Selling Your property?
This is the first of three posts warning house sellers and buyers about the tricks estate agents use to get your hard earned money and also that will help you avoid being fleeced by your estate agent.
1. The sucker sign up
The foundation for the success of just about any estate agency is clearly to support the most quantity of sellers to sign with that service rather than with their competitors that are many usually look-alike. Research has repeatedly shown that the majority of us believe our houses to be worth more than they really are. Because we’ve lived in them and decorated them in a way that suits us, we’re frequently emotionally attached to them. We likely believe our bold colour scheme, modern open plan living area, ‘first attribute’ fireplace ‘designer’ toilet would entrance any prospective purchaser and are the height of practicality and good taste. But on seeing our dwellings that are cherished, many buyers’ first idea may be how they could gut the place and replace our execrable decorations with something better suited to their own tastes and lifestyle.
This could introduce a problem for estate agents. When they’re brutally honest with us about our dwelling’s (frequently deficiency of) attractiveness and give us a realistic selling price, then we are prone to get fairly grumpy and grant our company to a different broker who is more complimentary about our tastes and more optimistic about how much we can sell for. So, when pitching for our business as sellers, most agents will flatter us by praising our house, make an effort to sound us out over how much we believe then claim they can quickly match or surpass our cost anticipations and our property is worth. This often results in them overvaluing our houses. However, the agent understands that once we sign up with them, have located a new dwelling, have psychologically already moved into our new house and are under financial pressure to sell our existing property, it’s simple to coerce us into accepting a lower price than we had originally been led to expect.
Besides the overvalue, another common tactic agents use to get us to hire them is the phantom buyer. They’ll likely tell us that they have lately been contacted by one or several buyers that are looking to get a property just like ours, as we are showing them round our home. To demand ours even more, the broker may telephone his office in our existence, supposedly to check these buyers remain in the market. Always his office will affirm there are busloads of enthusiastic buyers all 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 cost, if ours don’t sign up with them immediately.
2. The price-slash
It is not rather unlikely your agent will have overvalued your property so that you can get one to sign with them. So, unless the market is very buoyant or unless they are lucky enough to locate a buyer with more money than sense, as soon as they start actively marketing your property, they’ll most likely have to soften you up to the prospect of accepting a lesser cost than they’d originally proposed.
Many sellers assume that it is in the agent’s interest to get the most favorable cost possible. But this simply isn’t the situation. Let’s we assume you’ve got a Sole Agency agreement with a selling fee of 1.5%. If you are looking for say GBP285,000, the estate agency will bring in the individual broker http://www.statons.com and GBP4,275 perhaps – GBP427. In case the broker manages to convince you to accept offer the agency will pocket GBP3,975 and the agent GBP397. While GBP20,000 drops, the agency only loses GBP300 and the broker GBP30. As the agent along with the service is likely to 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 lower price rather than waiting forever for a buyer to provide the full price – a GBP20,000, GBP30,000 or even GBP50,000 fall in your cost will have comparatively little effect on their commission. Some smart brokers 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 lower offer, their percentage remains gloriously intact.
Getting you to drop your price is usually comparatively easy. Though the broker may have originally been highly complimentary about your home, they now tell you that they have had several buyers view the property rather than all the feedback continues to be as favorable as they had anticipated. The agent may even inform you that just after you had signed up, they surprisingly got several other similar properties on the agency’s novels and that they sold very fast as they were more ‘competitively priced’. Or the broker might maintain that there have been a few offers for your own dwelling which were much lower than your asking price. But whatever approaches are used, most sellers can instantly be persuaded to drop their price down to the amount the broker had always known they’d get.
The perfect situation for the broker is when a customer signs an Exclusive Agency agreement giving exclusive rights to that agent to sell the property for an established interval. This gets the broker under less pressure to sell the property because, as long as it is shifted by them during the contract period, they will get their commission. Less favorable for the broker 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 sale and also the commission, meaning several services may do rather lots of work but miss out on bringing in any money – not something likely to be appreciated by the service manager. Using a Multiple Bureau scenario, there are two common scenarios which can develop. You may find that each broker will do less work as the understand it is likely another broker will get the fee as well as the sale to market your property. The consequently focus their efforts on properties where they try and shove buyers and have Sole Service. Or else there could be a frenetic race as each agent attempts to get you to take any offers they receive. In this particular case, they may feel an even greater need to convince you to accept a price-slash and you’ll end up bombarded with agent calls all letting you know what amazing buyers they have prepared to take your property if just you will reveal some flexibility on cost. It is only afterwards, after you have accepted an offer and removed your property from other agents, that you determine the buyer had not been quite as solid as was suggested – they may be in a chain trying to sell their property, or may not possess the finance fully organised or may not have the capacity to complete as rapidly as you’d considered. But by then it is normally too late to alter your mind and get back to other brokers.
3. The slash-and-grab
The most financially damaging situation to get a seller is when an agent determines that they can produce plenty of money for themselves by getting one to sell your premises at an attractively low price to somebody who is actually one of 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 one to accept a low offer from among their associates and they subsequently resell your property for a strong gain netting the agent perhaps GBP10,000 to GBP20,000 or more for just a few hours work.
A more sophisticated version of this scam is when you’ve got house which needs to be modernised or a flat or a house which can be split up into flats. Here the broker could possess a relationship having a developer. The deal will normally be that the broker alerts the programmer to the chance, motivates you to accept the offer of the developer (while maintaining your house is going to a private buyer) and gets a bung from the developer. This bung is known in the trade as a ‘drink’ and will normally range based on the profit made by the developer. As a way to encourage one to sell at below market value, offers may be withheld by the agent from buyers that are genuine or get friends to put in low offers to drive you towards a cost-slash.
The world wide web has made the slashandcatch similar properties that were somewhat harder by providing sellers with easy accessibility to advice about the costs have reached. However, the slash-and-grab works an absolute treat with older, possibly more vulnerable sellers who may be downsizing- selling off a larger family house and moving to some bungalow or flat after their kids have grown up and left home. These sellers make easy targets because, whenever they have lived in a house for quite some time, they may have bought it to get a five-figure sum – GBP50,000 or maybe GBP40,000. So when older receive a six-figure offer they will believe they may feel uneasy about pushing for more and are making a massive profit. Moreover, often such sellers will generally not have thought concerning the worthiness of these properties if converted into flats and so could be misled by the broker into just comparing the price offered to that paid for other similar family dwellings, which will generally be considerably significantly less in relation to the value when converted into flats. Still, it happens to everyday people most of the time – on my street a retired couple sold their 3-flooring end-of-terrace house for around GBP385,000. Unknown to the sellers, an associate in the estate service which had managed the sale and sold as three self contained flats for almost GBP750,000 just a few months later after likely less than GBP50,000 had been spent on the conversion purchased it.