Estate Agent Contracts
One of your first challenges when selling a property is interpreting, agreeing to, and signing your estate agent’s contract. This can be quite a daunting process, but with understanding, you can make an informed choice and, if necessary, negotiate any options before you sign.
Your estate agent’s contract is legal and binding for its full duration, normally somewhere between four weeks and four months, but I’ve seen longer!
A typical contract states that if you agree to sell your property through Agent A, you can’t market it with Agent B during the term of the agreement. If your property is not getting any interest through Agent A, you will have to wait for the contract term to end, before changing to a new agreement.
So how long does it take to sell a property? Looking at properties in my local area available for sale on Rightmove today (July 2021), on average they have been on the market for 258 days. Of those, the ones currently under offer have been on the market for a whopping 285 days on average – over 9 months! I suspect that the admin has been neglected for one or two of these properties, skewing the results, but it’s still a pretty concerning length of time to be stuck on the market. Another common problem at the moment is that there is so little on the market that it is hard to find an onward property. I know at least one of my neighbours is in this position – under offer but unable to find anywhere to move to.
Of course these figures don’t include the properties that sold quickly because they were well priced! The best results will always be achieved when you set a realistic price, and give your agent a reasonable period of time to achieve an acceptable offer, perhaps longer than you might have done a few years ago. I would suggest at least ten weeks (70 days) for a standard property, perhaps twenty weeks (140 days) or more if the property has significant challenges, such as flood risk, which make it less likely to sell quickly.
Sometimes, a refreshed approach is what it takes to sell your home. I talk about the pros and cons of changing agents in another post. Let’s get back to those pesky contracts.
There are four main types of estate agency agreement in England and Wales. The first two involve only one estate agent, the second two involve two or more agencies. The choices are the same whether your estate agent is a solo operator like myself, a larger independent, or a big corporate agency.
1) Sole Agency
If you choose a sole agency agreement, the estate agency named in the contract is the only one which is allowed to sell your home. You will benefit from having a single point of contact, and you will probably build up a warm and supportive relationship with the agency. Out of the four options, you will find this one the most common, the most straightforward to administer, and generally the most effective.
If, during the term of a sole agency agreement, a buyer finds your property as a result of seeing the estate agent’s advertising, social media posts, or for sale boards, their fee will be due. For example, Mrs Buyer may spot your for sale board, walk up the path, and talk to you over the garden gate. Because the estate agent’s board caused them to investigate your property in the first place, the agent’s commission is due.
However, if you sell your property yourself, no estate agent’s fees will be due. For example, if Mrs Buyer is out for a walk, and there is no for sale board by your property, but by complete coincidence she gets talking to you over the garden gate and decides to buy your property, you will not need to pay the agent, provided that you are willing to handle all the negotiation and sale procedures by yourself, without the agent’s help.
2) Sole Selling Rights
If you sign a sole selling rights agreement, the estate agent will be the only entity with the right to sell your property during the term of the contract. This means that you will still have to pay the estate agent’s fees if you find your own buyer, whether it’s a friend, a relative, or a complete stranger.
Sole selling rights were once considered a Very Bad Thing, but this is no longer the case, because the internet has vastly changed the landscape of property marketing. In the past it was relatively easy for an estate agent to work out how a buyer found a property, because the advertising channels were so straightforward. A sale was almost inevitably the result of a customer contacting a high street estate agent, or seeing a print advertisement in the local paper.
Now, however, it is much easier for a buyer to contact an owner direct via social media, and it is much more difficult for the agent to prove how this buyer found out that your property was for sale. Was it when they spotted it on a property portal? Or saw a post showing the agent’s professional photography on social media? Or was it when they noticed a for sale board when they were watching a narrowboating YouTube video? Wherever it was, it would be near impossible for the estate agent to prove that their advertsing was responsible, as your buyer’s behaviour on the internet is private and anonymised.
