This is the very first of three articles warning house sellers and buyers about the tricks estate agents utilize to help you avoid being fleeced by your estate agent and also to get your hard earned money.
1. The sucker signup
The basis for the success of just about any estate agency is obviously to support the utmost quantity of sellers to sign with that agency rather than with their many generally lookalike competitors. Studies have repeatedly shown that almost all of us believe our homes to be worth more than they really are. Because we decorated them in a way that satisfies us and have lived in them, we are often emotionally attached to them. We likely believe our fearless colour scheme, modern open plan living area, 'original feature' hearth or 'designer' toilet would entrance any prospective purchaser and would be the height of good taste and practicality. But on viewing our cherished houses, many buyers' first idea may be how they can gut the place and replace our decorations that are execrable with something better suited to their own preferences and lifestyle.
This could pose an issue . So, when pitching as sellers for our business, most brokers will flatter us by commending our house, try to sound out us we believe then claim they can certainly match or exceed our cost anticipations and our property is worth. This frequently results in our dwellings being overvalued by them. But the broker understands that once we sign up with them, have found a brand new dwelling, have emotionally already moved into our new house and are under financial pressure to offer our existing property, it is simple to coerce us into accepting a reduced cost than we'd originally been led to expect.
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'll likely tell us that they have 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's office may be phoned by he in our presence, supposedly to check these buyers are still in the market. Always his office will confirm that there are bus-loads of ready buyers all eager to see our property. The message of the agent is going to be clear - then we'll miss the chance of a sale that is fast at a great price if ours do not sign up with the buyers quickly.
2. The price-slash
It is not fairly unlikely your agent may have overvalued your property as a way to get you to sign with them.
Many sellers assume that it is in the broker's interest to get the very best cost possible. But this just is not the situation. Let us we suppose you've got a Sole Agency agreement using a selling fee of 1.5%. If you are searching for say GBP285,000, the estate agency will bring in GBP4,275 and the individual agent perhaps 10% of that - GBP427. In case the agent manages to convince you to accept offer the agency will pocket the agent GBP397 and GBP3,975. So while you drop GBP20,000, the bureau simply loses the agent GBP30 and GBP300. As the agent along with 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 forever for a buyer to provide the total price - a GBP20,000, GBP30,000 or even GBP50,000 drop in your price will have comparatively little effect on their commission.
Getting one to drop your price is usually relatively easy. Though the agent could have originally been highly complimentary about your house, they now tell you they've had several buyers view not all the feedback and the property has been as favorable as they'd expected. The excellent transportation links may suddenly become a concern because of a lot of traffic and congestion; your substantial garden, which had been such a huge selling point, might pose a problem for the type of busy young professional couples who would be in the marketplace to get a house like yours; your highly creative colour scheme, which the agent had so admired, might well have put off buyers looking for a more unbiased decor and so on. The broker might even inform you that after you'd signed up, they surprisingly got several other similar properties on the publications of the agency and that they sold incredibly fast as they were more 'competitively priced'. Or the agent might claim that there happen to be a few offers for the house which were much lower than your asking price. But whatever strategies are utilized, most sellers can immediately be convinced to drop their cost down to the amount the agent had always known they'd get.
The ideal situation for the agent is when a customer signs a Sole Agency agreement giving that agent exclusive rights to sell the property for an established period. This gets the agent under less pressure to offer the property because, so long as it is shifted by them during the contract period, they'll get their commission. This sets up a race between agencies as to who gets the sale as well as the commission, meaning several services may do quite lots of work but miss out on getting any cash - not something likely to be valued by the agency supervisor. Using a Multiple Bureau situation, there are two common scenarios which could develop. You might discover that each agent will do less work to market your home as the know it's likely another broker will get the fee as well as the sale. They therefore focus their efforts on properties where they attempt to shove buyers towards these properties and have Sole Service. Or else there could be a frenetic race as each broker tries to get one to accept any offers the receive. In this particular case, they may feel an even greater need to convince you to accept a cost-slash and you will get bombarded with broker calls all telling you what amazing buyers they've prepared to take your property if only you will show some flexibility on cost. It's just after, after you have accepted an offer and removed your property from various other agents, that you determine the buyer wasn't quite as solid as was proposed - they might be in a chain selling their property, or may not possess the finance fully organised or might not have the ability to finish as rapidly as you had considered. But by then it is generally too late to alter your mind and return back to other agents.
3. The slash-and-grab
The most fiscally damaging situation to get a seller is when an agent decides that they can create a lot of money for themselves by getting you to sell your properties for sale Radlett premises at an attractively low price to somebody who is in fact one of the broker's business contacts, friends or relatives. This slashing your price and catching your home might be quite clear-cut as when the agent manages to convince one to accept a low offer from among their associates and they subsequently resell your property to get a strong profit netting the broker maybe GBP10,000 to GBP20,000 or more for just a few hours work.
A more sophisticated version of this scam is when you've got a house that may be split up into flats or house which has to be modernised or a flat. Here the broker may have a relationship using a developer. The price will normally be that the agent alerts the programmer to the chance, motivates the offer of the developer to be accepted by you (while asserting your house is going to a private buyer) and then gets a bung from the developer. This bung is well known in the trade as a 'drink' and can usually range according to the gain made by the programmer. So as to motivate one to sell at below market value, the agent may withhold offers from buyers that are genuine or get friends to put in low offers to drive you towards a price-slash.
The Internet has made the slashandgrab similar properties that were slightly more challenging by providing sellers with quick accessibility to advice about the prices have reached. However, the slash-and-grab works an absolute treat with older, possibly more exposed sellers who might be downsizing- selling off a larger family home and moving to a bungalow or level after their children have grown up and left home. These sellers make easy targets because, whenever they have lived in a house for a long time, they may have bought it to get a five-figure sum - GBP50,000 or maybe GBP40,000. So when sellers receive a six-figure offer like GBP350,000, they will consider they are already making a profit that is substantial and may feel uncomfortable about pushing for more. 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. Nevertheless, it occurs on my road - to average folks all of the time a retired couple sold their 3-floor end-of-terrace house for around GBP385,000.