What to look out for in estate agent contracts

October 25, 2018 2:57 pm

Due to the seemingly complex and lengthy nature of most contracts, many people don’t pay a close attention to the all-important terms and conditions. In essence, contracts are legally binding, and the failure of fully comprehending what you are signing up to can be a major cause for regret. This is especially true in the real estate market. When selling a property through an agent, signing an agreement is a standard procedure.

It’s certainly not unheard of for property owners to become dissatisfied with the outcomes of the services they’ve received from their estate agents. This is mainly attributed to the lack of prior contract reading and disputing the unfavourable terms. In order to avoid bad blood between you and the estate agent, there are important aspects of an agent’s contract that you ought to consider before signing.

Type of Contract

It is worth keeping in mind that are two major types of agent contracts, namely sole agency contracts and multi-agency contracts. However, they are variations to these contracts, all of which have different features.

Sole Agency – This type of contract grants only one agent the responsibility of advertising and finding a buyer. The advantage of this type of contract is the fact that if you are able to find a buyer before the agent, you don’t have to pay the agent. However, if there was an open-ended agreement, the agent has the right to claim a commission if you sell to a buyer who had been initially introduced to the property by the agent. Even if the property is sold years later to the buyer, the initial agent will still have a right to claim payment. This is called future liability.

Sole Selling Contract – This type of contract is a bit risky since the agent is granted the sole rights to sell a property. This means that even if you find a buyer, the agent is still entitled to claim payment.

Ready, Willing and Able Purchaser Agreement – Sellers are advised to avoid contracts with this clause at all costs. The agent is entitled to receive payment as long as he/she identifies a buyer. If an issue arises and you withdraw your property from the market, you still have to pay the agent.

Joint Agency Agreement – In this type of contract, two agents are granted the responsibility of finding a buyer. They share the role of advertising and also share the commission.

Multi-agency Agreement – This is whereby two or more estate agents are allowed to represent the seller. However, only the agent who makes the sale is entitled to receive payment.

Estate Agent Fees

Different agents have different fee structures. There are those that charge a fixed fee plus VAT and those that charge a percentage of what your property sells plus VAT. Before signing the contract, ensure that you are satisfied with the amount that the agent is requesting. Always take into account the VAT. It is also wise to inquire beforehand what is included in the fees. There may be additional hidden fees associated with their advertising strategy and withdraw penalties, which may lead to unbudgeted final costs. The contract may also contain in-house services such as Energy Performance Certificates. Watch out for those too.

Tie-in and Notice Periods

As a seller, you are usually bound to the contract for as long as you signed up for. This means that if you are dissatisfied with your agent at any point, whatever you do next is determined by the contract. This may include paying a specific penalty fee for withdrawal. Ensure that you are satisfied with the contract period and notice-of-action period before signing the contract. The average minimum tie-in period is four weeks and notice period is two weeks.

Selling a home or any property is one of the most significant transactions that you’ll ever have to make. As such, one should always be vigilant when getting into contracts involving this transaction. Watching out for the above-mentioned terms of an estate agent’s contract will go a long way in avoiding unnecessary costs and inconveniences.

%d bloggers like this: