What Should I Look Out for Before Signing an Estate Agent’s Terms of Business?
How Do Estate Agent Contracts Work in the UK
This is one of the most important questions that a potential home seller can ask when choosing an estate agent.
Choosing a property professional to embark on your sales journey with can be a minefield. With estate agency contracts often extending beyond 8 pages of A4 it’s a great idea to identify the key things that you should know.
In this article, I will explain some of the key things to look out for and some of the red flags that an agency doesn’t truly have your best interests at heart.
When I set up Alistair Redhouse Property Partners in 2012, we had one guiding principle: Care More. It is with that in mind that I hope this article will help home sellers across Oxford, Kidlington, Botley and beyond.
There are many Oxford estate agents who use morally questionable practices and below I will list what to look out for and why to look out for it.
Sole Selling Rights Contracts Instead of Sole Agency Agreement
A Sole Selling Rights (SSR) contract is a common trick used by estate agents to lock sellers into paying the agent regardless of whether they actually sell the property or not. If you’re selling your Oxford house in the traditional way, you should be signing a Sole Agency Agreement (sometimes called a Residential Marketing Agreement).
A Sole Selling Rights contract means that the agent will receive a fee if you sell the property, during their contract term, whether they introduced the buyer or not. This can be used maliciously as contract lock-in periods can be lengthy and the contract will continue in perpetuity unless you remember to formally terminate the agreement.
There was a home seller in Botley who came off the market with a well-known corporate Oxford estate agency, sold their property 18 months later to a buyer that that agency had nothing to do with, and was pursued aggressively for the fee.
There is a place for SSR contracts and that’s explained in this article [link] about the different types of estate agency contracts.
Blank Spaces in Contracts
Many home sellers in Oxford, Kidlington, Botley and beyond don’t trust estate agents. There are many reasons for this and transparency is essential, where possible, to build that trust.
There is an issue with a great number of Oxfordshire estate agencies being conniving and opportunistic when bringing properties to the market. Why have a blank space where the fee should go to be filled in by the agent at the house… It’s simple… to rip off susceptible Oxfordshire home sellers.
What I find morally repellant is that estate agents across the country get away with charging more to clients that they can get away with higher fees and less to those that challenge them. This is not equitable and an agent who ‘does a deal’ should raise eyebrows.
The blank spaces don’t stop at the fee; they will have blank spaces for how long they will lock you in for, how much they will charge if you withdraw your property from the market and even how much notice you have to give them once the lock-in has expired.
Withdrawal Fees
Many agents will have withdrawal fees. These are fees that are charged if you take your house off the market unsold. These (estate agency fees) charges are often not explained at the time that you sign the contract and can be significant. I valued a lovely home on the Cumnor Hill that was on the market with another agency. The seller wanted to switch estate agents and paid £1,500 + VAT to withdraw and move over to us. Anything over £500 +VAT I would personally consider to be excessive as, in my opinion, the agency should not financially win if they fail to deliver a sale.
There are two Oxford Estate Agencies that I know of that leave it ambiguous and state in their estate agency terms of business that they will charge ‘reasonable marketing expenses’. This lead to a hideous situation where a vulnerable older client of one of our Property Partners in Kidlington listed her house for sale with us and the agent who had it 6 months prior gave her a bill for £500 and said that if she took the house off with us and re listed with them they wouldn’t charge it but if she stuck with us then they would. Of course, our Property Partner’s duty of care is to look after the client at all costs, so we took up the fight. After speaking with their head office and threatening legal action and public exposure, the agency dropped the charge. A great success for the seller, but a situation that simply should not be allowed.
I will soon be writing another article titled “Can I change estate agents once I’ve signed?” So do check our knowledge hub to see whether it’s available yet.
AML Checks
Most agencies charge their sellers for Anti-Money Laundering Checks. This typically costs the agency £30-£45 to process and they will add a bit for the time to process it. Anything over £100 would be considered excessive.
Buyer Introduction
Every agency will have a clause in their estate agency contracts that if a buyer that they have introduced proceeds to buy the property for a period of time after they have been dis-instructed, they will still be entitled to a fee.
This is important for the agency as otherwise, you could have a viewing, take your house off the market, then proceed to sell it to the viewer straight after. However, some agencies will have the period set at 1 year, which to me feels excessive. Most are 6 months, so do check.
Tie-In Periods
Imagine you’ve just had a valuation meeting on your family home in Cowley from a charismatic agent who is adamant that he can achieve £50,000 more than the other agents valued the house for. It’s all very compelling; he seems very excited and clearly believes that he can get the price.
“Now”, he says with a glint in his eye, “just sign the contract and we'll get things going”.
You guessed it, the contract has a lock-in period for 12, 16, 24 or more weeks.
After 3 weeks on the market and only a lackluster amount of viewings, they’re on the phone suggesting the price is reduced and before you know it, you’re at the price the other agents suggested, but you’ve lost the new to market benefit and your house is now a stagnant house that has had to be reduced to sell. Not very exciting for a prospective buyer who is now looking to see why no one wants to buy it.
Tie in periods are a big no-no for me. The agent should deliver on their promises or you should be free to go elsewhere.
Notice Period with Estate Agency
On top of your tie-in period, if you have one, there will be a notice period. Some agencies will insist on notice of 28 days. This means that if you have endured beyond the full lock-in period and decide to leave, you have to give them a further 28 days’ notice.
With most agencies, the notice can be given before the end of the lock-in period, so for example, if you had a 21-day notice period, this could be given 21 days before the end of your tie-in period. This means that you’ll be free to leave the day the tie-in ends.
Ready, Willing and Able Buyer Clause
These were ubiquitous in the 80’s, 90’s and early 00’s, but less so now. You still need to keep an eye out for them, though.
Imagine you have found a buyer for your Headington family home and all is proceeding well. During the process, your partner is tragically diagnosed with a life-changing illness. You take your house off the market.
If there is a Ready, Willing and Able clause in the contract, on top of your crushing news, you will receive a bill from the estate agent for their full fees as they would have fulfilled the terms of the contract and introduces a buyer that is ready, willing and able to proceed.
So next time you ask yourself “what should I look for before signing an estate agent contract?” consider the following things:
· Sole agency Agreement not Sole Selling Rights (in most cases)
· Look out for estate agents filling in the blanks; their fee is ‘what they can get away with’
· Withdrawal fees should be less than £500
· AML Checks should be less than £100 and really less than £50
· Buyer introduction clause should be 6 months or less
· Do not tie in to a minimum term; there are plenty of agents that do 0 weeks and it’s a red flag if they feel the need to lock you in
· Notice periods to leave should be executable before the end of any fixed term.
· Do not ever agree to a Ready, Willing and Able buyer clause.
I hope that this article has been helpful in answering your questions about what to look out for when signing an estate agent’s terms of business. Selling a property can be a stressful process and the agent you choose has a profound impact on the journey you have.
If you have any questions about contracts or selling property in Oxfordshire, please do reach out and I’ll be happy to help.