Selling Your house?
Here is the very first of three articles warning house sellers and buyers about the tricks estate agents use to get your cash also to help you avoid being fleeced by your estate agent.
There are at least three principal techniques commonly used by estate agents that sellers must be watching out for - the sucker sign-up, the cost-slash along with the slash-and-catch.
1. The sucker sign up
The basis for almost any estate agency's success is clearly to support the maximum number of sellers to sign with that agency rather than with their many usually lookalike adversaries. Research has
repeatedly shown that the majority of us consider our houses to be worth more than they actually are. Because we have lived in them and decorated them in a sense that satisfies us, we're often
emotionally attached to them. We probably believe our fearless colour scheme, modern open plan living area, 'original attribute' fireplace or 'designer' lavatory would be the height estate agents Radlett
of great taste and practicality and would entrance any prospective purchaser. But on viewing our cherished homes, many buyers' first thought may be
how they could gut the place and replace our decorations that are execrable with something better suited to their tastes and lifestyle.
This could pose a problem for estate agents. Therefore, when pitching as sellers for our company, us will flatter by commending our house, try and sound out us we believe then maintain they can
easily meet or exceed our price expectations and our property is worth. This frequently results in them overvaluing our dwellings. However, the broker knows that once we sign up with them, have found
a brand new house, have psychologically already moved into our new house and are under financial pressure to market our existing property, it's easy to coerce us into accepting a lower price than we
had originally been led to expect.
In addition to the another common tactic agents use to get us to hire them is the phantom buyer. As we are showing them round our house, they'll probably tell us that they have recently been
contacted by one or several buyers who are searching for a property simply like ours. To pressure ours even more, the agent's office may be phoned by he in our presence, supposedly to check these
buyers continue to be in the industry. Always his office will confirm that there are bus-loads of eager buyers pantingly eager to find our property. The message of the broker is going to be clear -
then we'll miss the opportunity of a rapid sale at a great price, if we don't sign up with the buyers immediately. A few days after we have signed, when the promised buyers seem to have mysteriously
vanished into thin air, it's simple for the broker to tell us that the buyers have found somewhere else or changed their minds or for the broker to give us some other cock-and-bull story to explain
the buyers' astonishingly quick disappearance.
2. The price-slash
It's not quite unlikely that your agent will have overvalued your property to be able to get you to sign with them. So, unless the market is unusually buoyant or unless they are lucky enough to find
a buyer with more money than sense, once they begin actively marketing your property, they will probably have to soften you up to the prospect of accepting a lower price than they had originally
Many sellers suppose that it is in the broker's interest to get the very best price possible. But this just is not the case. Let us we suppose you have a Sole Agency agreement with a selling fee of
1.5%. If you are searching for say GBP285,000, the estate agency will make the individual agent and GBP4,275 perhaps - GBP427. If the broker manages to convince one to take an offer of GBP265,000,
the bureau will pocket the agent GBP397 and GBP3,975. While GBP20,000 drops, the bureau simply loses GBP300 and the broker GBP30. As the agent and also the agency will soon be under pressure to reach
their sales targets each week or month, it is usually better for them to push you to sell at a lowly cost rather than waiting endlessly for a buyer to offer the total cost - a GBP20,000, GBP30,000 or
even GBP50,000 drop in your cost will have comparatively little effect on their commission. Some intelligent brokers might even get you to agree a fixed fee of 1.5% of the asking price, so that when
they afterwards convince you to accept a lower offer, their percentage remains gloriously intact.
Getting one to drop your price is normally comparatively easy. They tell you that they've had several buyers see the property instead of all the feedback has been as favorable as they'd anticipated
though the agent could have originally been highly complimentary about your home. The exceptional transport connections may unexpectedly turn into a concern because of too much traffic and
congestion; your substantial garden, which had been such a big selling point, might present an issue for the type of active young professional couples who'd take the marketplace for a house like
yours; your exceptionally creative colour scheme, which the representative had so admired, might well have put off buyers looking for a more neutral decor and so forth. The broker could even let you
know that just after you had signed up, they surprisingly got several other similar properties on the agency's publications and that they sold incredibly quickly as they were more 'competitively
priced'. Or the broker might maintain that there have been a few offers on your house which were considerably lower than your asking price. But whatever tactics are utilized, most sellers can
instantly be convinced to drop their cost right down to the level the broker had always understood they would get.
The perfect situation for the broker is when a client signs an Exclusive Agency agreement giving that agent exclusive rights to sell the property for an established period. This puts the agent under
less pressure to offer the property because, so long as they shift it during the contract period, they will get their commission. This sets up a race between agencies as to who gets the sale as well
as the commission, meaning several agencies may do quite a great deal of work but miss out on bringing in any cash - not something likely to be appreciated by the agency supervisor. Having a Multiple
Agency scenario, there are two common scenarios which can develop. You may see that every broker will do less work to sell your property as the understand it's likely another broker can get the
commission as well as the sale. The thus focus their efforts on properties where they attempt to shove buyers and have Sole Service. Or else there can be a frenetic race as each broker attempts to
get you to take any offers they receive. In this particular case, they may feel an even greater demand to convince you to accept a cost-slash and also you'll get bombarded with agent calls all
suggesting what great buyers they've prepared to take your property if just you'll show some flexibility on cost. It's only later, as soon as you've accepted an offer and withdrawn your property from
other agents, which you discover the buyer was not quite as solid as was proposed - they may maintain a chain attempting to sell their property, or might not possess the finance entirely organised or
might not have the ability to complete as rapidly as you'd believed. But by then it's generally too late to modify your mind and go back to other brokers.
3. The slash-and-grab
The most financially damaging situation for a seller is when an agent decides that they will produce lots of cash for themselves by getting one to sell your property at an attractively low cost to an
individual who is in fact among the agent's company contacts, friends or family members. This slashing your cost and grabbing your house could be quite clear-cut as when the agent manages to convince
one to accept a low offer from among their associates and they subsequently resell your property for a healthy gain netting the agent perhaps GBP10,000 to GBP20,000 or more for only a few hours
A more complex variant of this scam is when you have a flat or house which has to be modernised or a house that may be split up into flats. Here the broker may have a connection having a programmer.
The price will typically be that the broker alerts the programmer to the chance, motivates the programmer's offer to be accepted by you (while maintaining your house is going to a private buyer) and
gets a bung in the developer. This bung is known in the trade as a 'drink' and will generally range from GBP5,000 to GBP10,000 per bargain based on the gain made by the programmer. So as to encourage
you to sell at below market value, offers may be withheld by the broker from buyers that are actual or get friends to put in low offers to drive you towards a price-slash.
The net has made the slashandgrab similar properties that were slightly harder by providing sellers with quick accessibility to information about the prices have attained. However, the
slash-and-catch works an absolute treat with older, potentially more vulnerable sellers who might be downsizing- selling off a bigger family home and moving into a bungalow or flat after their
children left home and have grown up. These sellers make easy targets because, whenever they have lived in a house for many years, they may have bought it for a five-figure amount - maybe GBP40,000
or GBP50,000. So when home sellers and buyers get a six-figure offer like GBP350,000, they'll believe they're already making a substantial profit and may not feel comfortable about pushing for more.
This scam hit the headlines in 2009 when an agent was found to have convinced a seller to take GBP2.9 million for a property which had a value as a development of nearer GBP10 million. However, it
occurs on my road - to ordinary people all of the time a retired couple sold their 3-flooring end-of-terrace house for around GBP385,000.