Estate Agency question
March 17, 2011 7:24 PM Subscribe
I am selling a house in England via an estate agency. They have found me a buyer and I have verbally agreed to the offer price. A reliable private buyer has since given me a solid offer. What should I do?
At this stage, my solicitors and the original buyer's solicitors have been in touch but contracts have not yet been exchanged.
The private buyer has offered me a few more grand than the balance I would get after estate agency fees (1.75% of the selling price + V.A.T. @ 20%).
In the contract I signed with the estate agency, these are the clauses I can find that are relevant :
Clause 1 :- You will be liable to pay remuneration to ACME Estate Agents, in addition to any other costs or charges agreed, if at any time (or within 6 months of termination by you of the ACME Estate Agents sole agency if a subsequent agent is instructed) unconditional contracts for the sale of the property are exchanged:
- With a purchaser introduced by ACME Estate Agents during the period of its sole agency or with whom ACME Estate Agents had negotiations about the property during that period, or
- With a purchaser introduced by another agent during the period of ACME Estate Agents's sole agency.
Clause 2 :- After the initial period, the sole agency agreement will continue until either you or we bring it to an end giving 14 days' written notice. Notice can be given within the initial period to expire at the end of the initial period.
Clause 3 :- Should an offer for your property be agreed privately or through another estate agent, you agree to disclose the identity of the purchaser prior to exchange of contracts.
SO - These are the questions I am asking myself :
How should I proceed?
Why would the estate agency want the identity of the private buyer?
What can they do if they contact the buyer?
Should I get a deposit from the private buyer to be sure the deal will go through?
The house has been on the market with the estate agency for 6 months, is there any way they can charge me fees even though I may not sell through them?
Should I cancel the contract with the estate agency if the original buyer does not come back with a higher offer?
Any hints / ideas / comments are welcome!
At this stage, my solicitors and the original buyer's solicitors have been in touch but contracts have not yet been exchanged.
The private buyer has offered me a few more grand than the balance I would get after estate agency fees (1.75% of the selling price + V.A.T. @ 20%).
In the contract I signed with the estate agency, these are the clauses I can find that are relevant :
Clause 1 :- You will be liable to pay remuneration to ACME Estate Agents, in addition to any other costs or charges agreed, if at any time (or within 6 months of termination by you of the ACME Estate Agents sole agency if a subsequent agent is instructed) unconditional contracts for the sale of the property are exchanged:
- With a purchaser introduced by ACME Estate Agents during the period of its sole agency or with whom ACME Estate Agents had negotiations about the property during that period, or
- With a purchaser introduced by another agent during the period of ACME Estate Agents's sole agency.
Clause 2 :- After the initial period, the sole agency agreement will continue until either you or we bring it to an end giving 14 days' written notice. Notice can be given within the initial period to expire at the end of the initial period.
Clause 3 :- Should an offer for your property be agreed privately or through another estate agent, you agree to disclose the identity of the purchaser prior to exchange of contracts.
SO - These are the questions I am asking myself :
How should I proceed?
Why would the estate agency want the identity of the private buyer?
What can they do if they contact the buyer?
Should I get a deposit from the private buyer to be sure the deal will go through?
The house has been on the market with the estate agency for 6 months, is there any way they can charge me fees even though I may not sell through them?
Should I cancel the contract with the estate agency if the original buyer does not come back with a higher offer?
Any hints / ideas / comments are welcome!
It depends on the legal meaning of 'agent' in 'with a purchaser introduced through another agent'. If it just means 'source' then you're on the hook for their fees; if it actually means _agent_ in the colloquial sense then you may not be, if the buyer contacted you directly. It looks like you probably are (to discourage going around them) as essexjan says. Yes to the lawyer/solicitor.
posted by Lady Li at 11:50 PM on March 17, 2011
posted by Lady Li at 11:50 PM on March 17, 2011
This is generally known as 'gazumping' and it happens quite a lot when the market is going well. There's nothing legally binding about the verbal agreement for offer you've made - it's subject to contract, so either party can pull out until contracts are exchanged. It's not a nice thing for your first buyer, but it happens.
Obviously, I'm no solicitor, so you'll need to talk to yours to sort out the exact details in your contract in your case, but generally agency contracts are written specifically to prevent you doing exactly what you want to do when you take them on as sole agents. You may not be on the hook for the whole 1.75% + VAT if you go with the private buyer as you may be able to negotiate a smaller fee to break the 'still on the hook for 6 months after termination' part of the contract with the agency. Their argument is they've spent six months marketing the property and doing paperwork with the buyer etc, so you still owe them even if you get a sale from elsewhere.
So - is the offer from your private buyer better if you still have to pay the agency fees? And is it worth the hassle?
There's nothing stopping you going back to the original buyers and asking them to up the offer due to a competing bid - but if you've accepted the original listed price (rather than a lower offer), they may not have the money to go higher, and you risk losing their offer altogether, given you've already accepted their current one.
I think your own solicitor should be your first port of call, as essexjan suggests, as how you proceed will depend upon how much it'll cost you to extract yourself from the sole agency contract. I suspect your solicitor has seen this sort of question before a few times, assuming he does a lot of conveyancing work.
posted by ArkhanJG at 1:31 AM on March 18, 2011
Obviously, I'm no solicitor, so you'll need to talk to yours to sort out the exact details in your contract in your case, but generally agency contracts are written specifically to prevent you doing exactly what you want to do when you take them on as sole agents. You may not be on the hook for the whole 1.75% + VAT if you go with the private buyer as you may be able to negotiate a smaller fee to break the 'still on the hook for 6 months after termination' part of the contract with the agency. Their argument is they've spent six months marketing the property and doing paperwork with the buyer etc, so you still owe them even if you get a sale from elsewhere.
