Selling Your property?
Here is the very first of three articles warning home sellers and buyers about the tricks estate agents utilize to help you avoid being fleeced by your estate agent and to get your hard earned money.
1. The sucker sign-up
The basis for virtually any estate agency's success is obviously to support the maximum quantity of sellers to sign with that service rather than with their many usually look-alike competitions. Research has repeatedly shown that almost all folks believe our houses to be worth more than they really are. Because we decorated them in a sense that satisfies us and have lived in them, we're often emotionally attached to them. We likely think our daring colour scheme, modern open-plan living space, 'first feature' fireplace 'designer' toilet would entrance any potential purchaser and are the height of practicality and great taste. But on viewing our cherished houses, many buyers' first thought may be they could gut the place and replace our execrable decorations with something better suited to their tastes and lifestyle.
This could present a problem for estate agents. So, when pitching for our business as sellers, most agents will flatter us by commending our home, try to sound us out we believe our property may be worth and then claim they can quickly meet or surpass our price expectations. This frequently results in them overvaluing our dwellings. However, the broker understands that once we sign up with them, have found a new house, have psychologically already moved into our new home and are under fiscal pressure to offer our existing property, it's simple to coerce us into accepting a much lower price than we had initially been led to expect.
Along with the another common tactic agents utilize to get us to hire them is the phantom buyer. They'll likely tell us that they've lately been contacted by one or several buyers who are searching for a property simply like ours, as we're showing them round our house. The agent may telephone his office in our existence, allegedly to check these buyers remain in the market, to force ours even more. Invariably his office will support there are busloads of eager buyers all eager to see our property. The message of the agent is going to be clear - if we do not sign up with them fast, then we'll miss the opportunity of a fast sale at a great price. Several days after we have signed, when the promised buyers seem to have inexplicably vanished into thin air, it's easy for the agent to tell us that the buyers have found somewhere else or changed their minds or for the agent to give us some other %#&@$!-and-bull story to spell out the buyers' astonishingly rapid disappearance.
2. The cost-slash
It's fairly likely that the agent will have overvalued your property as a way to get you to sign with them. So, unless the market is extraordinarily buoyant or unless they are fortunate enough to find a buyer with more money than sense, once they start actively marketing your property, they will probably have to soften you up to the prospect of accepting a lesser price than they had originally suggested.
Many sellers suppose that it is in the broker's interest to get the most favorable price possible. But this just is not the situation. Let us we presume you have a Sole Agency agreement with a selling fee of 1.5%. If you're trying to find say GBP285,000, the estate agency will bring in GBP4,275 and the individual agent maybe - GBP427. In the event the agent manages to convince you to accept offer the agency will pocket the agent GBP397 and GBP3,975. While you drop GBP20,000, the bureau simply loses the broker GBP30 and GBP300.
Getting your price to drop is generally comparatively easy. Though the agent could have originally been highly complimentary about your home, they now tell you that they've had several buyers see not all the feedback and the property continues to be as favorable as they'd expected. The superb transport connections may unexpectedly become a concern because of a lot of traffic and congestion; your sizeable Barnet houses for sale garden, which had been such a huge selling point, might introduce an issue for the kind of active young professional couples who'd be in the market for a house like yours; your tremendously creative colour scheme, which the agent had so admired, might well have put off buyers searching for a much more neutral decor and so on. The agent might even let you know that just after you'd signed up, they unexpectedly got several other similar properties on the books of the service and that they all sold very quickly as they were more 'competitively priced'. Or the agent might assert that there happen to be a few offers for your own dwelling which were considerably lower than your asking price. But whatever tactics are employed, most sellers can immediately be convinced to drop their cost right down to the amount the broker had always known they'd get.
The ideal scenario for the broker is when a client signs a Sole Agency agreement giving that broker exclusive rights to sell the property for an established period. This puts the agent under less pressure to market the property because, as long as they shift it during the contract period, they'll get their commission. Less beneficial for the agent is a Multiple Agency agreement where the seller's property is put by they with several brokers. Using a Multiple Bureau situation, there are two common scenarios which can develop. You might discover that each agent will do less work to market your property as the know it's likely another broker can get the fee and also the sale. The consequently focus their efforts on properties where they try and shove on buyers and have Sole Service. Or else a frenetic race could possibly be as each agent attempts to get you to take any offers the receive. In this instance, they may feel an even greater need to convince you to accept a cost-slash and you'll find yourself bombarded with broker calls all letting you know what great buyers they've ready to take your property if just you will reveal some flexibility on price. It's only later, once you've accepted an offer and removed your property from other brokers, that you find out the buyer was not quite as solid as was suggested - they may maintain a chain selling their property, or might not possess the finance fully organised or might be unable to complete as rapidly as you had considered. But by then it's usually too late to change your mind and go back to other brokers.
3. The slash-and-catch
The most fiscally damaging situation for a seller is when an agent determines that they can produce lots of cash for themselves by inducing one to sell your premises at an attractively low price to someone who's actually among the broker's business contacts, friends or family. This slashing your cost and grabbing your home could be quite clear-cut as when the agent manages to convince one to accept a low offer from one of their associates and they then resell your property to get a healthy profit netting the agent perhaps GBP10,000 to GBP20,000 or more for merely a few hours work.
A more complex version of this scam is when you've got a flat or house which should be modernised or a house which can be split up into flats. Here the broker can possess a connection having a programmer. The price will normally be that the broker alerts the programmer to the chance, motivates you to accept the developer's offer (while claiming your home is going to a private buyer) and then gets a bung in the programmer. This bung is well known in the trade as a 'drink' and can normally range depending on the gain made by the developer.
The Internet has made the slashandgrab similar properties that were slightly harder by providing sellers with easy access to advice about the prices have reached. However, the slash-and-catch works an absolute treat with older, perhaps more vulnerable sellers who might be downsizing- moving to some bungalow and selling off a larger family house or level after their kids left home and have grown up. These sellers make easy targets because, when they've lived in a house for several years, they may have bought it to get a five-figure amount - perhaps GBP40,000 or GBP50,000. So when sellers get a six-figure offer like GBP350,000, they will believe they're making a massive profit and may feel uneasy about pushing for more. Also, often such sellers will usually not have thought regarding the value of their properties if converted into flats and so can be misled by the broker into just comparing the cost offered to that paid for other similar family houses, that will generally be substantially less than the worth when converted into flats. This scam hit the headlines in 2009 when an agent was discovered to have convinced a seller to take GBP2.9 million for a property which had a value as a development of nearer GBP10 million. Still, it happens on my road - to normal folks all of the time a retired couple sold their 3-floor end-of-terrace house for GBP385,000 that is around.