Estate Agency Contracts

A good topic for discussion at the moment is estate agency contracts, not least because there are many agents keen to try and entice clients away from their current agent with promises of lots of viewings and ready and waiting buyers. It’s an age old strategy which some clients enjoy. Others however can often see through the bluster and enjoy a strong enough relationship with their current agent to know what actions are being taken, what market conditions are like and what feedback they have had both on condition and price.

Firstly let’s take a look at the types of contract that you are likely to sign when engaging an estate agent. Sole agency is the most popular. This essentially means that if the agent introduces a buyer within the agency period who proceeds to exchange of contracts, their fee becomes payable and is then due upon completion. There are some nuances to this, for example if the vendor demonstrates on day one that they have someone privately interested and that is documented on the contract, most agents would waive their right to a fee if that client proceeds to purchase the home.

Most agents will have an agency period and the norm is around twelve weeks. I would be wary of signing anything beyond that timeframe as if you don’t hit it off with your agent, they can stop you engaging someone else until the expiration of this agreement which could severely damage your chances of a sale. Some agents also have very long notice periods - 28 days for example. 14 days is more reasonable and most will agree to that if you ask them up front. It will stop you being tied up if you decide to change agent at a later date.

Sole Selling Rights

The other type of agreement is sole selling rights. This one is to be seriously considered before being entered into. Auctioneers often have sole selling rights contracts which is to be expected - buyers can come from anywhere and bid without being introduced directly to the house by the auction company so they need to protect themselves and their fees by saying ‘whoever buys it, we are getting paid’. Some estate agents also use these contracts which can be troublesome. They can be a nightmare if you want to take it off the market, often having clauses that even if you sell it yourself within two years of termination, they can still be paid. There can also occasionally be a ‘ready, willing and able buyer’ clause. One previous client of mine was hit with that recently. The sale didn’t progress anywhere and he took it off the market as he had decided to stay put. As the agent had had an offer which was in principle agreeable, they charged him the full fee anyway. Read it carefully!

Withdrawal Charges

One thing that has crept in recently is a ‘withdrawal charge’ or a ‘digital marketing fee’. Be very wary of this as it’s basically a reward for the agent for not selling your home and you taking your business elsewhere. Some are also charging now for anti money laundering checks alongside the contract. That is their prerogative though some of the figures being quoted for these are eye watering when being honest, they cost peanuts to organise. Houseclub are committed to no sale, no fee with no withdrawal charges and no cost for our AML checks. Let’s start our relationship on an honest, simple transparent footing.

When changing agents, if that is something you do at any stage. Agent one should send Agent two a list of their viewers. If any of the viewers on the list proceed to buy the property within six months of termination of the agreement, Agent one is still entitled to be paid their commission. This is entirely normal. Agent two in most cases will keep a note and if any of these parties do go to them to offer, they should be directed back to Agent one to stop you potentially having to pay two fees. Be sure Agent two has this list prior to commencement of their marketing to avoid complications down the line.