Selling a house for the first time can be daunting. It’s totally different from the buying process, not least because you will likely employ an estate agent.
Like with any experience in the fun world of adulting, more preparation means fewer surprises. Estate agents don’t have the best image and I will let you make up your own mind about that.
What I will say is that any time you sign a contract, you’re bound to it whether or not you understand what you’re entering into. It’s pretty much a given that the terms of any contract are more favourable to the issuing party. Therefore, it’s not in that party’s interests to educate you on what the contract means.
I get the impression that because people know about the general strategy for selling a house in that they need to get their house valued, advertise it and receive offers, they view the estate agency agreement as a simple piece of paper. This isn’t the case.
Aside from the contract, there’s also the matter of estate agent fees, pricing your house and considering any offers. The two main factors in most transactions are time and money. Estate agents want quick sales. If you do too, then great, your objectives are aligned. However, most people want the best sale price they can get. This is not top of the estate agent’s list of priorities.
With all this in mind, here are some of the things I learnt when selecting an estate agent to sell through.
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Houses are marketed online these days, so from that point of view you can use anyone who puts all their properties on Rightmove and/or Zoopla. However, it’s a good idea to at least consult one that has recently sold similar houses in your area and can demonstrate this. If they are selling all the houses in your area, then they are essentially setting the market rates. Therefore, you’ll get a realistic idea of how much you could get for yours by speaking to them.
Other services/conflicts of interest
Agents will keep reiterating to you that they work for you, that they want to get you the best price etc. However, sometimes they also work for the buyer and this means that the effort they put in for you is diluted while they try to keep both customers happy.
Things to look out for are: does the estate agent have an in-house mortgage broker that the buyer is using? This can be a double-edged sword. On one hand, the agent has some intel on how much money the buyer has access to. On the other hand, it means you’re not necessarily their priority.
Also, check to see whether the estate agent has in-house conveyancers and, if so, whether your buyer is using them. Again, this creates a conflict of interest as the agent will bend over backwards to please the buyer even if it inconveniences you. It is the agent’s job to see that the transaction completes and they will promise anything to anyone to achieve that.
Use the age-old method of getting three quotes and going somewhere in the middle. Some agents I have dealt with are almost notorious for setting all their asking prices extremely high. Get your valuations in and decide how much you can realistically get vs what you realistically want or need.
Take into account any (good or bad) differences between your place and the other places that have sold, how long everything stayed on the market and how long ago the agent’s sales were. Agents will show you details of all different properties at different stages of the process: on the market, offer accepted, contracts exchanged, sale completed. The only prices that matter are the ones that the buyers actually paid.
Bear in mind that, unless you set your asking price low for a quick sale, you are going to have to do the offer negotiation dance later. Therefore, usually, your valuation is one figure and your asking price is usually a figure maybe 10% higher than that to give you the wiggle room for the offer negotiation dance.
Bricks and mortar estate agents (ie those with a physical sales office on the high street) generally charge a percentage of the final sale price. In the past two years I have seen anything from 0.7% to 1.2% plus VAT for sole agency. Estate agents have to say whether or not their fee includes VAT. Most of them don’t specify, so make sure you ask, otherwise you may end up paying them 20% more than you anticipated.
You can negotiate the fee. I always negotiate the fee. I asked each agent what their fee was, then decided which agent I liked the most. I then asked that agent to match the lowest fee. This suited my particular circumstances.
The less you have to shell out, the more goes in your pocket, but bear in mind that if the agent is only getting a small percentage, then there is also little incentive for them to strive to get your potential seller to increase their offer.
If you think your house will require some effort to sell, or you anticipate a long chain or other reasons why the process may take a while, you may want to consider a higher commission to incentivise your agent.
Check your contract carefully to make sure you’re clear on what’s included in the fee. You should look for things like photographs, listing on an online property portal, accompanied viewings and floor plans. If these are not included, ask how much they will cost and factor this into your decision.
Sole agency/multiple agency
You can instruct one or more agencies to sell your property at the same time. I have noticed that sellers tend to go with multiple agencies if they want a quick sale, or they have been trying to sell their house for a long time and haven’t been able to agree a sale.
The fees for multiple agency are higher than for sole agency.
If you’re using more than one, you must make sure you instruct each agency on a multiple agency basis. If you miss this vital step and instruct one or both as sole agency, you could be liable to pay both agents regardless of which one introduced the buyer.
