Estate Agency Contracts – Which Is Best For You?

Categories Selling

When it comes to selling your home, there are two main types of contract under which you can employ an estate agent to sell your home:

  • Sole Agency – one estate agent is appointed to represent the seller.
  • Multiple Agency – two or more estate agents instructed to sell a property.

However, there are variations on these two types of contract that you should be aware of:

  • Sole Selling Right – a variation of sole agency, with an extra and unnecessary restriction for private sellers.
  • Joint Sole Agents – two estate agents are instructed to market the property together, usually sharing a percentage of the agreed fee.

This simple guide to the pro’s and con’s to the types of contract should help when you approach an estate agent.


 Sole Agency

This is the most effective method as your estate agent will be motivated to sell your home for the best possible price as they have an exclusivity period to thoroughly test the market.

A fee is only paid if the estate agent introduces a purchaser during their contractual period that subsequently completes upon the purchase.

The Sole Agency contract is for a specified period, but be aware of the terms and conditions – some estate agents include a further notice period of up to 4 weeks to terminate the contract. Make sure you read the small print and if it includes a notice period, either get this deleted from the contract or remember to give the specified notice in time.

Should you find a purchaser privately, not through another estate agent then there is no fee payable. However, if another estate agent introduces a purchaser during the Sole Agency period, then this is a breach of contract and you will be liable to pay both agents.

If a purchaser introduced during the agency period agrees to purchase your home within 6 months of the termination of the contract, even if they are re-introduced by a subsequent estate agent, you will be obliged to pay the first estate agent.

Should you decide to change estate agent, it is important that you supply the new estate agent(s) with a list of buyers that have already been introduced by either yourself or the previous estate agent(s).

 Pro’s of Sole Agency

  • Total commitment from your selling agent
  • No confusion or over exposure during marketing – buyers can be suspicious of multi-listed properties
  • Clarity and consistency with how your property is presented to buyers
  • No pressure to favour one estate agent’s buyer over the other

 Con’s of Sole Agency

  • Avoid excessive initial contract lengths

Sole Selling Right

This fundamentally works in a similar way to a Sole Agency with a few significant restrictions and potential costly differences.  Like Sole Agency, Sole Selling Rights require a seller to pay the sole selling estate agent’s fee, if another agent finds a buyer in the time scale of any contract – but such wording can be biased in favour of the estate agent not the client.

Many unwitting sellers believe that they are entering into a traditional Sole Agency contract, only later to discover they have signed up to a Sole Selling Right.

Sole Selling Rights are very restrictive. Should you agree to sell your home privately, even if that is to a member of your family, or to a purchaser introduced at any time in the past by a previous estate agent, you will be liable to pay the Sole Selling Right estate agent their selling fee.

Many Sole Selling Right contracts include clauses that ANY purchaser introduced by that estate agent who subsequently goes onto buy the house at ANY time, will render you liable to pay a full fee. Also, some refer to a fee being payable for the introduction of a ready, willing and able buyer, even if you are unable or decide not to proceed with the sale.

 Pro’s of Sole Selling Right

  • More relevant to commercial property sales

 Con’s of Sole Selling Right

  • Can result in unnecessary fees to the seller
  • Should be avoided

 Joint Sole Agents

This is sometimes confused with a Multiple Agency Contract. A Joint Sole Agency agreement is where two estate agents are instructed to market the property together, usually sharing in the fee.

A Joint Sole Agency is normally appropriate when specialist skills are required, for example when selling an equestrian property or new-build development.

Again this is for a specified time period, but this time the two estate agents work together, coordinating the marketing and when the property is sold the fee is then split.

 Pro’s of Joint Sole Agents

  • Usually the same terms apply as with a Sole Agency

 Con’s of Joint Sole Agents

  • Avoid ‘winner takes all’ fee arrangement
  • Has potential to over expose property online
  • Essentially a Multiple Agency in disguise

 Multiple Agency

This is where two or more estate agents are instructed to work in competition with each other, with the estate agent that introduces the buyer getting the full fee.

Multiple Agency agreements have no specified time period and the fee is usually set at a higher rate than a Sole Agency.

This type of agreement is usually the least recommended option as it can frustrate a sale.  Many buyers believing that if a property is listed with a number of estate agents that it is overpriced or difficult to sell.  Buyers may also be reluctant to make offers, if they fear a second buyer could be introduced by the competing agent.

 Pro’s of Joint Sole Agents

  • Has potential to find a buyer more quickly, with more estate agents marketing your property

 Con’s of Joint Sole Agents

  • The selling estate agent’s focus is to find a buyer quickly and not necessarily for the highest price
  • Usually costs more in estate agency fees
  • Buyers may fear competing with buyers introduced by second selling estate agent
  • Potential for unwanted canvassing from other estate agents to try to become an additional selling agent

Tell us about your experience:

What level of agency agreement have you chosen?  What is your preferred method for selling?  Let us know in the comments below

 

CONTRIBUTORS

Owen Miles MNAEA, Partner Shepperton
Andrew Dewar FNAEA, Joint Senior Partner

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