Estate agent fees and contract

Mutton_Geoff

Scottie48 said:

perhaps we should go on the market at a price we would accept without considering any offers

Bear in mind any offer isn't just about the price, your purchasers buying position is just as important inc whether they are first time buyers who might be more nervous and prone to change of heart, insisting in indemnity policies etc.

Agents contracts are signed by two parties, you are just as able to amend/delete as you see fit with the ultimate decision to go elsewhere.

eddddy

Scottie48 said:

Many thanks for all of your replies, they are very much appreciated. Based on similar properties that have sold in the area recently we don't expect to achieve it's listed price and would be prepared to listen to offers however given the agent have this minimum fee perhaps we should go on the market at a price we would accept without considering any offers

A much more sensible approach might be to say to the estate agent that you don't agree to the £5400 minimum fee - and if they want your business, they'll have to change it.

Almost all estate agents will negotiate their contract terms. 

And to be honest, that level of minimum fee is very unusual and very high. I suspect that the estate agent is taking a punt, and hoping that you will sign without reading all the details.


(Presumably you've had market appraisals from 3 or 4 estate agents. Did you ask them for copies of their contracts to compare with each other?)

DullGreyGuy

pinkshoes said:

I would not sign that as there is no incentive whatsoever to try and get a good price for it! It's almost a sign that they've over-valued it just to get you to go with them. 

I'd ask for an amendment without that clause.

There is an incentive for them to get a good price because there is no ceiling on their fee so an above asking price sale gets them more commission. 

It depends a little on what part of the cycle the housing market is in but generally it's accepted that the agency fee is of very little incentive for them. Take an offering being ± £5,000, which is a fair amount of money, for the agency that's £50 and for the agent themselves that's £5 (before taxes). 

How many extra hours will you put in to get £5? Trying to get £5 which may actually cost you the sale which would have gotten you £450.

In most parts of the cycle the estate agent is better off getting the seller to accept a lower offer, bagging the fractionally lower commission and spend the time instead trying to secure another sale on another property which if similar to the OP's property give them another £450 not £5

saajan_12

Scottie48 said:

Hi, we are in the process of going on the market and having agreed on an agent we have received their contract for us to sign. A fee of 1% plus VAT has been agreed but upon reading the contract I'm a little confused. The for sale price is £450,000 therefore fees should it sell at that would be £5400 inclusive of VAT. Now the contract reads should the final sale price be higher or lower than the asking price, our commission will be correspondingly higher or lower and is subject to a minimum fee of £5400. Is this correct? I would have thought if it only sells for £400,000 then their fee should only be £4800. Maybe it's me but it reads a bit contradictory, just want to be prepared before speaking to the agents tomorrow, thank you

Its 'correct' if that's what you agreed to.. I'd say the norm for that price point is x% on the sale price, no minimums and not pegged to the asking price which is somewhat irrelevant. 

Minimums might be more common for lower value properties where its still almost as much work and the x% doesn't make it worthwhile for the agents. I've previously done it the other way, so x% on the total sale price, plus a higher y% on anything over a threshold which is a little above the asking price. The idea was to incentivise the agent to get the best price, but not so much that they block any sale solely for the higher %. 

Scottie48

Yes we had 4 agents come along to do appraisals, but we didn't ask for copies of their contracts to compare. In hindsight perhaps it's something we should have done and ought to do before signing anything

Mutton_Geoff

I'd also use the VAT as a negotiating point with the agent. Almost none of their customers are VAT registered so quoting fees "plus VAT" is disingenuous in the consumer/end user VAT world. Say you're happy with the 1% but to include VAT.

I have incentivised agents by agreeing to their fee but then 5% on anything above £ >insert top end asking here<. Not many have accepted that and the last two agents I used (inc Savills) went ahead and achieved well above asking price for me even though I thought that price was top heavy in the first place.  

Jonboy_1984

We had a fixed price on a single bed flat in a town full of them as the EA wanted a minimum figure for the work they had to do, which was below their normal % figure. As it was a marmite property with some quirks it was a reasonable proposition and they ended up working for it, both in finding a buyer and then keeping them through to completion.

I would not agree to it on a much larger/higher value property.