Many clients I meet with appraisals know that they can use one or more real estate agents. They also know that using more than one agent will cost them more in fees. What they don’t consider is the small print of each type of deal or the relative merits of using one, two or more agents. Here’s our brief guide to each;
Such agreements shall read as follows:
‘If at any time you exchange an unconditional contract for the sale of the property, you will be required to pay us, in addition to any costs or charges:
• With the buyer we introduced during our sole agency period or
• With whom there was negotiation about the property during that period, or
• With a buyer introduced by another agent during that period.’
The agent is paid if they “promote” a buyer during their contract period or allow another agent to “promote” a buyer during the principal agent’s contract period. The definition of “acquainted” is broad. It can cover negotiations with the buyer, viewings, sending details, chatting on the phone and all these situations.
• A buyer knocking on your door because of seeing a “for sale” board.
• A buyer who looks through one agent but later offers through another agent.
• A buyer who is given details of your property by an agent and then knows that they know you.
• A buyer who looks through an agent but suggests making a private deal
Contracts should have a fixed period (average 12 – 14 weeks). Please remember that a contract almost always has a notice period at the end – add this to your stated contract length to work out the exact length of time you will be staying with your chosen agent. This type of deal allows you to find a buyer for your own home without paying an estate agent (private sale). An “exclusive rights to sell” agreement (mostly evasive) means that the agent will be paid even if they find a private buyer.
Sole agencies are the most common of the deals – most agents want a special shot at selling your home. If the estate agent is good, you shouldn’t need another agent to help you sell. However, before you settle on a sole agency, you may want to check how comprehensive agent marketing is—you don’t want to be if you haven’t covered all the bases (or priced your home to get the business). A contract is locked in for months and months.
If you appoint two estate agents to sell the property, this is known as ‘joint agency’ or ‘joint sole agency’. A joint agent contract is where the real estate agents involved share the commission when the property is sold. In practice, the agent who finds the buyer usually gets a higher share of the commission, but this percentage must be agreed upon between the owner and both agents at the time of contract initiation.
Shared agency is often a useful way to get out of an agency before the contract ends – if you’ve told your estate agent you’re unhappy and are thinking of ending their contract early, give them the option to stay on a shared agency basis, they may be wiser to see the value of one fee rather than nothing. This type of agency is useful when you want to use two agents who provide different services (for example, if a city agent and a country agent live on the border of a city). Remember that most people have a negative perception of properties with more than one agent (“I’ve seen it before – there must be something wrong”). If you are thinking about a joint agency, try to choose two agents who are happy to communicate/work with each other.
More than one agent is appointed and there is no fixed contract period. You can add as many agents as you want, remove one at any time, and so on. However, only the agent who actually finds the buyer is paid.
Often times, when a used property fails to sell through a sole agent, this is a drastic step to take as overall fees increase significantly and the property can quickly become exposed. Confusion and misunderstandings can arise if agents argue over who introduced a particular buyer – be sure to track each agent’s activity.
Estate agents’ fees are finalizing and should have been invoiced by the exchange. The bill will be sent to the owner’s attorney, but the owner must receive a copy for inspection. Most deals are based on a “no fee” basis, so if your home doesn’t sell, you don’t have to pay anything (but see additional fees below).
Fees should be clearly stated in the contract – if the fee is a percentage of the sale price, the maximum in pounds and pence should also be shown.
Although estate agents’ fees are often stated as a straight percentage of the sale price, remember that VAT is charged at the current rate (currently 20%).
Some estate agents charge additional fees over and above the selling fee – we’ve recently seen these described as “advertisement fees” or “exit fees” (fees if your property doesn’t sell or if you take it from the agent). Upfront costs for brochures and professional photography are common among upmarket agents – it’s always worth making sure you know all the fees you may be liable for before signing a contract.
Be careful if you agree to a fixed fee from an estate agent – the fee is often based on the asking price, so if your property sells for less, you may overpay the agent compared to the usual percentage fee (which is). Payable at final sale price)
If you want to give your agent extra incentive to get a higher rate, consider negotiating a tiered fee (eg 1% if you earn less than £240,000, 1.2% if you earn between £240,000 and £250,000, 1.5% if you earn more than £250,000) to reward excellent service and average Adjust the levels carefully to get a fine result.
If you change real estate agents, make sure the previous agent gives you a list of the names of the people they “promoted” your property. If one of these names goes on to buy the house (practically within 6 months from the date of termination of the agent’s contract), the old agent is entitled to payment. Make sure you don’t end up paying both agents because you didn’t do your homework.
Always ask estate agents to confirm their contract in writing (you might think this is standard practice, but you might be surprised!) and if you break a contract with the agent, make sure you confirm that too.
You can move from one sole agent to another, from a single agent to joint agents or any other order.
Don’t fall behind on a marketing deal – if you let an agent down, take a breather for not marketing your home effectively and make sure the next one can do better before you hire them.