Estate Agents: Negotiating Fees, Finding the Best
It’d be fair to say estate agents don’t have the best of reputations. They’re often the butt of jokes and the attribution of countless sighs, but it’s important to remember that the public can often be as villainous as agents themselves.
There are many examples of very good agents who do superb work for their clients. In order to ensure you end up working with one of those, here are some tips for finding a decent estate agent and negotiating costs.
Protecting your rights
Let’s get the all-important legislation out of the way – you might need it – so it’s vital to have it on record. As of 1998, an ombudsman system now stipulates a code of professional standards under which all estate agents in the country are signatories – stay away from any business that isn’t signed up. In the main, however, ethical practice is regulated by the Estate Agents Act of 1979, executed by the Office of Fair Trading (OFT).
The OFT must ensure that estate agents cannot make offers they can’t keep, claims they cannot substantiate, or act in the slightest bit threatening to those who choose not to take out a mortgage with them after a sale. Check that your agent is a member of the National Association of Estate Agents (NAEA) which has a strict code of practice. Agents who fall foul of the NAEA risk fines and/or expulsion. Check on the Ombudsman for Estate Agent’s website (OEA) to see which agents in your area are members. If the agent is a member of both the OEA and the NAEA you are giving yourself the best chance of protection in case something goes wrong.
Choosing the right agent for your sale should ensure a stress-free transaction. Be meticulous with small print and entirely understand the nature of any contract in order to avoid pitfalls.
Agency Contracts Can be Split Into Four Main Types
Sole Agency – Your agent is the only agent with the right to sell your property. Sole agency means you may sell independently to the contract and avoid a fee but if you do so you may have to pay the agent for any advertising they have carried out on your behalf and the cost of the “For Sale “board.
Joint Sole Agency – The Agents you appoint under this type of contract agree to jointly market your property and share the agency fee you pay.
Multi-agency – You instruct whichever agents you chose but you only pay a fee to the agent who sells your property. Generally, the sale fee will be higher than sole agency agreements
Sole Selling Rights – This type of arrangement means that the agent you appoint is entitled to a fee when your property sells, irrespective if they sell it or not. So just to highlight this beware that if you sell the property yourself or through another agent you are still liable to pay a commission to the agent with the sole selling rights.
Always ensure that fees are paid on sale and not up-front – it’s surprising how many still fall for this one and find themselves having paid for services they’ll never need.
If you’re unsure about specifics do not sign any contracts, and remember to always reserve your right to go elsewhere prior to signing if you are not comfortable with the deal presented. Those selling a property should be aware that it’s the estate agent’s job to achieve the best deal for the seller, not for them.
When your agent makes appointments with potential buyers ask them for the “buyers position “so you are aware if they have a property to sell, where they are in their property chain and their financial position – your agent should have this information from their vetting procedure.
Negotiating a Fee with Estate Agents
According to the National Federation of Property Professionals (NFPP), the average fee for an estate agent is 1.5 per cent, with costs in the South East considerably more. Yet, across the country, fees vary and there’s no real guarantee of what you can expect to pay in any region or transaction before asking. The market isn’t the only agent dictating cost here.
Fees can often fluctuate by thousands of pounds in very competitive transactions.
There are generally four drivers in fees: the type of contract entered into, the will of the agent, the amount of competition, and the geographic region of sale.
The majority of estate agents pledge never to exceed 2.5% in fees but this is a commitment rarely adhered to even with properties under £600,000.
Once the agent has outlined their offer and you’ve demonstrated you’re not ignorant of the market knowledge involved, you’re ready to set about writing a contract.
The vast majority of estate agents ask for a minimum of six months of exclusive representation, but this is defined nowhere in law – aim to get this period down as much as possible. Agents may stipulate that six months is a conventional practice as if it’s mandatory but you’re entitled to haggle for a shorter contract and there’s no advantage in being unnecessarily contracted to any service.
A good technique is to offer 1.5 per cent but offers a higher fee if the agent manages to achieve a sale above the asking price. You’re free to decide how much in excess of the guide price earns the agent higher payment, but keep it competitive – don’t forget the end result: finding a buyer. Splitting hairs on decimal points will hinder progress. Adopting a fair but attractive stance for what’s on offer is a greater incentive in getting a property sold.
Watch out for estate agents pitching a ridiculously high sale price, the seller will only have to pay a higher commission following the transaction even if the price is reduced significantly in the process.
Never approach just one estate agent – go to two or three in the local area and get a good idea of fluctuations in fees. Find the devil in the detail and pick the agent who gives you a fair price for a deal that covers only what you need.
Never agree to any para-legal, brokering, or surveying advice offered by your estate agent – it’s like being asked to buy an expensive shoe-maintenance cream for the pair of boots you just bought in a shop. Do your homework and compare the services offered to those in the marketplace. Agents want you to use the services they recommend as generally they will receive a fee from the service provider for recommending you.
Always remember that there is no fixed price other than the fee on which you both agree.