It is the very first of three posts warning buyers and house sellers regarding the tricks estate agents utilize that will help you avoid being fleeced by your estate agent and to get your hard earned money.
1. The sucker sign-up
The foundation for the success of almost any estate agency is obviously to support the most amount of sellers to sign with that agency rather than with their many generally look alike competitions. Studies have repeatedly shown that most of us believe our dwellings to be worth more than they actually are. Because we decorated them in a way that satisfies us and have lived in them, we are often emotionally attached to them. We probably think our daring colour scheme, modern open-plan living area, 'original attribute' hearth or 'designer' restroom would entrance any prospective purchaser http://www.statons.com and will be the height of practicality and great taste. But on viewing our beloved homes, many buyers' first thought may be they can gut the place and replace our execrable decorations with something better suited to their own preferences and lifestyle.
This may present an issue for estate agents. When they can be brutally honest with us about our house's (often lack of) attractiveness and give us a realistic selling price, then we are more likely to get quite grumpy and grant our company to a different agent who is more complimentary about our tastes and much more positive about how much we can sell for. Therefore, when pitching for our business as sellers, us will flatter by commending our house, make an effort to sound us out over how much we feel then assert they can certainly match or surpass our cost anticipations and our property may be worth. This often results in them overvaluing our houses.
Along with the overvalue, another common strategy agents use to get us to hire them is the buyer that is phantom. As we're showing our house rounds, they'll likely tell us that they've lately been contacted by one or several buyers that are looking for a property just like ours. To pressure ours even more, the agent's office may be phoned by he in our existence, allegedly to check that these buyers are still in the marketplace. Always his office will affirm there are bus-loads of enthusiastic buyers all eager to find our property. The message of the agent is going to be clear - then we'll miss the chance of a fast sale at a great price if ours do not sign up with the buyers quickly.
2. The cost-slash
It is not rather unlikely that your agent will have overvalued your property to be able to get one to sign with them. So, unless industry is extraordinarily buoyant or unless they are lucky enough to locate 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 initially suggested.
Many sellers assume that it is in the broker's interest to get the best price possible. But this just isn't the situation. Let's we presume you've got a Sole Agency agreement using a selling fee of 1.5%. If you are trying to find say GBP285,000, the estate service will earn GBP4,275 and the individual agent maybe - GBP427. The agency will pocket GBP3,975 and the representative GBP397 in the event the agent manages to convince you to take an offer of GBP265,000. While you drop GBP20,000, the bureau simply loses the broker GBP30 and GBP300. As the broker and also the service is going to be under pressure to reach their sales targets each week or month, it is often better for them to push you to sell at a lowly cost instead of waiting forever for a buyer to provide the total cost - a GBP20,000, GBP30,000 or even GBP50,000 drop in your price will have relatively little effect on their commission.
Getting one to drop your price is generally comparatively easy. Though the broker may have initially been highly complimentary about your home, they tell you they've had several buyers see the property and not all the feedback has been as favorable as they'd anticipated. The broker may even tell you that after you had signed up, they unexpectedly got several other similar properties on the publications of the service and that they sold amazingly fast as they were more 'competitively priced'. Or the agent might maintain that there have been a few offers for the home which were much below your asking price. But whatever strategies are utilized, most sellers can quickly be convinced to drop their cost down to the amount the broker had always known they would get.
The ideal scenario for the agent is when a customer signs a Sole Agency agreement giving exclusive rights to that broker to sell the property for an agreed period. This gets the broker under less pressure to sell the property because, as long as it is shifted by them during the contract period, they will get their commission. Less favorable for the broker is a Multiple Agency agreement where the seller places their property with several agents. With a Multiple Agency situation, there are two common scenarios which can develop. You may see that each broker will do less work as the know it's likely another agent will get the sale and the percentage to market your premises. They therefore concentrate their efforts on properties where they try to shove buyers and have Sole Agency. Or else a frenetic race could possibly be as each agent tries to get you to take any offers the receive. In this case, they may feel an even greater demand to convince you to accept a cost-slash and you will get bombarded with agent calls all suggesting what amazing buyers they have prepared to take your property if just you will show some flexibility on price. It's only after, once you've accepted an offer and withdrawn your property from other brokers, which you discover the buyer wasn't quite as solid as was proposed - they might be in a chain attempting to sell their property, or may not possess the finance totally organised or may not have the ability to complete as rapidly as you'd believed. But by then it is normally too late to modify your mind and get back to other brokers.
3. The slash-and-grab
The most fiscally damaging situation to get a seller is when an agent determines they can earn plenty of cash for themselves by inducing one to sell your premises at an attractively low price to a person who is actually one of the agent's business contacts, friends or family members. This slashing your price and catching your home could be quite clear-cut as when the broker manages to convince you to accept a low offer from among their associates and they then resell your property to get a strong gain netting the agent maybe GBP10,000 to GBP20,000 or more for merely a few hours work.
A more sophisticated version of the scam is when you've got house which has to be modernised or a flat or a house that can be split up into flats. Here the agent can possess a connection using a developer. The bargain will usually be that the broker alerts the developer to the chance, encourages you to accept the offer of the programmer (while maintaining your house is going into a private buyer) and then gets a bung from the developer. This bung is well known in the trade as a 'drink' and will usually range from GBP5,000 to GBP10,000 per price according to the profit made by the programmer. In order to motivate one to sell at below market value, the agent may withhold offers from buyers that are actual or get friends to put in low offers to drive you towards a price-slash.
The Internet has made the slash-and-catch similar properties that were slightly more difficult by providing sellers with easy accessibility to advice regarding the prices have reached. However, the slash-and-catch works an absolute treat with older, possibly more vulnerable sellers who may be downsizing- selling off a larger family dwelling and moving to some bungalow or level after their kids have grown up and left home. These sellers make easy targets because, when they have lived in a house for a long time, they may have bought it to get a five-figure amount - GBP50,000 or perhaps GBP40,000. So when home sellers and buyers get a six-figure offer they will believe they're making a massive profit and may feel uncomfortable about pushing for more. Still, it happens to average people all of the time - on my road a retired couple sold their 3-flooring end-of-terrace house for GBP385,000 that is around. Unknown an associate in the estate service which had handled the sale and sold as three self-contained flats for nearly GBP750,000 just a few months later after likely less than GBP50,000 had been spent on the conversion purchased it.