Beware buyer fees by Adam J Walker

JUNE_1_Adam_Walker

During the last few months a small number of estate agents, mostly in London and the Home Counties, have started to use conditional contracts. In other words they have started to ask buyers to pay their fees. To my mind this is an alarming development that could have far reaching implications for the whole of the estate agency profession.
Under a conventional agency agreement where the buyer pays the fee, the agent’s duty is crystal clear. They act on behalf of the vendor and are duty bound to achieve the best price for them and to act in their best interests throughout the sale.

Under a conventional retained agency agreement the agent’s duty is equally clear, they act on behalf of the buyer and their duty is to buy the property as cheaply as possible. Buying agents operate almost exclusively at the top of the market and many prestigious and reputable estate agency firms have a buying division.

THE CONTRACT
A conditional contract is a horrible mish-mash of the two systems. The vendor is often attracted by a leaflet or advertisement that offers to sell their property for nothing or for a ludicrously cheap fee. Once instructed, the agent will market the property in much the usual way. However, buyers are told that a condition of their offer being accepted is that they must agree to pay the agent’s fee. This causes all sorts of conflicts of interest.
The vendor may be confused about whether or not the agent is acting for them or for the buyer. They may also not realise that the buyer will probably deduct the agent’s fee from the price that they offer. Many agents fail to explain this properly.

The buyer is not receiving any benefit in return for the fee that they pay – they still have to compete with other buyers, so what are they paying for?
Another factor is that some buyers may not be willing or able to pay the agent’s fee. Some might even try to cut the agent out and negotiate directly with the vendor.

View the rest of this story that appeared in Property Drum here

Appeared – JUNE 2014 PROPERTYdrum

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