CHOICES - buyer's commission may be required. How do I make an offer?

user1168934

I have viewed a property with CHOICES estate agents that I really like and would like to make an offer. I have noticed that EA have mentioned in several places "buyer's commission may be required". What does that mean and how would it work? How do I go about making an offer?

I don't want to pay their fees and I have no leverage to negotiate the fees with them. Also the rates seems excessively high to me in any case and its just plain ridiculous especially when they are not my agent anyway.

This is what it says on the advert.

Buyers Commission May Be Required*
Full details available upon request - *This property is being marketed by Choices on behalf of the seller on the basis that the buyer pays our fee of between 2.4% incl VAT and 3.6% incl VAT of the net purchase price. Unless otherwise agreed offers will therefore be submitted to the seller net of our fee.

P.S. There are old posts on the forum for this but they are from around 2010 and choices terms and conditions have changed. Unlike before, they now explicitly state that they represent the vendor and not the buyer - so why ask the buyer to pay the fees at all. Why not just negotiate the fees with the seller like all other EA.

deannagone

I wouldn't even consider making an offer.  The agency has negotiated the fees with the seller, the seller isn't paying them, the buyer is. The seller thinks they are onto a good thing, not realising buyers, if they have any sense, won't consider the agreement unless the property is an absolute bargain.  So they'd actually lose more money than they'd gain.

eddddy

So just make your offer and state that you don't agree to pay any commission fees.



Typically, by law, an EA has to pass all offers on to the seller - but I guess it's possible that the EA has persuaded the seller to sign a document agreeing that they don't want to know about offers from people who won't pay a commission fee.

Slithery

Sounds like the dreaded 'modern auction method'.

Avoid.

greatcrested

So you have 2 choices

1) find another property

2) decide what you are prepared to pay/ would offer under normal circumstances, then deduct 3.6% and offer that.

Just to be clear, there's nothing there that means you have to pay when offering? The fee is only due if/when you acually purchase yes?

csgohan4

looks like a modern auction method where the buyers pays some of the vendors costs or more to fill the pockets of the EA

eddddy

Looking at the T&Cs - it's not really like the 'Modern Auction Method'. It's more like a 'trick' to get sellers to effectively pay extremely high commission fees.

For example,

• The buyer offers £200k
• The EA presents the offer to the seller as £195.2k (i.e. £200k less 2.4% commission fee)
• The commission fee only becomes due on exchange of contracts, and is payable on completion.
• So on completion, the buyer pays the seller £195.2k and the EA £4.8k - totalling their original offer of £200k

So it sounds like it's a 'nonsense' to hoodwink naive sellers into effectively paying a 2.4% fee. (But the buyer might have to pay a bit of extra SDLT, and need a bit of leeway in their mortgage LTV.)

See: https://www.choices.co.uk/buyers-terms-and-conditions/

user1168934

I have just found T&C on CHOICES website. Here is what it says:

Key Features Document for buyers, where the buyer pays the fee:

i) The buyer fee you agree to pay will become due on exchange of contracts but will be payable on completion of the sales transaction.
ii) Upon request by you this fee can be added to the net agreed purchase price and paid by the seller on completion of the sale
iii) This property is being marketed by Choices on behalf of the seller on the basis that the buyer pays our fee of between 2.4% incl VAT and 3.6% incl VAT of the net purchase price. Unless otherwise agreed offers will therefore be submitted to the seller net of our fee.
iv) You must be aware that HMRC have indicated that the commission fee will be considered as part of the ‘chargeable’ consideration for the property and may therefore be included in the calculation for any stamp duty liability which you will pay on transfer of the property to your ownership. For example under the new stamp duty reforms, if you purchase the property for £200,000 plus a buyers fee of 2.4% inc VAT = £4800, you will pay £1,596.00 in stamp duty* (*according to your circumstances).
v) Your solicitor/conveyancer will be advised of this arrangement through the memorandum of sale.
vi) All offers will be submitted verbally and in writing to the vendor unless we are instructed not to do so in the case that an offer is below a pre agreed limit.
vii) We are acting for the vendor in all cases and not as your agent.
viii) If for any reason you do not agree to pay our fee in line with our contract it will be paid by the seller and your refusal will not therefore affect the net cost or proceeds of the transaction

The last point viii seems of interest to me. So in theory I can refuse to pay the fees and say to them that your fees is whatever you agree between yourself and the seller. But I wonder if they will pass the actual number I am offering to the seller or not. May be they will just deduct their fees (which will probably be the higher rate of 3.6%) and pass the net number to the seller. This might make my offer lower than any other other buyer who might have negotiated - utterly confused what to do

user1168934

eddddy said:

Looking at the T&Cs - it's not really like the 'Modern Auction Method'. It's more like a 'trick' to get sellers to effectively pay extremely high commission fees.

For example,

• The buyer offers £200k
• The EA presents the offer to the seller as £195.2k (i.e. £200k less 2.4% commission fee)
• The commission fee only becomes due on exchange of contracts, and is payable on completion.
• So on completion, the buyer pays the seller £195.2k and the EA £4.8k - totalling their original offer of £200k

So it sounds like it's a 'nonsense' to hoodwink naive sellers into effectively paying a 2.4% fee. (But the buyer might have to pay a bit of extra SDLT, and need a bit of leeway in their mortgage LTV.)

See: https://www.choices.co.uk/buyers-terms-and-conditions/

Thanks. I just found the t&c too and posted it here and afterwards saw your post.

I am not really worried about the extra SDLT I will have to pay but I am not sure what you mean by "need a bit of leeway in their mortgage LTV". Are you saying the fees will not be covered by my mortgage and I might have to pay in cash on top of my deposit? that would be dreadful.

eddddy

user1168934 said:

eddddy said:

Looking at the T&Cs - it's not really like the 'Modern Auction Method'. It's more like a 'trick' to get sellers to effectively pay extremely high commission fees.

For example,

• The buyer offers £200k
• The EA presents the offer to the seller as £195.2k (i.e. £200k less 2.4% commission fee)
• The commission fee only becomes due on exchange of contracts, and is payable on completion.
• So on completion, the buyer pays the seller £195.2k and the EA £4.8k - totalling their original offer of £200k

So it sounds like it's a 'nonsense' to hoodwink naive sellers into effectively paying a 2.4% fee. (But the buyer might have to pay a bit of extra SDLT, and need a bit of leeway in their mortgage LTV.)

See: https://www.choices.co.uk/buyers-terms-and-conditions/

Thanks. I just found the t&c too and posted it here and afterwards saw your post.

I am not really worried about the extract SDLT I will have to pay but I am not sure what you mean by "need a bit of leeway in their mortgage LTV". Are you saying the fees will not be covered by my mortgage and I might have to pay in cash on top of my deposit? that would be dreadful.

Yes - essentially that.

So make your offer and say that you don't agree to pay any fees.

greatcrested

Yeah there are well established norms for the buying of property, and the commissions earned by estate agents.

Variations to the norm are just manipulations by the agents to increase their earnings in one way or another, whether via this method, or the so-called 'modern auction' method.

Best not to get involved.