Why Vendors Choose Bad Estate Agents

Whether you are viewing properties or in the middle of a transaction it will become obvious to you (very quickly) who the competent agents are and who is sadly lacking. Unfortunately most agents are sadly lacking and as you leave your tenth message you might wonder why a vendor would choose an ridiculous company to represent them in their sale.

To do this it is worth winding back the clock a little and putting yourself in the shoes of a vendor. You are just about to sell your property and a multitude of choices confronts you. The easiest, and worst, way to differentiate them is to make one or more of the following three mistakes

• Base your decision on the fee the agent will charge
• Be blinded by large agents with ten, fifteen or even twenty negotiators working out of one office
• Believe lots of sold signs in the area from one agent must be good news

Many buyers bemoan this fact and often say, "I bought through Agent X because I really loved the property even though I know they over price". The truth is the slicker agents do not overprice, they simply achieve "a true market value" because the property is bought to the attention of more buyers. They do this through more aggressive staff who call everyone who could possibly be interested and advertise extensively both traditionally and electronically. The unhappy buyer quoted above would be far more unhappy had they never known about their dream pad.

The poor quality agent, in the meantime, has not the means to market affectively either through their poorly motivated staff, in the media or on the internet and so fewer people are aware of the property's existence. There could be twenty buyers who want to compete but only one or two are told that it is there. The result is a lower price.

On reflection, the buyer may also feel better that although he has paid more for your property than if he had been lucky enough to find it through a poor quality agent, the transaction moves more smoothly because the person they are dealing with is professional and competent. There are plenty of clues to understand how well things will come together if you know a little about how the agent works, and key to this is the fee they charge and how it is used.

For the purposes of this chapter stay inside a potential vendor's shoes and you will see that it is actually remarkably easy to choose a bad agent unless you know better.

The Fee

The fee that you, the vendor, pay is very likely affect three things:

• The price achieved for your property
• The quality of the staff you deal with (and so the likelihood of exchange)
• The quality of marketing

The Fee and the Price

The fee paid to a high street agent is a percentage of the final figure that your property is sold for, with a small handful of exceptions who charge flat fees. The fee is usually payable when the property completes.

The key is not what you agree to pay the agent is low but that what you agree to pay them is going to be money well spent.

The first step is to be sure that the staff are motivated to sell. For this reason avoid agents that operate a "pooled commission". In this situation the fee goes into a central pot and then a percentage of that is shared between every negotiator, whether or not they are involved in that particular transaction. The result is that the moment one negotiator has interest in your property the other negotiators lay off, knowing they will get a percentage of the deal. To them this is a simpler option than coming out at eight in the evening with an alternative buyer to get you an extra five or ten thousand pounds. Even though that alternative buyer may be desperate to buy your property, they will never be told about it.

Always look for an agent where the individual negotiator gets paid part of the fee if they themselves find you a buyer and get paid nothing if they don't. In this way the negotiator will be at your door at eight in the evening in order to get that extra ten thousand for you and steal the deal from their colleague.

On the same note ensure that whoever values your property will get part of the fee if it sells. In this way you know they will give you a realistic valuation because an instruction from you is one thing, but if it is unsellable, that is another. You may be surprised how many managers or valuers are just targeted on getting the instruction and so simply over value and over promise in order to get your property onto their books and hit their individual targets.

The commission paid to a negotiator not on pooled commission is usually between ten and twenty percent of the fee and so negotiating a low fee is not always as clever as you might think. If you feel very pleased with yourself for having twisted the agent down to 1% consider this:

• The fee on a £250,000 flat at 1% would be £2,500 of which a negotiator on 10% commission would get £250. If you pay 2% the negotiator gets £500. Which property do you think the negotiators will work harder on, not only to sell, but to ensure the agreed sale progresses to exchange?
• If you managed to negotiate the fee down either the person who came to see you or the agent are weak and lack confidence. If they cannot justify their fee to you, how well will they justify the price of your property to buyers?

If you instruct a weak agent that lacks confidence they are likely to get you a lower price. Say its 3% lower than the stronger more confident agent. On a £250,000 flat you have saved yourself £2,500 but it cost you £7,500. You are £5,000 worse off, clever you!

The Fee and the Staff

Here is a contradiction. You should attempt to negotiate the fee and see how low you can get it. This will give you an idea of what most of the vendors who are using that agent are paying. From this you will get a clear idea of how much the staff are generally being paid. If they do negotiate low fees their staff will be earning less than an agent who sticks to his guns. By definition this means the staff he can recruit are less experienced and once they have become experienced they will move to an agency that pays better, one that charges a higher fee.

Agencies that charge a higher fee and refuse to negotiate on it generally have more experienced, better motivated staff, and a lower staff turnover.

