By Richard Rawlings the UK's leading estate agent trainer.
According to the latest figures*, nearly half of properties listed for sale eventually get withdrawn. There is one obvious reason for this, that we all know; the property is clearly overpriced. Nothing todo with location, condition,or the market –had it been cheaper, it would have sold.
As estate agents, our job is to sell property. So, in failing our clients 46% of the time,how can we, as an industry, get it so wrong?
The answer lies in the side issue here which is almost as outrageous as the overpricing issue, but one that is closely affiliated with it – long sole agency periods! It is no coincidence that properties that are withdrawn from the market are also typically subject to a sole agency period of at least 20 weeks.
For context, pre-internet, sole agency periods of between one and three months were often applied to instructions to match the advertising lead time required by monthly or quarterly magazines. This was only fair on the estate agent, who would usually carry the cost of such advertising.
However, not only have these periods of sole agency remained well past their sell-by date, but agents have been subtly abusing them, with many agents proudly telling me that they have a 26-week sole agency agreement, as if it is some sort of badge of honour.
These agents seem to think that their job is to lock-in the client so they can’t escape, as if the instruction is somehow more important than actually selling the property. Then, in a fiercely competitive environment, weak agents who cannot demonstrate their value, simply tell the client what they want to hear in terms of an inflated asking price, to secure the deal. But they need to lock the seller in because they know the property is unlikely to sell. Result: Another unsaleable instruction with a potentially disgruntled client. It is interesting to note that these types of agents also show the greatest disparity between initial asking price andeventual sale price, and it takes them (much) longer to sell –if they sell at all (and 46% don’t!).
The sadness is that even if the property does eventually sell, it is likely to sell for a figure below that which it could have achieved, had it been priced correctly at the outset. So there’s another client disservice.
These agents also seem to be unaware that by having a fixed period of sole agency, irrespective of its length, they are giving their clients licence to put a “time-up” date in their diary. This is the date on which they will either withdraw, or switch to another agent.
While there are many benefits to the seller in having a sole agent to represent them (as opposed to multiple agents), there are none associated with a fixed period. Those agents who embrace the concept of a zero-week sole agency, and who know how to manage it well, never go back to a fixed period. This is of course the ultimate user-friendly contract. But it’s more than that. Because the seller could go elsewhere if the agent doesn’t perform,the agent HAS to price correctly from the outset. This means faster sales, which are also at, or close to, the original asking price, and minimal withdrawals.
Today’s prospective sellers seek a more intelligent way of comparing and assessing estate agents. Because so much informationis available, “number of instructions” is of far less importance than it once was, in the face of other metrics. After all, it’s the only stat that brags about the agency’s business success as opposed to its actual performance, which is surely the wrong way round? Sellers don’t need to know how many instructions you have (although such social proof affirmation is useful, it’s not everything).
So this focus on “get the instruction at all costs” is now severely flawed. Indeed, it is being eclipsed, as sellers increasingly turn to agent comparison sites such as Swoople.com, where they can easily access agent performance information that is more useful to them: speed of sale, sale price to asking price percentage, number of sales achieved over the asking price, fall through rate, withdrawal rate, etc.
All this points towards a requirement for agents to deeply understand not only the science behind pricing, but also how to professionally advise and persuade prospective sellers to make the right choices. This is very much in keeping with my own definition of our role as estate agents, which is “to help people make decisions, which are genuinely in their best interest, which, without our involvement they might have had difficulty making".
*Data from TwentyEA