Many clients I come across at appraisals know that they can use one or more real estate agents. They also know that using more than one agent could cost them more in fees. What they may not have considered is the fine print of each type of deal or the relative merits of using one, two, or many agents. Here’s our short guide to each one;
Single agency
Contracts of this type should be read as follows:
‘You will be responsible for paying us remuneration, in addition to any other agreed costs or charges, if at any time, unconditional contracts are exchanged for the sale of the property:
• with a buyer presented by us during the period of our only agency or
• with whom we had negotiations about the property during that period, or
• with a buyer presented by another agent during that period. ‘
The agent is paid if you “introduce” a buyer during their contract period, or if you allow another agent to “introduce” a buyer within the original agent’s contract period. The definition of “introduced” is very broad. It may well cover negotiations with a buyer, visits, submitting details, discussions over the phone, and all of these scenarios:
• A buyer knocking on your door as a result of seeing a “for sale” sign.
• A buyer who sees through one agent but then makes an offer through another agent.
• A buyer who receives details of his property from an agent and then realizes that he is known.
• A buyer who sees through an agent but suggests that they make a private deal.
Contracts must have a set period of time (the average is 12-14 weeks). Note that a contract almost always has a notice period at the end; Add this to your established contract length to calculate the actual amount of time you will be locked in with your chosen agent. This type of arrangement allows you to find a buyer for your home yourself without paying the realtor (a private sale). An “exclusive rights of sale” agreement (best avoided) would mean that the agent would be paid even if you found a private buyer.
Exclusive agencies are the most common arrangements; Most agents want an exclusive opportunity to sell their home. If the real estate agent is good, you shouldn’t need another agent to help you sell. However, you may want to check how complete an agent’s marketing is before accepting a single agency; If they don’t cover all the bases (or have overpriced your home to get the business), you don’t want to be. locked in a contract that lasts for months and months.
Joint agency
If you appoint two real estate agents to act together on your behalf in the sale of the property, this is known as a “joint agency” or “single joint agency.” A joint agency contract is where the real estate agents involved share the commission when the property is sold. In practice, the agent who actually finds the buyer usually gets a higher split in commission, but this percentage should be agreed at the beginning of the contract between the owner and both agents.
Joint agency is often a useful way to get out of a single agency before the contract ends – if you tell your realtor that you are not satisfied and are considering terminating your contract as soon as possible, then give him the option of being hired as a joint agency, they might be smart enough to see the merits of a portion of a fee rather than none. This type of agency is also useful when you want to use two agents that offer different services (for example, a city agent and a country agent if you live on the border of a city). Note that the majority of the public has a negative perception of properties with more than one agent (“I’ve seen it before, there must be something wrong with it”). If you are thinking of a joint agency, try to choose two agents who can communicate / work together happily.
Multiple agency
More than one agent is appointed and there is no fixed contract period. You can add as many agents as you want, remove one at any time, and so on. However, only the agent who actually finds the buyer is paid.
Often used when a property is not being sold with a single agent, this is an extreme measure to take as the total fees will be considerably higher and the property can be overexposed very quickly. Confusion and disputes can also arise if agents argue over who introduced a particular buyer; be sure to track the activity of each agent.
General rates
Real estate agent fees are due on completion and should have been billed in the contract exchange. The invoice is sent to the attorney acting on behalf of the landlord, but the landlord should also receive a copy for verification. Most deals are based on “no sale, no fee,” so you don’t have to pay anything if your home doesn’t sell (see additional fees below, though).
Rates must be clearly stated in the contract; if the fee is a percentage of the sales price, a maximum amount in pounds and cents must also be shown.
Although real estate agent fees are often expressed as a direct percentage of the sales price, remember that they are also subject to VAT at the prevailing rate (currently 20%).
Some real estate agents charge additional fees in addition to the sales fee; We have recently seen these expressed as “advertising fees” or “withdrawal fees” (a charge if your property is not sold or is taken away from an agent). Start-up costs for professional photography and brochure production are also relatively common with top market players; It is always worth making sure you know the total of ALL fees you may be responsible for before signing a contract.
Be careful if you accept a fixed fee from a real estate agent – the fee is usually agreed upon based on the sale price, so if your property is selling for less, you are likely overpaying the agent compared to a fee normal percentage (charged on the final sale price)
If you want to give your agent additional motivation to hit a maximum price, consider negotiating a tiered rate (e.g. 1% if they are getting less than £ 240,000, 1.2% if they are getting between £ 240,000 and £ 250,000, 1.5% if they are getting more than £ 250,000). Set the tiers carefully to reward excellent service and penalize an average result.
Additional tips
If you change your real estate agent, make sure the previous agent provides you with a list of the names of the people they have “introduced” to your property. If one of those names happens to buy the house (in practical terms within 6 months from the termination date of the agent’s contract), the former agent is entitled to their rate. Make sure you don’t get into a scenario where you owe both agents fees because you didn’t do your homework.
Always ask real estate agents to confirm the terms of your contract in writing (you would think this is standard practice, but you might be surprised!) And if you end a contract with an agent, make sure they confirm it too.
It can go from one single agent to another, from single agent to joint agents, or any other permutation.
Don’t back down in terms of marketing – If you’re leaving an agent because you’re not promoting your home effectively, take a break and make sure the next one you choose can perform better BEFORE you appoint them.