There is a long way to go between agreeing a sale price and an exchange. The solicitors must be chased and managed, the buyer must be educated, the surveyor must be kept happy, the lender must be pursued and the process must be bought to a speedy conclusion. None of these things will happen if:

• The negotiator does not understand the process himself due to lack of experience
• The negotiator is not motivated because financially your deal is worth very little to him
• The negotiator leaves the agent halfway through to get a better paid job elsewhere!

Any competent negotiator should know everything on this site, as a minimum. To get an idea of the myriad of events that can cause a transaction to fail simply read through the cases in each chapter.

An agent that is prepared to negotiate to a low fee is likely to achieve a worse price for your property and that deal is more likely to fall through before reaching exchange

The Fee and the Advertising

Advertising and market presence are crucial but they should not be confused with advertising your property. Buyers will start studying the property papers weeks before they actively begin to search. The agents they will call first are the ones where the brand names have been burnt into their minds week after week. They agents they continue to call during their search will be on the same principle

Advertising is expensive and so those agents that negotiate their fee too low will have to compromise on this. The result is fewer buyers know about your property and there is a higher likelihood that you will get a poorer price.

If the agent says they advertise in a paper such as the Evening Standard ask to see an example. Is it a black and white box or a full colour page. Is it every week or do they stop during the summer and the winter when the market is quieter and they try to cut costs?

Every agent should have a web site. Check it yourself. Is it easy to use and informative? How often is it updated?

If the advertising is strong and consistent then things are looking promising. As mentioned above, however, when you are on the market don't get bogged down thinking its all about advertising your property. It isn't.

A vendors property in the paper, on a web sites or a set of details in the front window will keep vendors happy, generate some viewings but does not necessarily marry the right person to the right property. The overall aim that agents set out to achieve when they carry out marketing is to demonstrate that they have different types of property, across the price ranges, in a wide variety of areas. In other words: "Whatever you are looking for, we probably had it, have it, or will have it so come and get registered".

Serious buyers build a relationship with good agents who gain an understanding of what works and what doesn't. They build a trust and will go and view a property if the agent says they should, whether or not there are a set of details prepared. Someone who makes a random call about a place they saw in the paper is unlikely to be at an offering stage.

Most vendors find this concept difficult to understand and so most agents just tell them what they want to hear which goes something like this:

• "Don't worry Mr Smith, the details of your property will be ready next week"
• "Don't worry Mr Smith, your property is in next weeks Evening Standard"
• "Don't worry Mr Smith, we'll get your details in our front window this weekend"

They know none of it is particularly effective but they know the vendor thinks it is. In the meantime they crack on with registering active buyers and trying to match them to your property. Don't get side tracked by these irrelevancies. Feedback from viewings and honest advice are far, far better.

It is also worth considering that some agents have now stopped advertising property altogether preferring awareness campaigns and pushing buyers to look on their web sites .

Big Agent, Little Agent

Its easy for a vendor to be dazzled by the talk of large agents. They point to the fact that their office has ten, fifteen or even twenty negotiators operating out of one place. Its tempting to believe that with so many people on the case they cannot fail to sell your property.

Beware!

These very large offices often cover vast geographical areas so that in reality their competitors may have the same number of staff for the same area, simply spread over more premises.

A more telling figure is how many negotiators they have per property on the market. As an example a large office with fifteen negotiators may have six hundred properties on the market so the ratio is forty properties per negotiator. The smaller competitor may have four staff and one hundred properties giving it a ratio of twenty five properties per negotiator. In this case competition between the negotiators fighting to agree deals on limited stock will be more intense at the smaller office.

Estate agents operating large offices are not necessarily better if they are only large because they cover huge geographical areas

The size of an agents office should only become a crucial deciding factor when it becomes too small. As a minimum check the agent has at least two sales negotiators and a manager. That is two sales negotiators, not sales and lettings negotiators. Any fewer staff than this and holidays, illness, someone quitting, etc. will have a dramatic impact on their ability to sell your property for a good price, or even sell it at all.

Using More than One Agent

If you are using just one agent the term associated with this is sole agency. There are three other scenarios that any vendor should be aware of, at least one of which should be avoided:

• Joint Sole Agency
• Split Commission
• Multiple Agency

Joint Sole Agency

This is a fallacy and a very glossy way of saying you are on with two agents. You are either sole agency or with multiple agents. The term has evolved as a way of agents offering you a sole agency fee even if you are on with another agent. In advertising the words "joint sole" can be used to make the property sound exclusive in some other way than having to say "multiple".

