Real estate valuations: differences of up to 13%

Context

TL;DR

• Valuations differ by 11 to 13% on average
• Only 30-35% of transactions have verified data
• 3% of 50'000 francs amounts to 1'500 francs
• In Geneva, online access was abolished in 2023

Key facts

• Who → Patrice Choffat, founder of the Zurich-based Bestag platform
• Topic → conflicting property valuations and a scarcity of public data
• Gap → 11% to 13% on average across more than 10'000 pairs
• Data → approximately 30-35% of completed transactions in Switzerland
• Method → hedonic models based on location, size and features
• Geneva → online access abolished in 2023; cantonal official gazette
• Study → ZHAW; price difference of 120'461 francs

Across more than 10'000 pairs of property valuations, even established market leaders differ from one another by an average of 11% to 13%. This is the figure with which Patrice Choffat, founder of the Zurich-based Bestag platform, draws attention to the variability of estimates in the Swiss market: the same house can receive very different valuations, and transparency appears to be only partial.

In an interview with the Awp news agency, Choffat attributes the problem to two factors: the methods used to determine value and the scarcity of public information on completed transactions. His proposal is for Switzerland to move completely to open data for real estate transactions, with a gain in transparency that he considers considerable.

From traditional methods to hedonic models

The story begins in the past. Historically, valuations lagged behind the market. Experts relied on outdated methods and a multitude of parameters that were difficult to understand, used to support their intuition.

The advent of hedonic models in the 1990s changed the landscape. This is a statistical technique that evaluates a property based on location, size and features. Today, for private residential mortgages, banks rely exclusively on these models.

The model introduced a statistical criterion, but did not eliminate the discrepancies between valuations. According to Choffat, established market leaders continue to produce different valuations, while verified data covers only approximately 30-35% of completed transactions in Switzerland.

The transparency problem

The clearest example concerns Geneva. For years, transactions could be viewed online in the land register. In 2023, however, this possibility was abolished and the information was transferred to the cantonal official gazette, which reports only the parcel number and no longer the property's address.

The international comparison cited by Choffat is with the US, where every real estate transaction is public. In Switzerland, by contrast, the scarcity of data makes it more difficult to quickly verify which valuation is closest to the actual price.

Operational details

The most concrete aspect for sellers concerns how the agent's compensation changes when the final price changes. Choffat considers marginal compensation decisive: on 50'000 additional francs, a standard 3% commission generates 1'500 francs. Often 60-80% goes to the agency; for this reason, according to the expert, the amount does not really motivate the agent to fight for a higher price.

Choffat cites this result to argue that the compensation structure can affect the financial outcome of the sale, not just the cost of the mandate.

Competition and incentives

The relationship with competition follows the same logic. Where the average commission is lower, competition is stronger and agents' valuations are more closely aligned. In less competition-intensive markets, by contrast, estimates diverge much more. The proposed explanation is economic: an agent with many mandates in a region may find it advantageous to value a property slightly too low in order to secure the listing, sell quickly and limit the work. Choffat does not define it as dishonesty, but as individual optimization in a market that does not punish this behavior.

What can happen to the price

| Valuation | Consequence indicated in the source | | Too low | The property is sold below its potential value | | Too high | It finds no buyers; marketing takes longer and the price is adjusted downward | | As reliable as possible | It is indicated as the only real remedy for the two risks |

Compensation with fixed costs can worsen the problem, especially when it remains payable even without a sale. A progressive system, on the other hand, can bring the agent's interests closer to those of the seller. Before deciding, the owner can also use the costo della vita in Svizzera to view the sale within their own balance sheet, without confusing that picture with the property valuation.

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Key points

In conclusion, Choffat invites sellers to assess proposals from different bidders and verify that their remuneration aligns the agent’s interests with those of the seller. The comparison should take place before awarding the mandate, not after the price has been published.

Four checks before choosing

1. Gather multiple proposals. Ask several bidders for a valuation and place the figures side by side. The source does not suggest relying on a single contact: having several proposals helps identify discrepancies.

2. Have the method explained. Check how the property’s location, size and features are taken into account. These are the elements underlying the hedonic models described by Choffat; this makes clear the difference between a statistical model and the old reliance on numerous parameters that are difficult to understand.

3. Measure the incentive. Ask how the agent’s compensation increases if the final price rises and what share is absorbed by the agency. The question echoes the criterion of marginal remuneration indicated in the interview.

4. Check the costs. Find out whether remuneration is also due when the sale does not go through. Compare a fixed structure with a progressive one or with a bonus-malus system, which the source identifies as a possible way of aligning interests.

If the figures remain far apart, ask each bidder to justify separately the price, the elements used and the expected compensation. This does not create public data that is lacking in Switzerland, but it makes the available proposals comparable. The final choice should therefore favor the most reliable valuation and a mandate that does not encourage prioritizing speed at the expense of potential value.

To separate the issue of the mandate from that of the banking transaction, you can also consult the conti bancari in Svizzera. To complete the check of the available budget before making the decision, use the calcolatore stipendio.

Source: tio.ch