Here is the first of three posts warning buyers and house sellers about the tricks estate agents use to get your cash and also that will help you avoid being fleeced by your estate agent.
1. The sucker sign-up
The basis for the success of just about any estate agency is clearly to support the maximum number of sellers to sign with that agency rather than with their many generally look-alike adversaries. Research has repeatedly demonstrated that the majority of us believe our houses to be worth more than they actually are. Because we have lived in them and decorated them in a way that suits us, we are frequently emotionally attached to them. We probably believe our bold colour scheme, modern open plan living area, 'first feature' hearth or 'designer' restroom will be the height of practicality and great taste and would entrance any prospective purchaser. But on viewing our precious houses, many buyers' first thought may be how they could gut the place and replace our execrable decorations with something better suited to their tastes and lifestyle.
This can pose an issue . Therefore, when pitching as sellers for our company, we will be flattered by most brokers by commending our house, make an effort to sound us out we feel our property may be worth and then claim they can certainly meet or surpass our cost anticipations. This frequently results in our dwellings being overvalued by them.
Along with the another common approach agents utilize to get us to hire them is the buyer that is phantom. As we are showing our house rounds, they'll likely tell us that they've recently been contacted by one or several buyers who are searching for a property simply like ours. The agent may telephone his office in our existence, supposedly to check these buyers remain in the market, to pressure ours even more. Invariably his office will support there are bus-loads of enthusiastic buyers all pantingly eager to find our property. The broker's message will be clear - if we do not sign up with the buyers fast, then we'll miss the opportunity of a fast sale at a good price.
2. The price-slash
It's not quite unlikely your broker may have overvalued your property as a way to get one to sign with them.
Many sellers assume that it's in the agent's interest to get the very best cost possible. But this simply is not the situation. Let us we presume you've got a Sole Agency agreement with a selling fee of 1.5%. If you are trying to find say GBP285,000, the estate agency will get GBP4,275 and the individual broker of that - GBP427. The bureau will pocket the agent GBP397 and GBP3,975 in case the agent manages to convince one to accept an offer of GBP265,000. So while you drop GBP20,000, the agency only loses GBP300 and the broker GBP30. Some smart brokers might even get you to agree a fixed fee of 1.5% of the asking price, so that when they later convince you to accept a lesser offer, their percentage remains gloriously complete.
Getting your price to drop is generally relatively easy. Although the agent may have initially been highly complimentary about your home, they tell you that they have had several buyers see the property rather than all the feedback continues to be as favorable as they had expected. The agent might even inform you that after you had signed up, they surprisingly got several other similar properties on the novels of the agency and that they sold very fast as they were more 'competitively priced'. Or the agent might maintain that there have been a few offers for the home which were considerably lower than your asking price. But whatever tactics are used, most sellers can instantly be convinced to drop their price right down to the level the broker had always known they'd get.
The perfect situation for the broker is when a client signs an Exclusive Agency agreement giving that agent exclusive rights to sell the property for an agreed interval. This gets the agent under less pressure to sell the property because, for as long as they shift it during the contract period, they will get their commission. This sets up a race between agencies as to who gets the commission along with the sale, meaning several services may do quite a lot of work but miss out on bringing in any money - not something likely to be appreciated by the agency manager. Having a Multiple Agency situation, there are two common scenarios which could develop. You may find that each agent will do less work as the understand it is likely another agent will get the sale and the percentage to market your property. The consequently focus their efforts on properties where they've Sole Service and attempt to shove on buyers. Or else a frenetic race could be as each broker 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 get bombarded with agent calls all suggesting what fantastic buyers they've ready to take your property if just you'll reveal some flexibility on cost. It's just after, after you've accepted an offer and removed your property from other agents, which you learn the buyer wasn't quite as solid as was suggested - they may be in a chain attempting to sell their property, or might not have the finance completely organised or might not have the ability to complete as rapidly as you'd believed. But by then it's usually too late to improve your mind and get back to other brokers.
3. The slash-and-grab
The most financially damaging scenario to get a seller is when an agent decides that they will produce plenty of cash for themselves by getting you to sell your home at an attractively low price to somebody who is in fact among the agent's company contacts, friends or family. This slashing your price and grabbing your home might be quite clear-cut as when the broker manages to convince you 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 only a few hours work.
A more complex variant of this scam is when you have a house which can be split up into flats or house which should be modernised or a flat. Here the agent can possess a relationship using a programmer. The price will typically be that the agent alerts the developer to the opportunity, encourages the offer of the programmer to be accepted by you (while claiming your home is going into a private buyer) and then 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 bargain based on the profit made by the programmer. To be able to encourage you to sell at below market value, the agent may withhold offers from actual buyers or get friends to put in low offers to drive you towards a cost-slash.
The web has made the slash-and-grab similar properties that were somewhat harder by providing sellers with quick accessibility to info about the prices have attained. But, the slash-and-grab works an absolute treat with older, maybe more vulnerable sellers who may be downsizing- moving to your bungalow and selling off a larger family house or level after their children have grown up and left home. These sellers make easy targets because, whenever they've lived in a house for a long letting agents in Hadley Wood time, they may have bought it to get a five-figure sum - maybe GBP40,000 or GBP50,000. So when older get a six-figure offer they will believe they are making a huge profit and may feel uncomfortable about pushing for more. Additionally, often such sellers will usually not have thought about the worthiness of their properties if converted into flats and so may be duped by the broker into just comparing the cost offered to that paid for other similar family houses, that will generally be considerably less than the value when converted into flats. Still, it happens to ordinary people most of the time - on my road a retired couple sold their 3-floor end-of-terrace house for around GBP385,000. Unknown a partner in the estate service which had handled 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 bought it.
