Should you appoint just one estate agent? Or is there a better chance of achieving a sale by using two or even three simultaneously?
Most sellers appoint a single agent, until things get a bit desperate, at which point a fresh crop of different agents’ boards will suddenly sprout from the ground.
These are the options – in all cases the arrangement should be ‘no sale no fee’, so you normally only pay the agent upon completion of a successful sale:
By far the most popular choice…
Here your estate agent is the only agent with the right to sell your property. Fees for sole agency are less than for multiple agency (see below). Importantly this leaves the door open to selling privately, if you wish, for example, to place your own advert in a local newspaper or on a website.
You are perfectly free to find a buyer yourself (since you are not an estate agent) with no obligation whatsoever to pay the estate agent’s commission.
Apart form the relatively low fees, the attraction of sole agency is that, being the only agent, it should inspire the confidence to spend more time and money promoting your home.
However, sellers have sometimes been badly caught out where they have later switched to a different agent, who then successfully introduced a buyer. If you read the small print, the contract you sign normally ties you in to the first agent for a number of weeks, or even months.
During this period they are the only agent with the right to sell your property, so it’s best to tell them that you only want to sign up for a short period – no more than four to six weeks – which leaves you free to terminate the contract if they fail to perform.
With multiple agency you’re free to appoint any number of agents, each with the right to sell your property on a ‘winner-takes-all’ basis. From the agent’s viewpoint there is a greater chance of wasted effort and expense, which is why the fees quoted will be higher. This again leaves you free to advertise and sell privately alongside the estate agents.
But because buyers often register with lots of competing agents, disputes sometimes arise between rival agents as to which one actually introduced the successful buyer.
Apart from the expense, the drawback is that a sea of boards outside your house can smack of desperation.
Joint Sole Agency
This is the caring, sharing approach. Here you appoint two agents who co-operate with one another. Both agents share commission, usually with the lion’s share going to the agent that actually introduces the buyer and therefore can genuinely claim to have sold the property. It is sometimes used as an alternative to multiple agency, perhaps when a property sale is struggling. Commission rates are usually a little higher than for sole agency.
Sole Selling Rights
This is the one to avoid. It means the estate agent is the only person with the right to sell your property. It differs from sole agency in that if the property sells to a buyer you found yourself, you still have to pay the estate agent. So if for example you decided to sell to a friend or family member, the agent could still claim thousands in fees. Essentially this arrangement blocks you from having a go at selling privately.
Competition between local agents is normally keen. For some agents their primary objective is to get the most ‘instructions’ and maximise the number of properties placed on the market with them. Some target-driven corporate firms have ‘negotiator of the month’ incentives to this end.
As we have seen, the easiest way to win business is to appeal to sellers’ greed by overvaluing.
The other way is to offer lower fees than the competition. So what level of fees should you expect to pay?
This can vary anywhere between one and three per cent (plus VAT). Deals below one per cent do exist but are rare. Budget agents charge low commission, but are unlikely to spend much on marketing your home. In common with dearer agents, they still have fixed overheads, such as staff and premises, so the only thing they can cut back on to enable them to charge less is advertising and marketing.
To achieve the best price for your home it is necessary to ensure that it is presented to the widest possible audience, so by saving half a per cent on an agent’s fee you could lose thousands through poor marketing. This, of course, doesn’t mean that a dearer agent will do a better job; they may just spend it all on flash cars.
But a good agent should recoup the difference in the fee for you by creating more buyer interest. However, you may still be able to negotiate lower fees, for example if you’re willing to show prospective buyers around yourself.
Estate agents normally qualify for commission upon the successful completion of a sale to a buyer they have introduced.
However, watch out for contracts that refer to introducing a buyer who is ‘ready, willing and able’ because it means that if an agent simply finds a buyer who is ready, willing and able to buy, you may be liable to pay the agent’s commission if you later decide to pull out for any reason, regardless of the fact that the sale never completed. Estate agents will think nothing of suing you for commission.
As noted earlier, it’s important to check the minimum term stipulated in the small print of their contract when instructing sole agents. Many sellers sign up for several months, promising not to instruct an alternative agent within the specified time.
But if your sole agent then fails to perform, you are unable to appoint another estate agent to market your property until the agreement expires.
Watch out for a clause saying that only by serving a two-week notice after the minimum term has expired may an agreement be terminated.
Nasty disputes occasionally break out between rival agents. It’s not unknown for one agent to poach a property from another, and both then claim commission for selling it. Disputes occasionally go to court.
This happened in a recent case when London agent Foxtons had arranged for an applicant to look round a £1.15 million property, but no offer was made because the house needed too much work. So no deal was reached.
Some months later, the same buyer agreed to buy the property after the seller was contracted to another agency, Hamptons. Foxtons claimed their £20,000 commission fee from the seller on the grounds that they’d ‘introduced’ the buyer.
But the Courts held that an agent has to do more than simply introduce the buyer to the property – they have to introduce them to the purchase. So commission was paid to Hamptons and Foxtons went home empty-handed.
This ruling suggests that commission should only be payable if an agent has already persuaded the buyer to make the purchase.
Before you sign an estate agent’s contract, always check the small print!
- What is the minimum term/tie-in period? Four to six weeks should be acceptable.
- How much notice is required to terminate the contract? It should be no more than two weeks.
- Is it sole agency or multiple? Avoid sole selling rights.
- How will the agent go about marketing – which websites and papers will they use?
- Is all advertising included? Check that they don’t expect you to pay towards the cost of ads.
- Are sales particulars or a brochure included or is there an extra charge?