What are estate agent tricks of the trade?
Overvaluing, undervaluing, and fake viewings - but a few of the tactics some agents use. Here's what you should check before choosing an agent.
Overvaluing a property is by far the most common tactic used by estate agents. Valuing a potential client's home at an inflated rate is a common tactic used to convince a seller to choose them over another estate agent.
Once the seller is locked into a marketing contract, the agent will advise the seller to reduce the asking price over time. It is not unheard of for an unscrupulous agent to fabricate a low offer/s in order to 'downwardly' manage a seller’s expectations.
Once the seller’s expectations are realigned, they more likely to accept a below the asking price offer.
The best defence against this tactic is to obtain valuations from 3 or 4 agents - enough for an exaggerated valuation to become apparent.
Another underhand trick is where an agent undervalues a property with a view to the property being bought by the agent's friends or colleagues. This approach is an abuse of confidence where the agent feels that the seller trusts the agent and the seller is unlikely to get a valuation from other agents.
As a seller, you should make it clear that you will be seeking a valuation from a few agents.
Fabricating previous successes
Often the agent will tell you they have sold a similar property near yours for a high price. This claim might not be true – they may not have even sold the property at all.
Our House Price Checker lets you check the actual sold prices (as registered at HM Land Registry) of any property sold in the UK. The HOuse Price Checker will not tell you which agent handled the sale, but this can be checked in the sold properties section of online portals like Rightmove or Zoopla.
Search sold prices using 'county', 'town' or 'postcode':
Long agency agreements
The estate agent may want to tie you into their agency agreement for as long as possible.
The agent's default contractual period maybe for 6 months or even longer. The length of the contract, as with most other aspects of the contract, is negotiable.
Don’t sign an agreement with a contractual period of longer than 3 months. If at the end of the contractual period the property hasn’t sold, you can still renew the agreement if you are happy with the agent's performance. If you think the agent hasn't performed well enough, you can speak to alternative agents.
Supposedly fixed fees/commissions
If you don’t raise the issue of fees or commission, the agent will charge you their standard agency 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 on a commission rate but neglect to tell you that the rate is exclusive of VAT. Agents are dealing with individuals, not companies. The agent should include VAT in their terms, but you should double-check this in the small print before you sign the agreement.
Fake property viewings
Some estate agents may arrange viewings for people who are not genuinely interested in buying the property. The people looking around 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
This trick might actually work in the seller's favour but it is one for buyers to be aware of.
The estate agent could contrive ways for buyers to feel time-pressured and a fear of missing out. 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. More to the point, ask 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. Estate agents typically earn referral fees from brokers.
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 and more of an unknown quantity.
If the seller accepts an offer from a buyer who used the agent’s recommended broker, the agent will probably receive a referral fee. This referral fee can create a conflict of interest where the agent is also being incentivised by the broker.
This conflict can create a situation where an agent may try to persuade a seller to take a lower offer than they might have received from a buyer who used an independent broker.
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 and sellers: Do not be pressured into using the estate agent’s preferred conveyancer. Solicitor referral fees can lead to a conflict of interest.
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