Selling Your house?
This is the first of three posts warning house sellers and buyers concerning the tricks estate agents utilize to help you avoid being fleeced by your estate agent and also to get your hard earned money.
1. The sucker sign up
The foundation for virtually any estate agency’s success is clearly to encourage the most quantity of sellers to sign with that agency rather than with their competitors that are many generally lookalike. Research has repeatedly shown that many of us believe our houses to be worth more than they really are. Because we decorated them in a sense that satisfies us and have lived in them, we are frequently emotionally attached to them. We probably think our fearless colour scheme, modern open plan living space, ‘first feature’ hearth or ‘designer’ bathroom would be the height of practicality and good taste and would entrance any potential purchaser. But on seeing our houses that are precious, many buyers’ first thought may be they could gut the place and replace our decorations that are execrable with something better suited to their own preferences and lifestyle.
This can introduce a problem for estate agents. When they can be brutally honest with us about our house’s (often lack of) attractiveness and give us a realistic selling price, then we are likely to get quite grumpy and grant our company to a different agent who is more complimentary about our tastes and more optimistic about how much we can sell for. Therefore, when pitching for our company as sellers, us will flatter by praising our home, try to sound out us over how much we feel then assert they can easily meet or surpass our cost expectations and our property is worth. This often results in them overvaluing our homes.
In addition to the overvalue, another common approach agents use to get us to hire them is the buyer that is phantom. As we are showing them round our home, they will probably tell us that they have recently been contacted by one or several buyers that are looking for a property simply like ours. The broker may telephone his office in our presence, purportedly to check that these buyers continue to be in the market, to demand ours even more. Invariably his office will confirm there are bus-loads of ready buyers all pantingly eager to find our property. The message of the broker will be clear – then we’ll miss the chance of a rapid sale at a great price, if we do not sign up with them fast. A few days after we’ve signed, when the promised buyers seem to have inexplicably vanished into thin air, it’s easy for the broker to tell us that the buyers have found somewhere else or changed their minds or for the agent to give us some other cock-and-bull story to spell out the buyers’ astonishingly quick disappearance.
2. The cost-slash
It is not fairly unlikely that the agent will have overvalued your property as a way to get one to sign with them. So, unless industry is unusually buoyant or unless they are lucky enough to find a buyer with more money than sense, once they begin actively marketing your property, they will most likely have to soften you up to the prospect of accepting a lesser cost than they’d initially suggested.
Many sellers presume that it’s in the broker’s interest to get the best price possible. But this just is not the situation. Let’s we suppose you have a Sole Agency agreement with a selling fee of 1.5%. If you’re searching for say http://www.statons.com GBP285,000, the estate agency will make the individual agent and GBP4,275 of that – GBP427. If the agent manages to convince one to accept an offer of GBP265,000, the bureau will pocket GBP3,975 and the agent GBP397. While you drop GBP20,000, the bureau only loses GBP300 and the broker GBP30. As the broker and also the service will soon be under pressure to hit their sales targets each week or month, it’s usually better for them to push one to sell at a lowly price instead of waiting forever for a buyer to supply the entire cost – a GBP20,000, GBP30,000 or even GBP50,000 fall in your cost will have relatively little effect on their commission. Some clever agents may even get one to agree a fixed fee of 1.5% of the asking price, so that when they afterwards convince you to accept a lesser offer, their percentage remains gloriously intact.
Getting your price to drop is generally relatively easy. They now tell you they’ve had several buyers view the property instead of all the feedback continues to be as positive as they had anticipated though the agent may have initially been highly complimentary about your house. The agent may even inform you that after you had signed up, they surprisingly got several other similar properties on the service’s novels and that they sold incredibly quickly as they were more ‘competitively priced’. Or the agent might maintain that there happen to be a few offers on your home which were substantially lower than your asking price. But whatever tactics are employed, most sellers can instantly be convinced to drop their cost down to the level the agent had always known they would get.
The perfect situation for the agent is when a customer signs a Sole Agency agreement giving that broker exclusive rights to sell the property for an agreed period. This puts the broker under less pressure to offer the property because, as long as they change it during the contract period, they’ll get their commission. Less favorable for the agent is a Multiple Agency agreement where the seller’s property is put by they with several brokers. This sets up a race between agencies as to who gets the commission and the sale, meaning several agencies may do rather a great deal of work but miss out on bringing in any money – not something likely to be appreciated by the service supervisor. With a Multiple Agency situation, there are two common scenarios which can develop. You may find that every broker will do less work to market your premises as the understand it is likely another broker will get the sale and also the percentage. They thus focus their efforts on properties where they will have Sole Service and try and push buyers towards these properties. Or else a frenetic race can be as each agent attempts to get you to accept any offers the receive. In this instance, they may feel an even greater need to convince you to accept a price-slash and you’ll end up bombarded with broker calls all letting you know what great buyers they have ready to take your property if only you will show some flexibility on price. It is only after, after you’ve accepted an offer and withdrawn your property from various other brokers, that you find out the buyer had not been quite as solid as was proposed – they may be in a chain trying to sell their property, or may not have the finance entirely organised or may not be able to finish as rapidly as you had believed. But by then it’s usually too late to alter your mind and return back to other brokers.
3. The slash-and-catch
The most financially damaging situation to get a seller is when an agent decides that they can earn a lot of cash for themselves by getting you to sell your premises at an attractively low price to a person who is actually among the agent’s business contacts, friends or relatives. This slashing your cost and catching your house may be somewhat straightforward as when the broker manages to convince you to accept a low offer from among their associates plus they subsequently resell your property for a strong profit netting the agent maybe GBP10,000 to GBP20,000 or more for just a few hours work.
A more advanced version of the scam is when you’ve got house which has to be modernised or a flat or a house which can be split up into flats. Here the agent could possess a relationship having a programmer. The price will normally be that the agent alerts the developer to the opportunity, encourages the offer of the programmer to be accepted by you (while claiming your house is going to a private buyer) and gets a bung from the programmer. This bung is well known in the trade as a ‘drink’ and can usually range from GBP5,000 to GBP10,000 per price according to the gain made by the programmer. To be able to motivate you to sell at below market value, the agent may withhold offers from actual buyers or get friends to place in low offers to drive you towards a price-slash.
The Internet has made the slashandgrab marginally more challenging by providing sellers with quick access to advice about the prices similar properties have achieved. But, the slash-and-grab works an absolute treat with older, possibly more vulnerable sellers who might be downsizing- selling off a larger family dwelling and moving to a bungalow or flat after their children left home and have grown up. These sellers make easy targets because, if they have lived in a house for a long time, they may have purchased it to get a five-figure amount – GBP50,000 or perhaps GBP40,000. So when home sellers and buyers get a six-figure offer like GBP350,000, they will believe they may not feel comfortable about pushing for more and are making a gigantic gain. However, it happens to common people all of the time – on my street a retired couple sold their 3-flooring end-of-terrace house for GBP385,000 that is around.