Even a genuine private buyer may be influenced by the agent’s work, for example they may refer to the floorplans on the agent’s Rightmove advert, or they may make an offer that they wouldn’t have made otherwise, thanks to the advice the agent gave you on preparing your property for sale, or the work carried out by the home stylist they employed.
Given the complexity of these relationships, and the fact that many agents put a lot of time, energy and hard cash into promoting your home, it is not surprising that they want to protect their investment by securing a sole selling rights agreement. I predict that you’ll be seeing a lot more of these contracts in the future. They offer clarity and transparency to all parties.
3) Joint sole agency
A joint sole agency is when two agents agree to market your property together and split the commission. If you commit to a joint agency agreement and you sell the house through a third agent, you would be in breach of contract, and you would still have to pay the agreed fees to both agents.
Don’t worry too much about negotiating the percentage split between the two agents. If you appoint two agents at the same time and each one attends their own valuations and viewings, a 50/50 split would be usual.
It is possible that one or both agents will expect a higher fee, especially where one may end up carrying the greatest burden of work, for example, if one is local and the other is not.
In more complex situations, or where the agents belong to a group, they may arrange the split between themselves.
4) Multi-Agency Agreement
In a multi-agency agreement two or more agencies are instructed, but only the agency who makes the sale gets the commission. In this type of agreement the agencies are directly competing against each other.
I don’t recommend instructing more than two agents under any circumstances. It can only harm the presentation of your property, your relationship with the agents, and their willingness to put in any effort on your behalf.
Why Having Two Agents can be a Good Thing
- Instructing two agents can be good way to maximise the pool of potential buyers who see your property.
- You can combine the services of a local agent who knows your area and has a great presence locally, with a national agent who can add a worthwhile advantage in terms of specialist advice and a niche audience.
Why Having Two Agents can be a Bad Thing
- Firstly it smacks of desperation – it’s as if the property is not easy to sell, or stuck on the market, and the people who see it advertised twice are immediately on their guard and expecting hidden problems.
- The success of a joint agency depends upon a positive amicable relationship between all parties, transparency, and great organisational skills. It’s a big ask, especially when there are conflicting interests at stake.
- Selling your house is stressful, and selling with two agents can be even more so. For example, you will need to be more careful to avoid double booking of viewings, and there may be conflicting information and advice, and you may have to deal with different apps and procedures.
- There is not a lot of point selecting two agents who cover exactly the same market area and target audience. Why add an agent if you are not adding anything significant to the marketing mix.
- It is normal to charge higher fees for a joint or multiple agency. Although you are within your rights to haggle over any such increase, especially where you feel that the sole agent has had a fair crack at the whip and has failed to sell your property, why would you want to keep them on at all?
- Almost inevitably, your first agent will reluctant to accept the appointment of a second agent, and their nose will be put out of joint. Will they give you their best efforts thereafter?
- Although a bit of healthy competition would seem to be an advantage, in reality competing agents can be so eager to grab the sale, that they can put you under pressure and neglect to negotiate the best possible outcome for you.
- The biggest problem with a joint sole agency (split commission) is that one agent could decide not to bother to do any work, as they are going to get paid anyway!
- Naturally, each agent will be keen to promote their own client. Which buyer should you choose? Agent A will not know the circumstances of Agent B’s clients, and they cannot share personal data with each other because of data protection, so with the best will in the world they cannot be objective in their advice.
- Joint agencies can confuse and upset potential buyers. For example, you might agree to an offer placed via Agent A, but if Agent B delays withdrawing your property from sale, your buyer may get jittery and pull out of the deal.
What do I do?
My standard agreement is a Sole Agency contract. I only accept a Joint Agency in very particular circumstances, such as a divorce or a probate case.
The big decision
At the end of the day, the estate agent agreement you choose is entirely up to you, and will depend upon your personal preferences, your property, and the market conditions in your area. Take your time, and don’t allow any agent to pressure you into making your decision.