Many clients I meet at valuations know they can use one or several estate agents. They also know using more than one agent could cost them more on the fees. What they might not have considered is the small print of each type of agreement or the relative merits of using one, two or many agents. Here’s our brief guide to each;
Contracts of this type should read as follows –
‘You will be liable to pay remuneration to us, in addition to any other costs or charges agreed, if at any time, unconditional contracts for the sale of the property are exchanged:
•with a purchaser introduced by us during the period of our sole agency or
•with whom we had negotiations about the property during that period, or
•with a purchaser introduced by another agent during that period.’
The agent gets paid if they “introduce” a buyer during their contract period, or if you let another agent “introduce” a buyer within the original agent’s contract period. The definition of “introduced” is a wide ranging one. It may well cover negotiations with a buyer, viewings, sending details, discussing on the phone as well as all these scenarios:
•A buyer who knocks on your door as a result of seeing a “for sale” board.
•A buyer that views through one agent but later makes an offer through another agent.
•A buyer that is given details of your property by an agent and then realises that they know you.
•A buyer who views through an agent but suggests that you do a private deal
Contracts must have a set period of time (the average is 12 – 14 weeks). Please note that a contract almost always has a notice period at the end – add this to your stated contract length to work out the real amount of time you’ll be locked in to your chosen agent. This type of agreement does allow you to find a buyer for your home yourself without paying the estate agent (a private sale). A “sole selling rights” agreement (best avoided) would mean the agent would get paid even if you did find a private buyer.
Sole agencies are the most common of the agreements – most agents want an exclusive shot at selling your house. If the estate agent is any good, you shouldn’t need another agent to help in selling. However, you might want to check how comprehensive an agent’s marketing is before you agree to a sole agency – if they don’t cover all the bases (or have over valued your house to get the business), you don’t want to be locked into a contract lasting months and months.
If you appoint two estate agents to act together for you in selling the property, this is known as ‘joint agency’ or ‘joint sole agency’. A joint sole agency contract is where the estate agents involved share the commission when the property is sold. In practice, the agent that actually finds the buyer usually gets a higher split of the commission but this percentage share would need to be agreed at the start of the contract between owner and both agents.
Joint agency is often a useful way to get out of a sole agency before the end of the contract – if you tell your estate agent that you’re not happy and are considering terminating their contract at the earliest opportunity, then give them the option of being retained on a joint agency basis, they might be smart enough to see the merits of a slice of a fee rather than none at all. This type of agency is also useful when you want to use two agents that offer different services (for example a city agent and a country agent if you live on the border of a city). Do bear in mind the majority of the public have a negative perception about properties on with more than one agent (“I’ve seen that before – there must be something wrong with it”). If you’re thinking about joint agency, try to choose two agents that can communicate/work together happily.
More than one agent is appointed and there is no fixed contract period. You can add as many agents as you like, remove one at any time and so forth. However, only the agent that actually finds the buyer gets paid.
Often used when a property fails to sell with a sole agent, this is an extreme measure to take as the total fees will be considerably higher plus the property may become over-exposed very quickly. Confusion and disputes can also arise if agents argue over who introduced a particular buyer – make sure you keep a track of each agent’s activity.
Fees in General
Estate agents fees are due on completion and should have been invoiced at exchange of contracts. The invoice is sent to the solicitor acting for the owner, but the owner should also receive a copy to check. Most agreements are based on “no sale, no fee” so you shouldn’t pay anything if your house doesn’t sell (however, see below re extra fees).
Fees must be clearly stated on the contract – if the fee is a percentage of the sale price, a maximum amount in pounds and pence should also be displayed.
Although estate agents fees are often expressed as a straight percentage of the sale price, do remember they are also subject to VAT at the prevailing rate (currently 20%).
Some estate agents charge extra fees over and above the sale fee – we have recently seen these expressed as “advertising fees” or “withdrawal fees” ( a charge if your property doesn’t sell or you take it away from an agent). Costs up front for production of brochures and professional photography are also relatively common with upper market agents – it would always be worth making sure you know the total of ALL fees you may be liable for before signing a contract.
Watch out if you agree to a fixed fee from an estate agent – the fee is usually agreed based on the asking price so, if your property sells for less, you’re likely to be overpaying the agent compared to a normal percentage fee (which is charged on the final sale price)
If you want to give your agent extra motivation to achieve a top price, consider negotiating a tiered fee (eg 1% if they get under £240,000, 1.2% if they achieve between £240,000 and £250,000, 1.5% if they get over £250,000). Set the levels carefully to reward superb service and penalise an average result.
If you change estate agents, make sure the previous agent gives you a list of names of the people they have “introduced” to your property. If one of those names goes on to buy the house (in practical terms within 6 months from the date of termination of the agent’s contract), the old agent is entitled to their fee. Make sure you don’t get into a scenario where you owe fees to both agents because you didn’t do your homework.
Always ask estate agents to confirm their contract terms in writing (you would think this is standard practice but you might be surprised!) and, if you do end a contract with an agent, make sure they confirm that as well.
You can go from one sole agent to another, from a sole agent to joint agents or any other permutation.
Don’t go backwards in marketing terms – if you leave an agent because they aren’t marketing your home effectively, take a breather and make sure the next one you choose can do better BEFORE you appoint them.