One sale, two commissions: Estate agents have ways of ensuring their cut
Sunday 29 May 1994
They had never sold a house before - and after their experience they never want to sell another. They ended up paying not one estate agent but two, and it cost them more than pounds 1,600.
It all started simply enough. In November 1992 they put their house on the market with a local branch of Mann and Co, an estate agent with branches all over the South-east. After three months with no buyer in sight, Mr White took the house away from Mann and placed it with a Gravesend estate agent, Deo Gloria.
But a few days later Mann rang Mr White up - it had a buyer. 'We told them it was now on the market with Deo Gloria, but they said that didn't matter. So we said okay, send them around,' Mr White said.
The prospective buyer arrived with a Mann representative. The rep insisted Mr White sign a 'one-day agreement' before the buyer looked round and Mr White, who had never heard of such agreements, signed. That was to be his downfall.
The buyer liked the house and eventually bought it. But Mr White ended up paying Deo Gloria and Mann commission for the sale.
The reason lies in the small print of the contract Mr White signed with Deo Gloria and Mann. Both were 'sole agency' contracts, one with Deo Gloria for 12 weeks, the other with Mann for one day. This type of contract is common: it gives an estate agent the exclusive right to sell a house, usually for a specific time. It also gives it the right to claim commission if the house is sold through any other estate agent. Both Deo Gloria and Mann were entitled to their cut from Mr White - and he was forced to pay out.
So too was Martin Davies. In April 1992 Mr Davies put his house in Cambridgeshire on the market with the Woolwich. After a few months he took the house away from them and signed a sole agency agreement with Carter Jonas, which sells property all over the South.
Carter Jonas did a little better than the Woolwich. It sent a number of people round to see the house and one almost bought it. After that possible sale collapsed last summer, more than a year after they had first put the house on the market, Mr Davies resigned himself to staying put.
But in September Mr Davies received a phone call from his former estate agent, the Woolwich, asking if he was interested in a possible buyer. This led to a sale, and Mr Davies paid the Woolwich commission of pounds 3,525. When he wrote to tell Carter Jonas he was shocked by the reply.
Carter Jonas pointed out that since Mr Davies had never cancelled his agreement, it was entitled to its sole agency commission on the sale. Under threat of litigation, Mr Davies paid Carter Jonas pounds 3,237 - making his total estate agency fees pounds 6,762. Hardly surprisingly, he is very upset.
'There is no doubt we were in the wrong and Carter Jonas acted within its rights. We were naive and paid dearly,' he said.
But it is an easy thing to do. What house sellers forget is that sole agency contracts usually need to be cancelled in writing - and that it is up to the seller to do this. The agent has no interest in cancelling a contract when it has received no commission.
Mr Davies and Mr White assumed, wrongly, that estate agents are more like friendly advisers than commercial businesses. This is often the image - but it is the small print that matters most.
The sole agency contract is a perfectly acceptable contract for sellers - it is cheaper than the multiple agency contract and, unlike a sole selling rights contract, allows an owner the right to sell a house privately without paying commission.
But the best advice is to enter into it in the spirit of serial monogamy. Sign a sole agency contract for a definite, short period. Put in or strike out clauses to suit yourself (try negotiating for a smaller commission as well). And always cancel the agreement in writing at the end. Otherwise you, too, could end up paying twice.
David Berry works for BBC TV's 'Watchdog'
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