DID YOU KNOW…
…that you can negotiate the length of time that you are tied into an estate agent contract? It is your decision how long the contract lasts. Not the agent’s.
Estate agents will typically try to tie you in to a 12, 16 or 20 week contract. Some contracts come with a “back-end” clause that keeps sellers tied in for up to an extra 28 days at the end of the contract period. But if you end up not getting on with your agent before the end of the contract and wish to terminate you may incur penalty costs and have to serve a notice period of up to 4 weeks. And furthermore, you may still have to pay the agent’s commission even if a buyer introduced by the agent decides to purchase after the contract is terminated. Especially if you have signed a contract giving them sole selling rights.
You signed a 16 week sole agency contract with Agent A. You were unhappy with the service and terminated the arrangement.
You sign up with Agent B and a couple of months later the sale of your property goes through. You pay Agent B the commission you owe them for selling your home only to be approached by Agent A asking for a percentage as well. Agent A argues that the purchaser was originally “introduced” by them. Due to the terms of the original contract you are legally obliged to pay their fee.
This can happen months, or even years after you terminated the original contract.
How do estate agents benefit from longer contract terms?
Your bargaining power against some estate agents – such as national chains, or agents with a virtual monopoly in your area will be very difficult to negotiate terms on their contracts. Independent agents may be more compliant, but unscrupulous agents will want to hang on to those longer contract lengths.
Why do they do this? It’s because this gives them scope to rope in unsuspecting sellers with a high, unrealistic valuation price. Sometimes this can be ten, twenty, or even thirty thousand pounds higher the than the market value of the property. Who wouldn’t be swayed by that – right? But the agent knows, having dangled the golden carrot in front of the seller, that with a long contract they will have time to persuade the seller to lower the asking price to a more realistic level after a period of time.
Why do estate agents give high valuations?
Competition between estate agents is immense. At any given time there is only a finite number of sellers coming to the market. And there are a lot of agents trying to win the business. Some agents will do whatever it takes to get a seller to sign up with their agency. And with their number one priority of getting a seller to list it should come as no surprise that their valuation might not be as accurate as it should be.
Overly high valuations also allow estate agents to get away with higher commission rates. The Times’ analysis (https://www.thetimes.co.uk/edition/news/estate-agents-dupe-sellers-klwl96z2p) of Zoopla data found that homeowners who list their property with any of the 10 estate agents that overvalue the most would pay on average double the rate of commission charged by the 10 agents that overvalued the least. It also found that the largest estate agents were most likely to overvalue sellers’ properties.*
*Source Which?: https://www.which.co.uk/news/2019/04/selling-a-property-the-priciest-estate-agents-are-most-likely-to-overvalue/
Reasons for negotiating a shorter contract time
* If you notice that other homes in your area are selling fast and you have still sitting without an offer (perhaps because of the unrealistic asking price) you can easily get rid of your agent and hire another.
* If your home doesn’t sell within the shorter period agents will normally be happy to extend the contract
House Fox’s view
When we set up House Fox Estate Agents we committed ourselves to transparent estate agency practices, fairer fees, and good customer service. Our normal contract period is just eight weeks, with no back-end notice periods. We have never knowingly over-valued a property to get an instruction, and this is borne-out by our record of achieving an average of 97% of asking prices. At the time of writing, this is the highest percentage in North Somerset.
We know that our clients have the right to negotiate contract length and are happy to offer periods as short as one month. All you have to do is ask, we’re here to help.