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Agent hype leads to mispricing

12 August 2004

Barak Geffen, Executive Director of Sotheby's International Realty operated by Lew Geffen says, "Many agents are wasting clients' time and money because they are overvaluing property to get a sole mandate. They are selling a hyped promise and are not able to deliver on this promise.

The fact that about two thirds of all houses on the market are not being sold by the agent who was first awarded the sole mandate is the fault of an industry which has low entry barriers and agents who are ill equipped to explain the dynamics and complexities involved in bringing buyers and sellers together and establishing the correct price.

Continuing in this vein, he says that, "Agents are selling the world's second most expensive asset class and yet anyone can become an agent by writing a board exam even though their knowledge base of valuating assets and negotiation is very low. Compare this to the 10 years of education and experience needed, including getting complex masters and honours degrees, before one can be able to sell businesses in the merchant banking industry."

In addition, sellers need to feel that the agent should have their aspiration price as a priority, and often end up giving their property to the agent solely based on the one who quotes the highest valuation. Advertising at inflated asking prices is sure to miss where buyer behaviour and activity is taking place.

Cape Business News article

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