Not so bad...really
Does Anyone Have a Good Word...
...to say about estate agents?
I do.
Bad agents run the gamut from lazy and uninformed to downright dishonest.
Good agents give good value.
Of all the professionals involved in conveyancing, the estate agent is probably the most motivated to see every sale succeed. Solicitors and surveyors get paid even if a sale falls through but, generally speaking, agents get commissions only from a completed sale.
Many transactions go through rocky patches, and when that happens, the agent is often the only calm sane person who has access to both sides and wants the transaction to succeed.
They can, and do, refloat sinking ships.
Can't You Do It Yourself?
Beginning 1 October 2008, all UK residential estate agents must belong to an approved redress scheme that will deal with complaints related to the buying and selling of residential property.
Sellers and buyers alike can do it themselves, and many are in fact doing so, registering with internet sites that charge small fees for postings. Some buyers are even making their own websites.
But many agents have a ready supply of, or access to, a pool of genuine buyers. You may sell your £500,000 house without an agent and congratulate yourself on saving perhaps £10,000 on the agency fee. But if an estate agent could have sold the property for £520,000, you will actually be worse off.
Often, they sell a house as soon as it becomes available, and when that happens their fee seems excessive - they earn so much money for so little work. But many properties take ages and lots of marketing effort to shift.
Sellers: How Much is Your House or Flat Worth?
In the year 1008, you set your asking price by finding out how much your neighbour got for his hovel, determined how similar or dissimilar his place was to yours, and guessed at the highest possible price you could command. Today, a mere thousand years later, actual sale-price data and powerful computer programs have removed much of the guesswork. See the PWP Valuation page for more pricing information.
Sellers: Fixed Fee, Cash Amount...or Both?
With a fixed-fee arrangement, the vendor agrees to compensate the estate agent a certain percentage of the selling price. However, some agents convert the percentage amount into a cash amount - and if the house sells for less, the agent may demand more than the vendor thinks is due. The amount may be considerably more if the property has been overvalued, whether intentionally or not (see the Example below). The Estate Agents' Ombudsman notes that "the fee must be openly described as fixed irrespective of the price finally achieved for the property."
Example: Commission of 1%
Percentage: Property is valued at £500,000; 1% commission is £5,000.
Property actually sells for £450,000; 1% is $4,500.
Difference: £500.
Deposits
Estate agents can, and do, take deposits from buyers. If they accept a deposit, they should issue a receipt and, says the OFT, "put the deposit in a special account, called a 'client account', which is set up for this purpose at a bank, or other financial institution."
The Ombudsman suggests that deposits should be handled by solicitors, not estate agents. One dispute arose after a prospective buyer paid a $5,000 deposit, was unable to obtain a mortgage, withdrew the offer to buy, and was then told by the agent that the deposit was not refundable.
Agents, Commissions and Financial Facts of Life
The higher the sale price, the higher the agent's commission.
An agent working on, say, two per cent commission earns £10,000 on a sale of £500,000. If the agent can sell the property for an additional £25,000 or even £50,000, the commission rises to £10,500 and £11,000 respectively.
But commission is not everything. Turnover is important too, and agents generally want to seal the deal rather than take the risk of going for the highest possible price. A definite £10,000 commission today is more appealing than a possible £10,500 tomorrow.
Buyers Beware
How many estate agents should you register with?
A barn...a bungalow...or both?
A property was marketed as a 100-year-old barn. The survey revealed that it was a bungalow, and only 36 years old. The connection to farming? The site used to be a pig sty.
If you are a buyer, register with more than one estate agent but don’t take on too many. That way, you get to consider a wide range of properties, but if you register with too many, the number of properties can become unmanageable.
If you are a seller, make sure you understand the contract you sign with the agent.
The Estate Agent Works for...
Is your company thinking of making redundancies? Are you planning to have more children, and maybe have one on the way right now? Do you drive a banger but really have loadsamoney?
How much do you want the estate agent to know about you, your finances and your personal and professional circumstances?
Remember that estate agents represent the seller, not the buyer, and the agent is obligated to represent the best interests of their client.
