Property – Is there too much transparency in the property market?
I’ve written before about the property valuation tool on Zoopla and how it can sometimes produce wildly inaccurate figures. The problem is that it seems to work on a very simple algorithm. It looks at the sale price last time the property was sold and then applies the average price change for the surrounding area over the intervening period. For example, if a house sold for £250,000 two years ago and property prices in the area had fallen 2% since then, Zoopla would now value it at £245,000.
This is starting to become an issue for both vendors and estate agents. Two or three years ago many of the big house builders were facing a cash crisis. With any sizeable developments where the last few houses had just been completed, the builders sold them off to anyone who was in a position to complete quickly for whatever they could get. Some people got a serious bargain. The problem arises when those same people try to sell their houses now.
If we take the fictional example above, suppose the realistic value of the house was £300,000; the buyer managed to save £50,000 by being in the right place at the right time. An estate agent coming to value it now would look at recent sales of houses of a similar size and character, apply the knowledge of the local market gleaned from hands on experience and probably come up with a valuation of around £300,000. Unfortunately, potential buyers are probably going to see the price the vendor paid two years ago and put in an offer well below the asking price.
If the Zoopla valuation tool was infallible, anyone could be a valuer, but it isn’t. It gives transparency to some information but not all of it. My advice to vendors who find themselves in this position is to stick to their guns – they should achieve something reasonably close to the asking price. As for potential buyers, remember that the previous price paid is not an exact guide to current market value.
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