So - is the offer from your private buyer better if you still have to pay the agency fees? And is it worth the hassle?
There's nothing stopping you going back to the original buyers and asking them to up the offer due to a competing bid - but if you've accepted the original listed price (rather than a lower offer), they may not have the money to go higher, and you risk losing their offer altogether, given you've already accepted their current one.
I think your own solicitor should be your first port of call, as essexjan suggests, as how you proceed will depend upon how much it'll cost you to extract yourself from the sole agency contract. I suspect your solicitor has seen this sort of question before a few times, assuming he does a lot of conveyancing work.
posted by ArkhanJG at 1:31 AM on March 18, 2011
That all said - it depends upon the definition of 'agency'. The waters are rather muddy, as it entirely depends upon how your private seller found you - which is why they'd want to contact him/her, to find that out. The OFT attempted to clear this up, and actually made it worse.
Generally speaking, if they found your property through a website or private ad service that is doing any of these:
"- Operating a register of buyers
- Fielding property enquiries on behalf of vendor (this is a common 'gotcha')
- Arranging viewings
- Handling negotiations and passing on offers
- For sale signs showing a company telephone number"
then it would be generally be classed as an agency service by a court, and you're still on the hook for your first agent's fees. If you found him through, say, a mutual friend or a straight up newspaper classified advert then it's a private sale, and you're probably free and clear as you're not violating the 'sole agency' clause.
posted by ArkhanJG at 1:48 AM on March 18, 2011
Generally speaking, if they found your property through a website or private ad service that is doing any of these:
"- Operating a register of buyers
- Fielding property enquiries on behalf of vendor (this is a common 'gotcha')
- Arranging viewings
- Handling negotiations and passing on offers
- For sale signs showing a company telephone number"
then it would be generally be classed as an agency service by a court, and you're still on the hook for your first agent's fees. If you found him through, say, a mutual friend or a straight up newspaper classified advert then it's a private sale, and you're probably free and clear as you're not violating the 'sole agency' clause.
posted by ArkhanJG at 1:48 AM on March 18, 2011
Due to restricted bank lending a large percentage of agreed house sales in England are failing to complete, I would stop worrying about the 1.75% and find out which buyer has the shortest chain/best chance of actually completing. Get your estate agent talking to both buyers to figure this out.
posted by Lanark at 6:43 AM on March 18, 2011
posted by Lanark at 6:43 AM on March 18, 2011
I'm not your lawyer. That looks like a sole agency contract, within the initial period. That period will be specified in the contract (probably something like 8-10 weeks). If you got the offer within this period - following the appointment of the agent - then, yes, the contract states that you are on the hook to pay commission on the buyers the agency did not introduce. In the absence of this provision, which motivates agents to sell quickly so beware, everyone would freeride on estate agents marketing, get ownership details from the land registry and negotiate their own deals. Sucks but did this other buyer find out about the property being for sale due to the agents sign board up out front? The initial period is sometimes referred to as the exclusivity period. I am not your lawyer. You have one of those. Ask him or her. Good luck! This is not legal advice and cannot be relied upon as such.
posted by dmt at 7:47 AM on March 18, 2011
posted by dmt at 7:47 AM on March 18, 2011
You're going to find it hard to prove that your second buyer didn't find out about your house sale via your estate agent (they probably listed the house on Rightmove for instance) & sole agency contracts are usually pretty watertight. Not worth the potential hassle for a relatively small amount of money in other words.
I'd put the second buyer in contact with your agent & have your estate agent advise you. In the current environment you cannot rely on any verbal offer going through to completion, since bank valuations are often coming in much lower than agreed prices and mortgage funding is in very short supply. An offer with cash or mortgage behind it that can complete now may be worth more than an offer from someone who was to sell an existing property elsewhere, which could take months, if they can sell at their expected price at all. Sorting out this kind of stuff is what you pay estate agents to do: make yours do the legwork!
posted by pharm at 8:06 AM on March 18, 2011
I'd put the second buyer in contact with your agent & have your estate agent advise you. In the current environment you cannot rely on any verbal offer going through to completion, since bank valuations are often coming in much lower than agreed prices and mortgage funding is in very short supply. An offer with cash or mortgage behind it that can complete now may be worth more than an offer from someone who was to sell an existing property elsewhere, which could take months, if they can sell at their expected price at all. Sorting out this kind of stuff is what you pay estate agents to do: make yours do the legwork!
posted by pharm at 8:06 AM on March 18, 2011
Agree with everything from pharm. In particular sole agency contracts are enforceable. Foxtons has a reputation for litigating - and winning - in their breach. If you're within the initial period, pay up. If not, get your solicitor to advise you on the organs but beware the commercial factors pharm describes - anecdotally, my little sister is a London estate agent and about one third of her deals are falling down on obtaining mortgage finance. Something to think about if either of the offers are for cash.
posted by dmt at 11:23 AM on March 18, 2011
posted by dmt at 11:23 AM on March 18, 2011
This thread is closed to new comments.
You have your own solicitor - give him/her a copy of the entire agency agreement - there is no way that anyone here can give you any suggestions on what to do on the basis of the couple of clauses you've quoted in your question. Your solicitor can advise you on what to do - and will, of course, charge you for the privilege of doing so.
posted by essexjan at 7:58 PM on March 17, 2011 [1 favorite]