Contract/agency agreement wording
So you’ve chosen your agent and now you’re ready to sign their contract. Keep your eyes peeled for the following:
Contract period and pricing strategy: these go hand in hand
The default seems to be 12 weeks and this can be negotiated down. I never contract an agent for longer than four weeks because I like to keep my options open. If you sign up for 12 weeks and quickly realise you don’t like what they’re doing (or not doing), you’re stuck with them unless you can renegotiate a multi-agency agreement and bring another agent into the mix, but you’ll end up paying more as I mentioned before.
Also, don’t forget that after the sole agency period has finished, you are still contracted to that agent until you actually terminate the agreement. There will usually be a notice period. So say for example the selling period is 12 weeks and the notice period is 14 days, then in reality you are contracted for 14 weeks.
The other reason I never agree to a long contract period is because I want to control the pricing strategy. I don’t want to cede that control to the agent. A long contract period gives your agent a nice long period over which to reduce the asking price of your house. They need your agreement to do this. However…
Consider the following situation. An agent assures you they can get a very good price for your property and woos you with compliments about it, the area and proximity to schools, amenities etc. They suggest an asking price so high it gets you thinking not only could you move to the place of your dreams but could perhaps do some reno too…
- Week 1: House goes on the market. No viewings.
- Week 2: Still no viewings. Agent suggests dropping the price to generate interest.
- Week 3: You drop the price. Some viewings. Feedback is that it’s a lovely house but not big enough (read: not worth 90% of the asking price).
- Week 4: Same as last week. Agent suggests dropping the price.
- Week 5: The people who saw it on Rightmove in Week 3 but didn’t view it because it was out of their price range are now thinking hmmm, let’s see if they drop the price some more.
- Week 6: People who have just started househunting notice that your house has been on Rightmove for five weeks and that you’ve reduced the price. They are put off by preconceptions that there must be something wrong with it.
The longer your house is on the market, the less attractive it will be. The sweet spot is to put it on the market at an asking price high enough that it doesn’t look like too much of a bargain, but low enough that 90% of the asking price would be a realistic sale price.
So, the longer your contract period is, the longer you are locked in with the agent and the longer they have to persuade you to drop the price.
Once you have dropped the price, you can’t feasibly increase it again unless you take it off the market and readvertise it some months later when prices have increased across the board. Therefore, you need to price your place realistically to begin with to generate a good amount of interest in the first couple of weeks.
Sole selling rights (not to be confused with sole agency)
Sole selling rights means that if you exchange contracts with a buyer who was introduced while you were contracted to a sole agent, then you are committed to paying the commission to that agent.
This is not a problem if the agent found the buyer for you. However, it also applies if you found the buyer yourself or if someone else made the buyer aware of your property (eg your brother told his friend about it).
The wording in the contract might not say “sole selling rights”. It could say something about “a buyer introduced by another agent during our sole agency period”.
If you are not comfortable with this, tell the agent you want it removed from the contract. You will likely get some pushback but, in my experience, they back down.
If possible, sign the contract at your home. This gives you a 14-day cooling-off period. So if you decide you’ve made a mistake, you can cancel. This option is not available to you if you sign at the estate agent’s premises.
Commission due upon exchange of contracts
This is a common clause. Exchanging contracts with your buyer commits them to buying your house and they pay their deposit. If, for any reason, they have to pull out, they lose their deposit to you and the agent gets their commission from that deposit. Check your contract to see whether it says you have to pay their fee on exchange, or simply become liable for it upon exchange and hand over the money when you complete.
I have successfully negotiated this out of agency contracts and changed them to say that the agent earns their commission upon completion, not exchange. This is because my situation was uncomplicated, with no chain either end so very little chasing for the agent to progress the sale. The agency will have spent some money on placing the property on Rightmove and conducting the viewings, but this won’t have been in the thousands of pounds. I take the view that if I pay them their commission and the sale falls through, there is little incentive for them to try to sell it again if it took a while to get an offer in the first place.
“Ready, willing and able” buyer
If you see this in a contract, either run a mile or make sure it’s removed before you sign it. This clause binds you to paying the estate agent’s commission if they find you a ready, willing and able buyer. Unfortunately, even if that buyer is really keen and has no chain there’s nothing to say that their offer needs to be acceptable to you or that contracts need to be exchanged before you are liable for the agent’s fee. Although estate agents are legally allowed to include this phrase, the terms “ready”, “willing” and “able” are open to interpretation.
What’s worked for you?
If you found these tips useful, please consider buying me a coffee. Thank you!
Have you found any other interesting clauses in estate agent contracts? How did you handle them? Let me know in the comments!