Ah, estate agents. We love ’em really, the little scamps. But like anyone, their job is to make as much money as possible – and the source of that money is often you. Here’s how to identify estate agent tricks and avoid becoming their doormat. Article by Nick Green.
It’s not that you shouldn’t trust estate agents. Ultimately, they do an important job. But as a buyer (or even as a seller) you need a good idea of just how far you can trust them. By getting to know some of the tricks they use to try and boost their own business, you can benefit from their undoubted expertise – without becoming the victim of it.
Estate agents start with a big advantage: they do this job every day, but the average homebuyer only moves home a few times in their whole life. In other words, estate agents are used to handling customers with ‘showroom shock’ – people stunned by the enormity of the purchase ahead of them, and all too ready to be led by the nose.
So the first rule for homebuyers and sellers is simple: be prepared, so you don’t come across as just another easy mark. The following tips will help you stand your ground in the face of any ‘creativity’ on the part of the estate agent.
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Estate agent tricks – some tips for homebuyers
Homebuyers in particular should tread carefully around estate agents, and take their words with a pinch of salt. The estate agent works for the seller (as well as their own business) so will put those interests first. Here are some of the traps to watch out for.
Estate agents are famously chatty, with good reason. By putting you at your ease, they may tease useful information out of you: such as, how much money you have to spend, or how badly you need to move. Even trivial personal information may give clues as to how high the estate agent could push you. Furthermore, by being charming and friendly, they can make you feel as if they are on your side, and so make you a ‘softer touch’ when it comes to making offers.
Be pleasant and polite while giving nothing away that might relate to your own circumstances. This is a game of poker.
Not exactly a 'trick' and more of a tactic, it's still worth being aware of this practice. An estate agent may initially post a property at a higher-than-realistic guide price to see what appetite there is for it. If the first offers are too low, they may adjust the guide price downwards. This will attract more bids, which may eventually push the actual price back up to the original guide price - or even above it.
Conversely, if there are lots of early bids, the estate agent might raise the guide price to see how high new bidders are prepared to go. Again, there's nothing underhanded about this, but it can make life tricky when you're trying to get an offer accepted.
Pitch your initial offer below the guide price, but not so far below it that it looks insulting. This will encourage the seller into thinking you are 'on the hook' and worth negotiating with. At the same time, make sure there is lots to recommend you as a potential buyer - e.g. have a mortgage in principle ready, or an agreed mortgage deal. Better still, be a cash buyer. There is more to being accepted as a buyer than just making a good offer.
It is the estate agent’s job to try and get the highest price possible for a property. There are various tactics they might use to achieve this, and not all of them are fair. One trick might be to exaggerate the offers from rival buyers, to encourage you to bid higher – or doing the reverse, to get the rival buyer to raise their offer.
A non-deceitful variant of this may be to invite sealed bids only, which prompts buyers to pitch in with their highest possible offer.
If you suspect you are being sucked into a bidding war, keep your cool. Have a maximum upper limit (your mortgage broker can help you set this) and don’t cross it. Also try to have an advantage other than the size of your offer, such as being a cash buyer or chain free.
Even more serious than playing buyers off against each other, is the practice of making up non-existent offers to try and persuade you to raise your bid. This isn’t common practice, but it does happen occasionally. It can be particularly damaging for you if it happens after your own offer has been accepted, and you have spent money on surveys etc.
If an offer sounds fishy, ask to see evidence. This usually means a letter from the other buyer’s solicitor, confirming that they are indeed willing to offer this amount.
To save you from losing money if you are gazumped (i.e. trumped by a higher offer at a late stage), ask if your estate agent operates a good will charter. This is an arrangement whereby both the buyer and the seller put down a refundable deposit when an offer is agreed. If either party pulls out, the other side gets to keep their deposit. This prevents sellers from continually accepting higher offers.
You could also ask about a lock-out agreement. This prevents the seller from negotiating with any other potential buyers for a limited time period (usually a few weeks). This can enable you to make enough progress with the purchase to convince the seller to stick with you as a safe bet.
If you are viewing an older house, you will need to conduct a full building survey to identify any potential problems with the structure. The results of such a survey may reveal the need for costly renovations, which in turn may put you off buying the property. The estate agent knows this – particularly if past buyers have pulled out for this reason.
An unscrupulous estate agent may therefore tell you that they believe recent surveys have turned up no major problems, and that a cheaper condition report or homebuyer survey should be enough. Such a comment could be a passing remark, never in writing, so they can deny they ever said it (or imply that you misunderstood them).
Never take anyone’s word on the condition of a property, other than that of a RICS surveyor – and for older properties, always choose a building survey.
New-build properties can be sold under the Help to Buy equity loan scheme, which allows buyers to cover 20 per cent of the purchase price with a government loan. This loan must eventually be repaid from the sale of the property, so it isn’t a discount. However, some estate agents have been known to advertise properties at only 80 per cent of the price to lure buyers in. You’ll still end up paying the full 100 per cent of the price – and probably more, if the property increases in value, because of the way equity loans work.
Double check the price of any new build property, particularly if it looks suspiciously cheap.
Sometimes estate agents will partner with non-independent mortgage brokers, and encourage you to use their services. Mentioning that they offer such a service is fine, but if they put excessive pressure on you to use it, they are breaking the law. Bear in mind that a non-independent mortgage broker will not be able to access nearly so many deals as an independent mortgage adviser, and so is unlikely to offer you the best value.
Always use an independent mortgage broker whom you have chosen yourself. Unbiased is the best place to find one perfectly matched to your needs.
Estate agent tricks – the tips for sellers
An estate agent is less likely to ‘pull a fast one’ on a seller, since technically they are meant to be working for you (and their fee will be paid from the sale of your property). However, bear in mind that they will still be looking out for number one, so may not always prioritise your best interests. Here are a few things to watch out for.
Overpriced estimates on your home
When you first choose an estate agent, you’ll probably contact several to come round and view your property. After discussion with you, each will then tell you what asking price they’re prepared to place on it.
This price may vary between estate agents, sometimes by tens of thousands of pounds. It’s tempting to go for the highest estimate, but take care. Some estate agents may deliberately over-value your home just to get you on their books. You may then wait in vain for offers, only to have to lower your price – by which time your property has been on the market for some time, which in itself can put off buyers.
Do your own research into similar local properties, and see what they are actually selling for (i.e. their final price). Choose the asking price that is just a little higher than this, so you’ve got room to come down if necessary.
Is your property unusual for them?
Sometimes an estate agent will specialise in a particular kind of property, e.g. high-end family homes. This may not make them ideal for you if you are selling, say, a flat or a small house. Such an estate agent may take you on, but might then side-line your property and not give it their full attention.
Research the estate agent’s usual types of property and make sure yours is in keeping with their general list. If yours seems out of character, ask them if this might be a problem.
Have they tried selling you more advertising?
If your property has been on the market for a while without attracting good offers, your estate agent might suggest wider advertising for an additional fee. This isn’t good practice (they should always be doing their best to sell your home) so you are right to be suspicious.
If your estate agent starts trying to get more money from you, your best option is usually to part company with them and find a new estate agent.
Look out for yourself
Whether you’re a buyer or a seller, remember that ultimately the estate agent will be putting their own interests first. That’s fine, of course – just so long as you remember to do so too. Don’t distrust your estate agent, but don’t place absolute faith in them either. Make every decision with care, seek out unbiased information, and both you and the estate agent should achieve a happy outcome.