Estate agents’ tricks of the trade
Most agents do a sterling job. However, some estate agents will use sneaky tactics to to get a sale. Here is what to look out for.
By far the most common tactic used by agents, valuing a house at an inflated rate is designed to convince a seller to choose them over another agent.
The next step in this ruse is to fabricate a very low offer/s in order to 'downwardly' manage a seller’s expectations.
Once the seller’s expectations are realigned, a real offer below the asking price is more likely to be accepted.
The best defence against this tactic is to obtain 5 or 6 valuations after which you should be able to spot the agents relying on this tactic.
Another trick is to undervalue a property with a view to the property being bought by the agent's friends or colleagues.
Fabricating previous successes
Often the agent will tell you they have sold a similar property near yours for a high price. This might not be true – they may not have even sold the property at all.
Fortunately, you can now cross check actual sold prices near you.
House price checker
The agent will want to tie you in for as long as possible.
Their standard terms and conditions may state 6 months or even longer. The length of contract, as with most other aspects of the contract, are negotiable. Don’t accept more than 3 months then, if the property hasn’t sold but you are happy with their performance, you can always renew.
Supposedly fixed fees/commissions
If you don’t raise the issue of fees or commission, the agent will charge you their standard rate. This will often be 2 to 3%. A bit of gentle negotiation should prompt a reduction to around 1%.
Another trick is to agree a commission rate but neglect to tell you that the rate is exclusive of VAT. Agents re dealing with individuals not companies. They should always talk in VAT inclusive terms.
Fake property viewings
Some estate agents may arrange viewings for people who are not genuinely interested in buying the property. The people looking round the property could be the estate agent’s friends, or even colleagues from another branch.
Conducting these fake viewings is designed to convince the seller that the estate agent is generating interest in the property, to retain the seller’s business.
Creating buyer competition
The estate agent could find various ways to create a situation in which buyers feel both time pressure and a fear of being pipped at the post. The more ‘buzz’ the agent can create around a property, the greater the sense of urgency felt by buyers.
This could be achieved by:
- Booking viewings close together, so that each potential buyer arrives while the previous viewers are still at the property. This creates a sense of competition.
- Sealed bids: a process in which buyers submit anonymous offers, and the seller decides which to accept, if any. Sealed bids have been common in the seller’s market over the past few years. The process can be very effective at creating a heightened sense of competition – even where none exists. Sealed bids may even be introduced by the estate agent when there is only one interested buyer, to drive this buyer to a higher offer.
Charging for extra marketing
If your house is not selling, your estate agent may try to charge you more for an extra marketing push. Before you agree to anything, ask the agent in detail what they are proposing to do differently and how it would increase the chances of a sale. And more to the point, why the agent is not already doing everything they can to market your home.
In-house mortgage brokers: buyers beware
As a buyer, you may feel pressured by the estate agent to use their in-house or preferred mortgage broker, rather than choosing your own.
The estate agent may imply that they will persuade the seller to accept your offer if you use their in-house broker. The agent could even tell you that they cannot pass your offer to the seller if you do not use their mortgage broker.
Remember that the agent is legally obliged to pass on all offers to the seller, so do not give in to their pressure.
More importantly, using the estate agent’s mortgage broker could be a conflict of interest.
The agent will always act in their own interests, and those of their client – the seller.
If the broker is indiscreet about your finances, it could compromise your buying position.
In-house mortgage brokers: sellers beware
From the seller’s perspective, some estate agents may suggest that going with a buyer who is using an independent mortgage broker is less reliable, more of an ‘unknown’.
If the seller goes with the buyer who uses the agent’s broker, this will probably generate referral fees for the agent. It will not necessarily be the best option for the seller, or the highest offer on the property.
The agent’s motivation for recommending an in house or preferred broker is the secondary income stream they receive from the recommendation.
Referral fees are standard practice in the industry and can amount to a considerable increase in what you end up paying for your mortgage.
An agent may try to persuade the seller to take a lower offer than they might have received from another buyer.
Tips for buyers and sellers
- Buyers: do not reveal the maximum amount you can afford to pay for a property to the estate agent. The agent may view this as a target.
- Sellers: if you suspect your agent may not be passing potential buyers’ offers on to you , ask a friend to put forward a low offer. Does the agent pass it on?
- Buyers: do not be pressured to use the estate agent’s preferred conveyancer. Their choice may not offer the best service available, so make your own decision.
- Sellers: incentivise your agent to get the best possible price for your property by offering to pay a higher percentage of commission if the agent achieves over a specified amount.