The point of estate agents?

SinkingFast

I read on here repeatedly "a house is only worth what a buyer is prepared to pay".

That being the case and bearing in mind the expense involved in using estate agents - what is the point of market evaluations by estate agents?

Doozergirl

Because buyers are generally going to be prepared to pay roughly the same as similar houses are available for? So a market valuation tells you roughly the market price - what most buyers would see a sensible sort of price where comparables exist. I guess most people don't have a great deal of knowledge on what their house might be worth although if you put any house on the market for 'offers over £10' I suspect that the eventual offers would still be very close to the market value.

I do find that phrase tedious though. There is potentially more than one buyer, therefore more than one price that people would be prepared to pay. You have to gauge the market, not just one person if you want to sell a house for the optimum price in a sensible timeframe. One low offer does not devalue a house. Several would clearly suggest the limit of what people are prepared to pay.

googler

Indicating to the seller what their house might sell for, so that they can budget for their next move?

Giving the seller a reality check so that they're not under the impression that a 10% rise in average price over the whole country over 6 months corresponds to a 10% rise over what their next door neighbour sold for a few weeks ago?

googler

.. and yes, the seller could figure out a valuation themselves from zoopla, ourproperty etc. - but what they'd be missing would be the contact with viewers and buyers over the last few months or so. The contact that should give the EA a feel for what people are prepared to pay, what's popular and what's not, what they're tending to like and dislike, etc.

Comments made to the EA like "Oh, I wouldn't pay THAT for a house in THAT STREET/ESTATE/AREA" won't be available to the seller looking at zoopla......

Doozergirl

googler wrote: »

Comments made to the EA like "Oh, I wouldn't pay THAT for a house in THAT STREET/ESTATE/AREA" won't be available to the seller looking at zoopla......

Neither would a sensible valuation! You might as well stick a finger in the air than use that site to value your house.

googler

Doozergirl wrote: »

Neither would a sensible valuation! You might as well stick a finger in the air than use that site to value your house.

I'm not referring to either their zed-index, nor their estimates for individual houses - I'm talking about looking at zoopla (or ourproperty, or nethouseprices, whichever you choose) for ACTUAL PRICES PAID and when they were paid in the same street, estate or area that the seller is in.

MissMotivation

SinkingFast wrote: »

I read on here repeatedly "a house is only worth what a buyer is prepared to pay".

That being the case and bearing in mind the expense involved in using estate agents - what is the point of market evaluations by estate agents?[/QUOTE]

Local knowledge
Access to statistics (Rightmove Plus, agent's own historical data etc)
Dose of reality (Everyone thinks their house is better than any others)
Access to Buyer's requirements (Database of buyers and what they want to pay for particular types of property or areas)
Experience!

Most sellers that I talk to have not got a clue what their house is worth.

SinkingFast

Thanks for your replies. I think the point I am trying to understand is that if EAs have all that knowledge then a buyer comes along and says it is only worth XXX because that is all they can afford/are prepared to pay then who is right and who is wrong in terms of pricing?

If a vendor is paying (in our case £4,500) in fees to an EA for this specialist service why is everyone so quick to say "It is only worth what somebody is prepared to pay for it", regardless of all the specialise knowledge an EA may have.

If I liked a house worth a million pounds and made an offer of £500k because that is all I think it is worth (knowing it is all I could probably afford) does that instantly devalue the property or would I be seen for what I really was - a dreamer?

princeofpounds

Thanks for your replies. I think the point I am trying to understand is that if EAs have all that knowledge then a buyer comes along and says it is only worth XXX because that is all they can afford/are prepared to pay then who is right and who is wrong in terms of pricing?

Ultimately buyers and sellers create markets. However, you always have intermediaries who act as information providers and exchanges, which helps create a more liquid and efficiently priced market (and real estate is very illiquid so needs all the help it can get). This is what agents really earn money for, not for valuation (which is just a service to help transactions occur by not pricing unrealistically).

The concept you are having trouble with is that of the bid-ask spread. A buyer might come along and see an asset worth 500, the seller might see it as worth 700. There will be no transaction, and no market price.

Price discovery only happens when the bid-ask spread is narrowed and crossed. Only the *marginal* buyer and seller determine prices. Not any old buyer and seller who have an opinion.

So 'it's only worth what someone is willing to pay for it' is right, but it's only part of the story.

Doozergirl

SinkingFast wrote: »

Thanks for your replies. I think the point I am trying to understand is that if EAs have all that knowledge then a buyer comes along and says it is only worth XXX because that is all they can afford/are prepared to pay then who is right and who is wrong in terms of pricing?

If a vendor is paying (in our case £4,500) in fees to an EA for this specialist service why is everyone so quick to say "It is only worth what somebody is prepared to pay for it", regardless of all the specialise knowledge an EA may have.

If I liked a house worth a million pounds and made an offer of £500k because that is all I think it is worth (knowing it is all I could probably afford) does that instantly devalue the property or would I be seen for what I really was - a dreamer?

Their is no real formula to follow and as a vendor, market valuations are important - but you'll often find that the EAs themselves may vary wildly in their own valuations. It's incredibly subjective so whilst int hat respect it is only worth what someone is prepared to pay, a market valuation is there to help you know what a reasonable offer might be! The number of viewings will help you know if the asking price looks reasonable.

Of course a house isn't devalued if someone makes a much lower offer than asking price. The actual market value of the property has to be what several people (a decent section of the 'market')might be prepared to pay. That may well not be the asking price, nor a price offered.

The phrase 'it's only worth what someone is prepared to pay' doesn't begin to explain the subtleties of trying to set an asking price correctly and subsequently get a fair price for a house.

JA1000

Auctions work well without EAs, market forces determine the price. Remember that EAs are sales people, the price they put on a property will be a good guide price but there will be people out who genuinely believe this is the price and pay it (subject to valuation) the EA then gets the commission. Good luck to them.

I think it's just a shame that more people don't realise that you don't need an EA to buy a house. I find it incredible that people think they are a necessity and pivotal in the purchase. It's like saying you need a garage to buy a second hand car, you don't and 1000's get sold every day without any problems.

Buying a house privately is even more secure than buying a car and when people realise this, if they ever will then it would be really nice to see an active private market for buying and selling.