Property Prices – What is ‘Instruction for reduction’???
Where do I start! – Instruction for reduction! one of the terms I hate the most within the industry! albeit I have not heard the saying mentioned a lot, but I hear and see the tactics being used on a near daily basis…
so, what is it? – Instruction for reduction is whereby an Estate Agent is invited round your home, they have sat you down, gone through comparable evidence and showing you similar properties that have sold recently that are the same size/style/location as yours (if they haven’t, then show them the door straight away as they haven’t taken the time to bring evidence with them! )… they discuss the price with you but manage to either (just as an example)
1) work out another 2 agents have been in before, Agent 1 has said its worth £325,000 and Agent 2 has said £320,000 – £330,000. they then decide to say £330,000 – £335,000 (or there about) to try and make you feel that marketing at the higher price the property will sell because they have ‘X’ amount of people on their prehistoric ‘mailing list’
2) they know what the house is worth, add 5-10% onto the price and quote you a higher fee, dressing it up saying something along the lines of “don’t worry, we will get you X number of thousands more than agent 1 or 2 and our super inflated fee will be swallowed in this so you’re better off.
there are more scenarios, but they seem to be the most common. Next is when it becomes clear it’s an “Instruction for reduction” tactic….
The contact! – the dreaded 2+ page document take note of the “sole agency period” or “sole selling rights” etc – this is where a conversation is had about how many weeks you are stuck in contract with this agent…. here’s something to think about.
1) If this agent has got X amount of people willing to buy your home how many weeks do they really need to do this? if it’s any more than 2 then it is quite clear these people don’t exist.
2) if they are confident, that they can get you this price (bearing in mind the other agents have said a lower price) why would they need an 8, 10, 12 or even 16-week contract to do so?
overall the agent who plays these tactics has 2 things on their mind.
They plan on getting the higher fee using the sales approach above, meaning the manager is happy, the office is happy, he/she is happy and everyone in that office plans on earning a fortune from the sale of your home. they don’t care what it sells for all they are concerned about is their own commission.
They know the price is inflated, however you’re not stuck with them for 8-12 weeks (Plus don’t forget the 2 weeks’ notice period) so they plan on giving it a few weeks, if it doesn’t sell reduce it.
this is where the problems come in…
You have now been on the market for 10 weeks with X agent, you haven’t sold, they still have a 1%-1.75% fee, they are now asking you to reduce from your original marketing price by 10-15k which now takes you down to the value of the lowest valuation you had. problem is, you feel you don’t have a choice, the agent has given you all the talk about ‘the markets slow’ and lines along this wave length. so now you are at £320,000-£325,000 – NOW the problem is your property looks ‘stale’ on the market, viewings twig to what is happening, they then start to think something is wrong with the property and won’t view your property because of that reason, which then means a further reduction is no doubt on the cards…
You then reduce to below market value and sell! (no surprise really) but not only have you now achieve less than all the valuations, you’re paying a higher fee and you have just wasted months on the market and completed countless open days etc to be in this position….
then let’s look at the other plan you could use! – instead of going with the agent who says the highest price. listen to the prices and make this decision SEPARATE from the decision to which agent you pick.
You would be much better going on the market (let’s use the prices mentioned above) at “Offers in excess of £320,000” OR “Guide price £320,000” – this is then the bottom valuation, it will cause a lot more interest, heightened number of viewings therefore leading you to a much better price. in this scenario you are almost guaranteed to get over the £320,000 and therefore are better off than the situation described above.
pick the agent which most suits you, ignore what they have said, ignore the fee, which agent are you getting value for money for? which is offering the most? do they offer premium listing? featured property? do they do ALL the viewings? make sure they are ‘working’ for you and not just sticking it on Rightmove and hoping for the best!
as you can tell this is something I am passionate about, I will be doing a series of short videos covering the subject over the coming weeks but if this is something you have experienced or, are experiencing please get in touch and let me know! I would LOVE to hear your stories and see if I can help in any way, regardless of which agent you are on with advice is completely free!
I will leave you with one final tip. when you have the agent round, ask them “so how many people do you have on your books/mailing list who want to buy this property” – if they reply with a number then rule them out there and then! – show them the door. the answer should be ZERO! – how do they know? they have only just seen your home? they haven’t had time to call anyone to discuss, they don’t know what they could be selling until they are with you. so, if a number is said, chances are its possibly an outdated salesman/woman sat in front of you!