Are estate agents really that bad?

Jon – Are Smart Estate Agency especially successful? Do their properties sell faster than others? Do they usually get a better price?

The age-old problem with selling houses is that the seller does not know how the market is going to behave with their particular property. The agent has a commission level and terms which has to suit a range of scenarios – quick sale, slow sale, complications, changes in government policy, and so on. Getting the price right in the first place is the tricky bit, and there are a lot of agents out there all trying to do the same thing, including now the on-line only agents.

We had a flyer through the door the other day from a ‘local ethical investor’ who was offering to buy any property in our district and complete the purchase within a month with no solicitors’ or agents’ fees as well as paying out £250 to pay off the last instalment of a mortgage. All done discreetly with no adverts, no ‘for sale’ board, and no other viewings. Is it credible that the price obtained will be in line with the real market value obtained through competitive marketing?

No doubt a quick and convenient service for those who need to turn a property into cash quickly but the traditional agents still seem to have the market under their control – that’s not to say that a great deal of reform would not come amiss.

One local estate agency operates 15 offices across the area, each staffed with qualified people. They visit and value properties, discuss owners requirements and how they see the property positioned in the market to get the best possible price, advertise, approach and vet prospective buyers, help with price negotiations and then formalities and shepherd through purchases and sales. They also manage a very large number of let properties for landlords. They are, at the present time, in good shape as a business. Good traditional estate agents must be doing something right.

You are in a difficult position, Mrred.

You state that you did sign a sole-agency agreement but did not keep, or were not given, a copy of it. The estate agent has told you that the agreement gives them exclusive selling rights for eight weeks from the date you signed it. You have accounted for three of those weeks and I presume therefore that you are tied in for a further four or five weeks but they will not produce a copy of your contract with them. My view is that you should write to the firm to state that since they have not responded to your e-mail request for a copy of your signed contract you regard the sole agency terms as inapplicable, and for that reason and also because they have not introduced any potential buyers since you engaged them, you are no longer bound by such terms and have placed your instructions with a different agent.

However, the first agent might now be able introduce a prospective purchaser and require payment of their commission. They might also be able to produce the sole-agency agreement you signed. A complication is that your second agent is an on-line agency that will charge you a set fee whether they sell your property or not and from what you have written I take it that you have already confirmed your instructions and that they are in the process of marketing your property. If the on-line agency manage to find a buyer for you before the eight weeks expires I think the first agent will be able to claim commission from you and although you might have a good defence for not paying it you could still be held liable as they will have done some work on your behalf albeit without success.

You will not have much control over what happens next because your first estate agent will submit a bill to your solicitor or conveyancing executive for payment of their commission which would normally be deducted from the sale proceeds before the remainder is available to put towards the purchase of your next property. The on-line agency will also expect full payment of their fee.

My advice is to speak urgently with your legal representative and explain the situation and ask them to negotiate with your first estate agent to seek a reduction in their commission on the basis of reasonable expenditure only. Since the commission on a sole-agency sale is lower than on a joint-agency sale the first agent might demand that the commission is payable at a higher rate [since you have breached the exclusivity agreement] so this will require some tricky negotiation. There is considerable animosity within the estate agency world between high street agents and on-line agents so I would expect resistance.

I think you are stuck with paying the on-line agent’s fee and at best could hope for a reduction in the first agent’s commission. The fact that they appear not to have achieved much in the first three weeks counts for little if you gave them eight weeks to act for you. There is a possibility that they over-valued the property or did not apply themselves to marketing it with sufficient duty of care and due diligence but arguing those points could take for ever and get you nowhere but your legal representative will advise. Bear in mind that fees will be payable on top of everything else for such further advice, negotiations and additional legal work. With any luck the first agent cannot turn up your sole-agency agreement and hold you to it, but that is a long-shot.

One way of getting good service from an estate agent is to use the agent you are buying through to sell your own property for you. They will usually work that little bit harder because their commission on your sale is dependent on their support during your purchase. It can only work, however, where the two transactions are in the same locality or with a multi-office agent that covers both areas.

Personal recommendation is, in my view, the best way to get good legal support. Almost everything is done on-line nowadays so you don’t have to use a local firm and can stick with one that provided a good service before. Personnel changes are a problem with conveyancing work, though, because it is just a step on a career path for many lawyers or legal executives.

In my opinion, conveyancing fees are much better value than estate agency commission. The amount of work that a good legal practitioner does, and the responsibility they carry for the transaction, far outstrips the effort made by the agent — and because the agents recover their fees as a deduction from the sale proceeds and the client does not pay them directly the real cost gets lost in the documentation and doesn’t register strongly enough.