The London Property Conundrum

Jan. 26, 2011 - PRLog -- The last week of January has yet again brought the age old problem affecting a market such as this. A shortage on instructions has allowed bad practise to rear its ugly head, helping no-one.

Forget reports of doom and gloom, its transaction levels which are hurting most. Simply, there is a shortage of both sales and lettings instructions. That is a fact all London agents will agree with. It's how they deal with it which causes problems.

Agents are by nature immensely competitive creatures. They work extremely hard to find buyers and tenants and invest huge sums of money in advertising with no guarantee of a return. We aren't like retailers who can hold a sale to shift stock and generate cash-flow. The stock is not ours and we have a duty to get the best possible price for our clients.

There is a simple principle in this industry - if you don't have the instructions, you can't get deals. Further, success breeds success so market share is essential.

However, when instruction levels are low, two things happen. Agents start to overvalue to tempt the client and then start to drop their fees to undercut their competitors. In both cases, you can expect to be asked to commit to a lengthy sole agency agreement during which time, some agents will increasingly press you to drop the price that they suggested. If this happens, the client becomes disillusioned but is stuck in a business relationship they don't want.

This year, we have found advertising prices soaring as the cost of paper has spiralled and many portals have also increased their charges. Low fees mean agents need to sell more properties to remain viable, which exhausts stock further. Another issue with low fees is that the negotiators earn less for their efforts and incentives are everything. If you want good staff, they need to have the opportunity to earn well.

The key issue is that an optimistic agent can't change the value of your property. Ask for comparable evidence of that which has been sold or let nearby. In the case of sales, this is precisely how a surveyor will assess value. If the agent is confident that they can achieve the value they suggest, then great - but ask for an agreement which allows you flexibility.

It is worth noting who the most successful agents are in their given areas. You will be interested to learn that seldom are the ones who slash their fees the most successful, rather those who are confident in the service they provide and the advice they give.

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Bushells is one of London's leading Estate Agents. Founded in 1937, we are one of the most successful estate agents in London. We are members of all recognised industry bodies including ARLA, TPO and NAEA.