Estate Agent: extremely high valuation + low fee, what's in it for them?

DragonQ

We recently had a bunch of valuations done and one EA said our house was worth 30% more than the 2nd highest valuation. I have read up that one should be weary of EAs that give you ridiculously high valuations because they sucker you in and hit you with high fees. However, this EA's fees were lower than any other EA we spoke to. Their contract has some crazy clauses in it, e.g. we always have to pay their fee if we sell within 6 months of the contract ending. However, they've indicated they will amend the contract if we aren't happy with it.

I feel like going with them is a bad idea because of these red flags but I am wondering what's their game here?

Snookie12cat

What they do is they get you to sign with them as they have the highest valuation. This works a lot as people obviously want the most they can get.
Then a few weeks in they tell you it's too high and then tell you to reduce it. 

That's what is in it for them by valuing it high. They get your business and you are tied in for a certain amount of time.

caprikid1

Are they new trying to grab market share ? Local able to compete against nationals ? What's their fee ?

DragonQ

They are a national franchised EA. Fee was under 1% inc VAT.

Sandtree

They are keen to do business and hope that the higher valuation means you'll go with them... they ultimately get their X% if it sells for their valuation or 40% less.

In some areas at the moment its really hard to judge pricing and as such listed prices are all over the shop, our last rental was put on the market (that triggered us to move) and the estate agents valuation ranged from £550k to £700k with the later saying it was priced to get offers and could easily go above. Landlord went with the highest and after 15 months or so sold it for £520k... which amused us a little as we offered £550k for it before it was listed so avoiding agency fees and he didnt even bother responding to the offer.

Snookie12cat

DragonQ said:

They are a national franchised EA. Fee was under 1% inc VAT.

Just go the one you feel has the best viewing times (so many agents do not do them past 5pm), ones that answer the phone and return messages etc. 
I would not expect the high price they quoted if you went with them, but if they have the lower fee and you are happy with their service, then no bother if they match the other valuations. 

As a buyer - some agents are inflexible and crap to deal with. If people cant get viewings past 5pm or weekends, then that would put me off.

eddddy

DragonQ said:

e.g. we always have to pay their fee if we sell within 6 months of the contract ending. 

Are you sure you've read that correctly? (It seems a bit unlikely.)

The standard condition (which is mandatory in the Property Ombudsman code of practice) is that you have to pay their fee if you sell to somebody that EA introduced during their contract period within 6 months of the contract ending  (or 2 years if no other EA is involved).

Snookie12cat

Sandtree said:

They are keen to do business and hope that the higher valuation means you'll go with them... they ultimately get their X% if it sells for their valuation or 40% less.

In some areas at the moment its really hard to judge pricing and as such listed prices are all over the shop, our last rental was put on the market (that triggered us to move) and the estate agents valuation ranged from £550k to £700k with the later saying it was priced to get offers and could easily go above. Landlord went with the highest and after 15 months or so sold it for £520k... which amused us a little as we offered £550k for it before it was listed so avoiding agency fees and he didnt even bother responding to the offer.

Love that! 
We offered on a house and it was refused and 15 months later my neighbour bought it for 5k less than we offered.

DragonQ

eddddy said:

DragonQ said:

e.g. we always have to pay their fee if we sell within 6 months of the contract ending. 

Are you sure you've read that correctly? (It seems a bit unlikely.)

The standard condition (which is mandatory in the Property Ombudsman code of practice) is that you have to pay their fee if you sell to somebody that EA introduced during their contract period within 6 months of the contract ending  (or 2 years if no other EA is involved).

Definitely no mention of them introducing the buyer in the clause. Just any sale.

Snookie12cat said:

DragonQ said:

They are a national franchised EA. Fee was under 1% inc VAT.

Just go the one you feel has the best viewing times (so many agents do not do them past 5pm), ones that answer the phone and return messages etc. 
I would not expect the high price they quoted if you went with them, but if they have the lower fee and you are happy with their service, then no bother if they match the other valuations. 

As a buyer - some agents are inflexible and crap to deal with. If people cant get viewings past 5pm or weekends, then that would put me off.

That's a good point about the viewing times, I will ask the other EAs about that. I know the one with the high valuation will do weekend viewings and isn't keen on evening viewings due to it being dark.

We are not in a hurry to move, partially because it is tough for us to find houses we like and may not find one for some time, so I don't really want to put it on the market then drop the price within a few weeks. That'd give the impression we are desperate for a sale.

eddddy

eddddy said:

DragonQ said:

e.g. we always have to pay their fee if we sell within 6 months of the contract ending. 

Are you sure you've read that correctly? (It seems a bit unlikely.)

The standard condition (which is mandatory in the Property Ombudsman code of practice) is that you have to pay their fee if you sell to somebody that EA introduced during their contract period within 6 months of the contract ending  (or 2 years if no other EA is involved).

DragonQ said:

Definitely no mention of them introducing the buyer in the clause. Just any sale.

OK - if you're certain.

In that case - don't touch them with a bargepole. That's a completely illogical clause.


It means you instruct them and they can do absolutely nothing. Then when you terminate their contract, they sit back and wait for another EA to make a sale and they claim their fee - in return for doing absolutely nothing.

(But I really think you should phone them, to make sure you've understood that clause correctly.) 

youth_leader

My selling experience was brutal because the EA exaggerated the sale price of my house, I ended up selling it for less than half of their 'estimate'. 

Do your own research on similar houses in your area and see what they actually sold for.