ESTATE AGENT VALUATIONS… Estimation Of Likely Selling Price Or “Pie In The Sky”
In South Africa, we real estate professionals are bound by the laws of South Africa. The law differentiates between a valuer and an estate agent when it comes to the determination of the value of a property.
Basically, a valuer is specialised in the valuation of property according to various methods, which may be applicable based on the nature of the property and/or the reason for the valuation. These valuers hold a specific qualification and can charge for their valuation service.
In recent years, a single property valuer qualification was initiated and holder of this qualification can render valuation service, subject to various restrictions. A valuer holding this qualification can charge for their services as long as the property is a single residential property within the confines set out by the Act.
“Although an agent cannot tell you what the market value of your home is, they have the experience to interpret what the market is accepting in comparison to what is available.” -Jan Myburgh, Harcourts Real Estate SA
But then, what about estate agents? Do they not render valuations?
An estate agent is a specialist in the current market and specifically of trends in the market which impact the market value of property. As estate agents, we mostly, well let’s say almost exclusively use the Comparative Market Analysis method. In essence, we know what properties went for what price, when, their condition at the time of sale and the impact of the economy and local trends and on the basis of that we determine a range within which the property is mostly likely going to sell. The more research and the better the particular agents know that market the more accurate that estimation.
When an estate agent is approached for a valuation, it very often may be assumed that the property might be sold. In many cases, a client will hint at the possibility that other agents have or very soon will be on site to also provide their professional input on the likely selling price.
We real estate professionals are very much a competitive group by nature and experience has taught that it is human nature for sellers to form a closer bond with an estate agent who “sees the same value” in his property as he or she does.
Therein lies a possible dilemma, do you value based on what is actually selling and possibly return a lower albeit more accurate and defensible value; or do you look to find value amongst the the values of properties lying dormant on the market at listing prices so far above what sellers see as their value that the owners have long since accepted the agent’s for sale board as part and parcel of the landscaping on their verge.
There are some pointers that an agent may be selling flying pies:
1. The valuation is far higher than the other agents;
2. After researching the particular agent you see lots of listings but the boards just don’t go down unless they are replaced as the listing agent;
3. Speak to other clients of that agent and speak to them about their experience;
4. Get a property report which shows the actual sale prices, you may be surprised, what similar house as yours recently actually sold for;
5. After listing, you either have interested viewers but no offers or a deathly absence of anyone;
6. The only interest you have is from agents interested in your listing when the first mandate expires;
7. The only buyers through the property are either buyers from out of town or buyer who have no idea of the area; and
8. In some cases, it may happen that the property sells at the inflated price, only for the buyer not to get the bond after the visit by the valuer, because they could not find the value.
There are other symptoms which may indicate that you and or your property may be under the spell of a pie in the sky valuation, fortunately this will not lead to mortal danger but it can lead to some sad ailments, like stale property syndrome, which eventually leads to selling below value; delayed plans, lost opportunities, unnecessary inconvenience, and endless frustration.
In conclusion, if you get a great valuation, that is great. It is, however, prudent to check how the agent arrived at the valuation as well as their track record of accuracy between valuation and eventual selling price. Don’t be too quick to jump on a high valuation.
If it’s too good to be true it usually is.
Article Credit: Clinton Begley | Source: The Port Elizabeth Property Blog, (MYPE)
About the Author:Clinton Begley (PPRE MPRE CEA B.PROC (NMMU)) is the co-founder, Principal/Director at BOLD REALTY, in Port Elizabeth, South Africa. In addition, to his passion for people and real estate, he is also an experienced trainer, coach, and mentor. He holds a B.Proc degree through the Nelson Mandela Metropolitan University and is a non-practising Attorney, Notary, and Conveyancer (with over a decade of experience).Download full article