Split Commission

This will often happen without the vendor knowing it and works something like this:

• You instruct Agent A to market your property after deciding they are the best to represent you.
• Agent A calls Agent B and offers to lend him your keys on the understanding that if agent B sells the property Agent A will still get part of the commission, and often vice versa.
• You come home one night to find agent B showing someone round your home and wonder why you spent so much time choosing an agent if, by default, it has led to others being instructed anyway

Agent A will justify this scenario by telling you that you have the benefit of two agents or more for the price of one but there are downsides. Firstly, if the commission is being split on a regular basis then by definition the staff must be poorly paid, with all the problems that have been covered earlier. Secondly, you have no idea who actually has keys and an agent you may have decided to avoid is actually on the case.

Multiple Agency

Most agents will try to make you feel bad about going on with more than just them. They will use words like, "Everyone registers with us, so why bother going on with someone else, you will only have to pay a higher fee."

Funnily enough the latter part of that sentence is exactly why you should be going on with someone else. A higher fee means they staff will get paid more if they sell your property and neither agency wants to have their nose rubbed in when the other agent gets you an offer. More motivated staff and an adversarial environment are all more likely to get you the best possible price and hence why you will find most professional developers almost always use at least two agents.

There are limits however, and you should be very cautious about instructing more than three agents. If three cannot sell your property there is either something wrong with it or something wrong with the price.

More than three signs outside your home immediately makes buyers perceive that you are either desperate and low offers are worth trying or they will wonder what is wrong with the property that has meant five agents cannot sell it.

Even if you limit the amount of boards, in this day and age it is quick and obvious to see when the same property appears over and over again on various internet sites and many buyers will not even call to view because of their suspicions.

In short one agent is alright, two agents are good, three agents are not bad but four or more agents are a no-no!

Changing Agents

If you have made a sensible choice of agent or agents think very carefully about the exact reason why you want to change. Some of the more ridiculous reasons are:

• They were slow to get details prepared
• You don't like the details
• Your property has not been advertised regularly
• Your property is not in their front window
• They have not had many viewings
• Some other agent may have different applicants
• They got a low offer

Slow preparation of the details -
Many vendors get sidetracked by the details. If the negotiators in the agent are well motivated they won't be waiting for details to get their hot applicants into your property. If they hesitate their colleague will be faster and get the deal (and the money).

You don't like the details -
This is, in the world of marketing, an extremely good sign. Advertisers claim that if their client does not like the campaign it is halfway to success as they are exactly the people that the campaign is not aimed at. Do not get bogged down thinking that the reason you bought the property is the same reason your new buyer will offer. If the agent(s) you have chosen are doing regular business leave them to it. You are paying them for their skills in selling so don't interfere.

Your property has not been advertised regularly -
Good agency is not about shoving your property in a newspaper, taking the calls, doing the viewings and agreeing an offer. Good agency is about taking the constant stream of applicants registering and matching them to the properties on the market. It is naive to think that one photograph in the Evening Standard will solve everything. It is far more likely to create a spate of viewings from window shoppers. A good agent will filter these out which means that despite having received many calls, very few viewings will actually occur. If a buyer is serious they will already have registered with that agent anyway.

Your property is not in the front window -
Again, it is crazy to think agency is all about popping a photo in the window and hoping someone will walk in desperate for it. If you have chosen your agents well the front window is a very small part of the business and more often than not attracts no more than idle shoppers.

They have not had many viewings -
If the negotiators are motivated and the agent is solid then the staff will be busy. They will know that poorly qualified applicants result in lots of viewings but very little business. If the staff are paid on commission they will want to stay focused on only taking the right people to the right properties. A classic case is the vendor who has a two bedroom flat where the second bedroom is very small. A bad agent will drag every two double bedroom applicant round there and then tell you the feedback is that the second bedroom is too small. A good agent will ask the applicant, at registration, why they need the second bedroom. If it is too rent out they will discount your property. Much fewer but much more focused viewings.

Another agent may have different applicants -
If you have instructed at least two good agents the chances of a third agent actually having someone different are pretty remote. Many vendors change agent simply for peace of mind that they are actually doing something. In reality if you go under offer quickly this is more luck than anything else.



They got a low offer -
Or did they? Perhaps they got the actual market value of your property but you do not want to face it. This is especially true if they have received two or more low offers on your property. You should also bear in mind that by law the Agent must put up all offers to you unless you have specifically instructed them in writing not to inform you about offers below a certain level.
It is unbelievably common for a vendor to swap agents after a low offer and the new agent is already rubbing their hands with glee. In their mind the previous agent has done the hard work. In other words they have found the market value of your property and all they need to do is get an offer in the same region, even slightly lower. They can then argue that a second or third offer at the same level is proof of what your property is worth. Very often they know that mentally you will be coming round to this way of thinking and will agree.