In actual practice, agents usually spend more time with buyers than with their seller/client. And often this relationship becomes friendly and close. The closer you become to an estate agent, the more often you should remind yourself that the agent is really working for the vendor, not you the buyer.
For Sellers
At the earliest opportunity, obtain valuations from at least three agents, and beware inflated estimates. If an estimate seems high, the agent may have intentionally overvalued your property in a bid to get your custom.
Determine the precise fees of each agent, and make sure you know what the fee entails (does it include advertising?, for example). Don't assume that the fee is fixed: negotiate, especially if several agencies are competing against one another. If you can reduce their fee by a half, even quarter, per cent, you can save thousands of pounds.
Your relationship with your agent is a contractual one. Make sure you read the contract and don't sign if you don't understand something. Ask questions. An agent who can't or won't answer your questions, or explain things satisfactorily, might not be the right agent for you.
Terminology Trouble?
"Sole agency" is different in important respects from "sole selling rights." With a SOLE AGENCY agreement, you have one appointed estate agent but if you find a buyer other than through your agent during the contract period, you should not have to pay a fee. With a SOLE SELLING RIGHTS agreement, you pay the fee even if you find the buyer yourself.
"Ready willing and able." Another tricky area: if the agent finds a buyer ready willing and able to buy your property, you may have to pay the commission even if you withdraw your property from the market. Especially with a Ready Willing and Able contract, the seller may have to pay for advertising or other costs if they take the property off the market.
Complaints Anyone?
CEAR - a new acronym. The Consumers, Estate Agents and Redress Act 2007 mandates that all companies offering estate agency services must join an approved redress scheme, such as the Ombudsman. Implementation was delayed and is now (April 2008) expected to take effect in October 2008. The act will enable anyone who deals with a residential estate agent to have access to a redress system.
The Estate Agents' Ombudsman
The Ombudsman for Estate Agents (OEA) Scheme has been operational since 1998. If a buyer or seller has a dispute with an agent, and that agent is a member of the scheme, the buyer or seller can lodge a complaint, which will be heard by the Ombudsman. The maximum award is £25,000.
In the three years to approximately 2008, the Ombudsman reviewed about 1,700 cases, supporting 63% and not supporting 37%.
Ombudsman hearings are confidential, but the OEA Annual Reports provide informative summaries of some cases. In one, for example, an agent failed to sell a house for an entire year, but when the seller instructed another agent, the house sold immediately, and at a higher price than the previous agent had recommended. For various shortcomings by the first agent, the Ombudsman awarded the seller $400.
In another case, the Ombudsman awarded a seller £900 and also shaved off several hundred pounds from the commission she had to pay. Among other things, the agent had not told her of all possible offers for her property.
More than 7,500 agents are members of the OEA scheme. A full list, copies of the Annual Reports (with the case studies) and other information is available on the OEA website: www.oea.co.uk
Valuable Information for Buyers - if they can get it
If you find a property you like, try to find out how long it has been on the market, whether there have been previous offers, and other relevant historical details. Ask the estate agent. Consult back issues of the local property newspapers (the local reference library may stock them) to see how long properties have been on the market, and what their original asking prices were.
Ex-Council Properties - Right to Know?
Attitudes toward ex-local authority properties vary: some buyers won't go anywhere near them, and others seek them out because many former local authority houses and flats offer excellent value for money.
A 2008 case handled by the Ombudsman illustrates a common problem: a property is ex-council but doesn't look it. The prospective buyer does not know that the property is ex-council...and the estate agent doesn't volunteer that fact, either in the sales particulars or during casual conversation. However, the agent is obligated to tell the truth if the buyer asks.
In the case addressed by the Ombudsman, the buyer intended to let the flat, but the lease had a restrictive covenant regarding letting. The buyer did not learn about this until well into the process and filed a complain asserting that the agent should have informed her at the start. The Ombudsman ruled that the agent was not obligated to volunteer that information.
Deposits
Agents can ask for a deposit, but if you as a buyer pay a deposit, make sure you get a receipt - and make sure, too, that the agent deposits the money in a separate client account.