How many times have you sat at a kitchen table, explained what a home is realistically worth, shown the comparable evidence and then heard, “But the other agent said we could get more”? You know what happens next. The homeowner chooses the higher number, signs up for a long sole agency agreement & the property sits on the market for months and months.
“We can always reduce it later” sounds like a reasonable compromise. The homeowner gets to try their price and the estate agent gets the instruction. Yet how often do we explain what that experiment might involve, both in £££££ and in the time and uncertainty of actually getting moved? We all know it hurts the homeowner, yet before now, nobody has put a ££££ cost, until now.
The figures make uncomfortable reading. They also give good estate agents something considerably more useful to discuss at a valuation than whether their fee is a few hundred pounds higher than the competition.
The asking price comes down. Then the buyer asks (and gets) a bigger discount.
Among the 2 million UK homes sold, exchanged & completed without an asking price reduction in the last two and half years, the average agreed price at exchange & completion was 0.2% below the original asking price. Yet among those UK homes sold following an asking price reduction, the average gap was 7.7%. Now before anyone starts tapping away in the comments, yes, an asking price is an ambition. It is not proof of what a property was ever worth. Advertising a £300,000 home for £330,000 does not make it a £330,000 home, however enthusiastically the valuer delivers the good news at the pre val/market appraisal.
So I looked at what happened after the asking price had already been reduced. Those UK homes that sold (with a price reduction) agreed sales at an average of 1.8% below their final asking price, compared with 0.2% for homes that needed no reduction. That additional negotiating gap of 1.6% is equivalent to £4,800 on a £300,000 property.
To make that tangible, imagine two homes both asking £300,000 when the negotiation begins. One launched at that £300k. The other started at say £320k and then reduced to £300k. Applying those average discounts produces agreed prices of £299,400 (not reduced) and £294,600 (reduced) respectively.These are different properties with different sellers and circumstances. This does not prove that changing the launch price of an individual home would put another £4,800 in its owner’s pocket. But I analysed 2 million home sales and you cant argue that it does give us good reason to challenge the reassuring suggestion that starting high carries no consequences because the price can always be changed later.
“Let us give it a few weeks” became another 79 days.
Yet it also costs time because nationally, the UK homes that found a buyer without an asking price reduction took an average of 24 days to reach sale agreed. Those that needed a reduction took 103 days. That is an additional 79 days, more than 11 weeks, before a sale was even agreed, let alone exchanged and completed. Now put yourself in the homeowner’s shoes. The house they wanted to buy may have sold to somebody else. The school move is becoming more complicated. A separating couple are still sharing a kitchen neither wants to be in. We talk about days on market as an industry statistic, but the homeowner experiences those days as another week of putting plans on hold. Of course, price is not the only influence. Condition, location, presentation and personal circumstances all matter. Yet if we are going to recommend “testing the market”, surely we should explain what we are testing, how long we will give it and what evidence will tell us the experiment has failed. Otherwise, “give it a few more weeks” can become a substitute for advice.
And sale agreed is hardly the finishing line.
Separate national analysis supplied by TwentyEA looks at what happened after a buyer was found. Where a sale was agreed within 25 days, 94% reached exchange and completion, (ie approximately 19 out of 20 agreed sales). Where finding a buyer took 100 days or more, that figure fell to 56%, approximately 11 out of 20.
That is a huge gap, making the slower group of homes that take a 100 days or more to achieve a sale agreed 40.4% less likely to reach exchange and completion. To be clear, these are the outcomes of agreed sales, not the chances of selling for every home listed. They are also groups defined by selling time, rather than whether the asking price was reduced. We cannot simply label every slow sale overpriced, but we should take that difference seriously. Getting an offer accepted gives everyone a reason to smile. Getting the homeowner moved is what they employed us to help them achieve. A photograph with “SOLD” across it does not tell the whole story.
So what should estate agents do with this info?
Please do not use these figures to frighten an already overpriced seller out of a necessary reduction. If the asking price is wrong, leaving it wrong helps nobody. Use them earlier, at the kitchen table, when the homeowner is deciding whether to follow the evidence or the agent promising the biggest number. (Interestingly, reducing the price within the first two weeks of the home coming on the market doesn’t have a massive affect on saleability, its when the reduction is over 4 weeks does the chances of sale drop like stone.
Explain the competing homes buyers will see. Agree how you will judge the response. Have an honest conversation about the difference between an asking price that wins an instruction and a strategy that helps somebody move. Homeowners are making a huge decision, often with money they need for the next chapter of their lives. They deserve more than a flattering valuation followed by an awkward telephone call six weeks later.
And when the conversation turns to your fee, remember the £4,800 negotiating gap, the extra 79 days and the 40% lower chance of getting to exchange & completion. If we can spend 20 minutes explaining a £500 difference in fees, we can surely spend a little longer explaining why “we can always reduce it later” deserves rather more thought????
