Price Topping Exposed!
In the first of a new series we are going to bring you a monthly list of price reduction “offenders.” Price Topping is the High Street Agents’ age-old tactic of over valuing a property to get the client to sign a contract which locks them in for a long period. Later, the agent will then advise the client to drop the price in order to sell the property. Ultimately the agent still gets his fee (it goes without saying that the percentage charged is not reduced).
Let’s say an agent is charging 1.5%. If they talk a seller in to dropping £50k the agent only loses £750. The trick is to value a property that is worth, let’s say, £500k at £550k. They entice the client with their claims to have lots of buyers on their database (which is High Street Agent code for buyers searching on Rightmove and Zoopla – buyers who would see the property no matter which agent they go with). Once the customer is signed up and locked in to a ‘sole agents’ contract they are trapped and can’t move agents until the contract period had expired. This gives the agent plenty of time to persuade the customer to drop the price to what it should have been in the first place, and walk away with the vast majority of the fee (1.5% on the reduced price of £500k is still £7,500 + vat)!
This is nothing new and has always happened with traditional High Street Agents. The chart below shows the main offenders for May 2016. Here at Edward Giles we don’t lock customers in to long contracts. Watch this space over the next few months for the list of top offenders!