Selling Your house?
This really is the first of three posts warning buyers and home sellers regarding the tricks estate agents use to get your cash and that will help you avoid being fleeced by your estate agent.
There are at least three primary techniques commonly used by estate agents that sellers should be watching out for – the sucker sign up, the cost-slash along with the slash-and-catch.
1. The sucker sign up
The foundation for any estate agency’s success is obviously to support the utmost variety of sellers to sign with that agency rather than with their many generally lookalike competitors. Research has repeatedly shown that most of us consider our houses to be worth more than they really are. Because we’ve lived in them and decorated them in a sense that satisfies us, we’re frequently emotionally attached to them. We likely believe our fearless colour scheme, modern open-plan living space, ‘original feature’ fireplace ‘designer’ bathroom would be the height of good taste and practicality and would entrance any potential purchaser. But on seeing our beloved dwellings, many buyers’ first thought may be they could gut the place and replace our decorations that are execrable with something better suited to their own preferences and lifestyle.
This can introduce a problem for estate agents. When they can be brutally honest with us about our dwelling’s (commonly deficiency of) attractiveness and give us a realistic selling price, then we are likely to get fairly grumpy and award our company to a different broker who’s more complimentary about our tastes and more positive about how much we can sell for. Therefore, when pitching as sellers for our company, we will be flattered by most agents by commending our home, make an effort to sound out us we believe then maintain they are easily able to meet or exceed our cost expectations and our property is worth. This often results in them overvaluing our homes.
As well as the overvalue, another common tactic agents utilize to get us to hire them is the phantom buyer. As we are showing them round our home, they will likely tell us that they’ve lately been contacted by one or several buyers who are looking to get a property just like ours. To demand us even more, the agent may telephone his office in our existence, purportedly to check that these buyers are still in the industry. Always his office will confirm that there are busloads of enthusiastic buyers all pantingly eager to see our property. The agent’s message is going to be clear – then we’ll miss the opportunity of a fast sale at a great price, if ours don’t sign up with the buyers immediately. A few days after we’ve signed, when the promised buyers seem to have mysteriously vanished into thin air, it’s possible for the broker to tell us that the buyers have found somewhere else or altered their minds or for the agent to give us some other cock-and-bull story to spell out the buyers’ astonishingly fast disappearance.
2. The price-slash
It is not rather unlikely your agent may have overvalued your property so that you can get you to sign with them. So, unless industry is unusually buoyant or unless they are fortunate enough to look for a buyer with more money than sense, once they start actively marketing your property, they’ll most likely have to soften you up to the prospect of accepting a lower cost than they had originally suggested.
Many sellers suppose that it’s in the broker’s interest to get the best cost possible. But this simply is not the situation. Let us we suppose you have a Sole Agency agreement with a selling fee of 1.5%. If you are seeking say estate agents in Hadley Wood GBP285,000, the estate service will get GBP4,275 and the individual broker maybe – GBP427. If the agent manages to convince you to take an offer of GBP265,000, the agency will pocket GBP3,975 and the agent GBP397. While you drop GBP20,000, the bureau simply loses GBP300 and the agent GBP30. As the agent and also the service will be under pressure to hit their sales targets each week or month, it is generally better to allow them to push one to sell in a lowly cost rather than waiting endlessly for a buyer to supply the full cost – a GBP20,000, GBP30,000 or even GBP50,000 drop in your cost will have comparatively little effect on their commission. Some smart agents may 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 commission remains gloriously complete.
Getting your price to drop is generally comparatively easy. Although the agent could have originally been highly complimentary about your home, they tell you that they have had several buyers view not all the feedback and the property has been as favorable as they had anticipated. The excellent transport links may suddenly become a concern because of a lot of traffic and congestion; your sizeable garden, which had been such a huge selling point, might present an issue for the kind of active young professional couples who’d be in the market to get a house like yours; your tremendously creative colour scheme, which the agent had so admired, might well have put off buyers searching for a more impartial decor and so on. The agent might even inform you that just after you had signed up, they surprisingly got several other similar properties on the service’s books and that they all sold very fast as they were more ‘competitively priced’. Or the agent might claim that there have been a few offers for your home which were much lower than your asking price. But whatever tactics are utilized, most sellers can immediately be persuaded to drop their cost right down to the level the broker had always understood they’d get.
The perfect scenario for the broker is when a client signs an Exclusive Agency agreement giving exclusive rights to that agent to sell the property for an agreed interval. This puts the broker under less pressure to offer the property because, for as long as it is shifted by them 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 great deal of work but miss out on bringing in any money – not something likely to be valued by the agency manager. Having a Multiple Agency situation, there are two common scenarios that may develop. You might find that each broker will do less work to market your premises as the understand it’s likely another broker will get the sale along with the percentage. They consequently focus their efforts on properties where they will have Sole Agency and attempt to shove buyers. Or else a frenetic race could possibly be as each broker attempts to get one to accept any offers the receive. In this case, they may feel an even greater demand to convince you to accept a cost-slash and also you’ll find yourself bombarded with agent calls all letting you know what excellent buyers they’ve prepared to take your property if only you will show some flexibility on price. It’s only after, once you have accepted an offer and withdrawn your property from various other agents, which you determine the buyer had not been quite as solid as was suggested – they can be in a chain trying to sell their property, or might not have the finance completely organised or might not have the capacity to complete as quickly as you had considered. But by then it is normally too late to change your mind and return to other brokers.
3. The slash-and-grab
The most financially damaging scenario to get a seller is when an agent decides that they can create lots of cash for themselves by getting you to sell your home at an attractively low cost to a person who is in fact among the agent’s company contacts, friends or family. This slashing your cost and catching your house might be somewhat straightforward as when the agent manages to convince one to accept a low offer from among their associates plus they subsequently resell your property for a strong gain netting the broker maybe GBP10,000 to GBP20,000 or more for merely a few hours work.
A more complex variant of the scam is when you’ve got a house that may be split up into flats or house which needs to be modernised or a flat. Here the agent may possess a relationship using a developer. The bargain will generally be that the broker alerts the programmer to the opportunity, motivates you to accept the offer of the programmer (while claiming your home is going to a private buyer) and gets a bung in the developer. This bung is well known in the trade as a ‘drink’ and can normally range depending on the gain made by the programmer.
The Internet has made the slash-and-catch marginally more difficult by providing sellers with quick accessibility to information regarding the costs similar properties have reached. However, the slash-and-catch works an absolute treat with older, possibly more vulnerable sellers who may be downsizing- moving to your bungalow and selling off a bigger family house or level after their children have grown up and left home. These sellers make easy targets because, when they have lived in a house for many years, they may have purchased it to get a five-figure sum – GBP50,000 or maybe GBP40,000. So when home sellers and buyers are given a six-figure offer like GBP350,000, they’ll consider they’re already making a huge profit and may not feel comfortable about pushing for more. Additionally, often such sellers will generally not have thought regarding the worth of the properties if converted into flats and so could be misled by the agent into just comparing the price offered to that paid for other similar family dwellings, which will generally be drastically less in relation to the worth when converted into flats. This scam hit the headlines in 2009 when an agent was found to have convinced a seller to take GBP2.9 million for a property which had a value as a development of nearer GBP10 million. However, it happens on my street – to everyday folks all the time a retired couple sold their 3-flooring end-of-terrace house for GBP385,000 that is around.