out to value your proerty, you are likely to instruct the one who promises the highest sale price. By the time the penny drops that the market sets the price, and not the agent, you have not had any viewings and are 4 weeks into a 16 week contract and your only option is to drop the asking price. But the agent who gave the most over optimistic valuation still has 12 weeks to sell at the new lower price and pocket the fee.

    Ultimately though it’s easy (and fun!) to be hard on estate agents but if they don’t sell for you, you don’t pay a penny. The same is not usually true of ad agencies..

    Disclosure: I’m a part time property investor / developer and my other half is an architect

    • Thanks for taking the time to post such an in depth comment, Nick. Really appreciate the interaction.

      This post was inspired by personal experience of several estate agents over an eight year period – during the boom property years and the more recent recession. Each has their own personal approach to getting people through the door and encouraging offers. I don’t disagree with anything you say. I used this group to illustrate a point and stand by it. The people making offers aren’t where they generate their income, the seller is.

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