On face value one might be forgiven for thinking that if you want to sell a property, you might simply advertise it for sale or employ an agent to do just that.
But have you ever thought; Can the housing market be made more efficient in Britain?
To help answer this, if you were selling any other item such as a car or a boat for example, advertising it or using an agent to do so would be a reasonable thing to do but not with houses as I will explain.
With houses things are different because houses are capital assets, rather than depreciating ones. In other words, they are not mere chattels to be chalked up at a notional price and simply sold.
How is this so?
It’s because the amount of work and expertise required to build a house is sufficiently great to cause its value in the market place to adjust, upwards or downwards, depending on buyer’s demand and their ability to pay to purchase the property.
Secondly, houses are expected to last for around a century, which is different to most other things that are sold or let.
Thirdly, the availability of finance or mortgage borrowing is another primary factor which affects the prices of houses in the marketplaces wherever they are situated.
Question:
Why can’t a selling agent just deal with all of that?
Because the important aspect when selling is to know and understand how many buyers are out there and what might they each be prepared to offer (or bid) once they have everything in place to make a final decision. Buyers also need to arrange things they require like a survey, a confirmed mortgage offer, completed legal searches etc…
The best people to deal with all these matters would unquestionably be an agent acting specifically for the buyer in question.
Only they could best represent each buyer and in fact therefore could also serve vendors to best advantage too.
Why would this be an improvement?
It would be an improvement because selling agents do not, in fact, act for any of the buyers whereas buying agents would be able to do so all the time.
Selling agents can only act for those selling their houses. This is half of the marketplace of course; and that’s exactly where the problem lies.
Registered House Buying Agents, [RHBs] on the other hand, would be acting for multiple buyers simultaneously so they would be fully in touch with these buyers as well as knowing what houses are currently available for sale on the market. They would know all of this because their other buyers will be among those selling too.
The difference between the two types of agents is that with selling agents, once they sell a property on behalf of their vendor-client, they aren’t interested in who else is buying. They’re only interested in who else may be selling!
Working in that way is, as I say, only dealing with one half of the housing marketplace at any one time. It is this which is causing the housing marketplace to malfunction or to perform badly. It is this which is causing wild price swings upwards and downwards, depending upon the availability of purchasing power (or buyer demand) at the time.
For as long as the existing estate agents are isolating themselves from being responsible for dealing with the buying side of the housing marketplace, price anomalies will continue.
The result must be more of what we see today, buyer frustration at what might have been, as regards home ownership.
In full response to the ‘lack of supply’ pontificators, whom are rather prevalent currently, the whole rationale or philosophy behind my carefully considered solution for restoring the housing markets around Britain to good health, embraces the wisdoms of bygone days. How so? There was a time when latin was in general parlance and the words: “Caveat Emptor” were in frequent use. The meaning of this should never have been forgotten.
This used to be an express warning which was applied especially where property or real estate was concerned. The words of the warning mean: ‘Let the buyer beware – unless they are covered by the seller’s warranty in terms of quality and worth’. The meaning of this simple latin saying amply describes why the current failures are occurring, manifesting within all housing markets up and down our still great country.
We should remember this because in actual fact it is the one thing which is required, in order to restore and correct the damaging anomalies surrounding today’s accelerating house prices. As explained, these anomalies arise from our having departed from and forgotten what were previously well-known and established wisdoms, to be relied upon whenever undertaking commercial transactions such as those involving the buying of houses for family use.
The problem of unaffordable house prices today simply isn’t a supply-side matter at all. It is a price-side problem not a supply-side one. A-level students studying economics ought to know this! Once this is understood, the requisite changes to the way in which our housing markets operate across the whole country may be realised so that they may, once again become normality. Central government necessarily would need to take a lead in resolving this current-day house price crisis of course.
In the local area where I live for example, there are clearly more than a sufficient number of houses that certainly could be used to satisfy both present and future demand for residential housing but they are not coming onto the market. Instead they are being used for non-residential uses. It is this that needs addressing most urgently, not the headlong rush to build more houses to satisfy a purely notional lack of supply when in fact, there is a more than adequate supply of suitable property both in our locality and in plenty of other locations all over the place!
Please consider what is being explained here and raise any relevant questions on this for public scrutiny and discussion. A campaign ought to be mounted to bring this matter to the attention of our government should those interested in this wish that to happen.
Using this logic (as well as other arguments), I emphatically suggest that the existing vendor-centric estate agent model is no longer fit for purpose, is out of date and is way too inefficient.
What do you think about this idea for drastically improving the operation of all housing markets potentially across the whole of Britain?
Constructive comments are very much welcomed.
Extra reading:
Article in The Property Industry Eye dated 9th May 2019 giving the current market downturn information:
Estate agents are reporting a drop in property instructions
New instructions sink to a three-year low – and worse is expected.