I’m going to share with you the seven tricks that estate agents use that you need to be aware of.
Overall estate agents and letting agents are very good at helping you to buy as well as rent properties, but there are some tricks that you need to be aware of as estate agents are also geniuses at making sure that they can get the best possible commission out of a deal and squeeze that little bit extra to make sure that they’re not just getting paid, but getting paid quickly.
So, without wasting any time let’s get straight into tip number one.
- Losing the keys
Even though estate agents have got great systems and processes, they generally still have a key cupboard where they lock away all the keys and know exactly which key is for which property, but sometimes they tend to lose them.
Now, why do you think this happens? Well, I thought I’d share a little story with you. This personally happened to us in the last couple of weeks and there are a few different reasons why estate agents ‘lose keys’.
A few weeks ago, I spoke to a landlord who had a property up for let with the competing agent in our town and they’d been struggling to find him a tenant.
I said: “I think we can get that property let fairly quickly for you, would you be interested in allowing us to also have an opportunity to let the property?”
What he agreed was to give us the opportunity to let the house but also keep the current agent and to see which one of us could let the property first. So, we arranged for one of our staff to go to the competing agencies to collect the keys. When we got there they gave us a set of keys to go to the property and let ourselves in, but the keys didn’t work and we couldn’t open the door.
We then went back to the letting agency, they apologised and they gave us a second set of keys and now the second set of keys didn’t work also. So we rang the landlord to get access and he said: “speak to the agent”. So at this point, the landlord’s complaining that we’re not very good at what we do and we said listen, we’ve tried the keys, we’re at the right property, we’re professionals and we know what we’re doing.
What we ended up having to do was go to the property and take a live video at the property showing us putting the keys into the door and it not working and sending this to the landlord and the landlord still claiming the agent had the right keys. This has now taken about 10 to almost 2 weeks and the whole time the property is sitting empty.
Finally, the agent admitted that what they had actually done was changed the locks on the house and they didn’t inform us. Now, why would they do that?
Well, their plan quite simply was to try and find a tenant for the property and let the house out before we found one so that they’d get their commission.
Now we knew we had tenants lined up and they knew we had a tenant lined up so they couldn’t afford to allow us to get actually get access, so they lost the keys.
Okay, so the trick that you need to be aware of is that agents will lose keys quite a lot to make sure that they don’t miss out on commissions because at the end of the day letting agents and estate agents are not professional landlords, their salespeople who get paid on commission.
Now, letting agents aren’t the only ones who can lose keys, estate agents can too.
But why would they do this? One reason would be if the property had already had an offer accepted on it by the homeowner. If the agent is on a fixed fee they can see their fee coming to them and they’ll likely not want to do any further viewings with potential buyers that are not known to the agency, so they’ll say things like “we don’t have a viewer available for the next few days” or “we can’t find the keys are the keys” and they won’t allow you or your viewer to see inside the property because the agents won’t allow you to offer on a property that you’ve not seen.
The agent will always have a preferred buyer, even though they may not be the preferred buyer for the homeowner. This might be because they’re also getting a mortgage through the agent and they’ll get a commission on this as well as from the sale of the house.
So in the future, just be aware of that trick when an agent says “I can’t find the keys” because they know where the keys are, trust me.
- Estate agents and lettings agents are not investors.
It’s very important to remember that most estate agents and letting agents are not property investors, their salespeople and their job is to get commissioned as I said already. What they are focused on is getting deals done, because if they don’t, they won’t get paid that commission.
So, they’ll get you excited about putting an offer in and they’ll also tell you that there are other offers on the property that the owners about to take when in reality there may not be.
What they’re trying to do is build inside FOMO (fear of missing out) and to get you to offer more money on the property than you were planning on spending.
Now, what they’ll also do when selling your property is say that they have a buyer who really wants to buy your property, but they may be also looking at another house and if you don’t accept the low offer that buyer is going to be gone in a couple of days time. Or when you’re buying they’ll push for sealed bids when they know that there are one or two or maybe a few more people interested in the property and quite often in a sealed bid scenario people have that fear of missing out so they’ll put in an offer higher than they wanted to originally put in.
Okay so, I know I mentioned that nobody is meant to see the price but I want to tell you a little story and this is about relationships with estate agents.
I was involved in we had to have our bids and by 12 o’clock and I said, okay. I’m going to put an offer forward, I’ll email it in, will an offer of £92,000 be the highest offer? To which the lady on the other end of the phone said no. I kept calling back after 12 o’clock until all of the bids are in and asked the lady if I offered 98 would it be the highest? She said no, I said what if I offered just over 100, would it be the highest bid, to which she said YES.
I put the phone down and I emailed my bid in at just over a hundred and one thousand pounds and guess what I got the highest bid, so you may sometimes feel that sealed bids are sealed, however, quite often it’s so the agent can give the person they want to get the property the deal now.
And the homeowner is getting the highest bid for the property so they’re not doing anything wrong and the reason the agents do it is they want the certainty of commission. So they want to go with me because they know I’ll complete the purchase.
It guarantees them their commission and it guarantees the homeowner their sale, but also it is still actually the highest price.
Now, once you’ve secured a property purchase don’t let the agents continue to market that property because you’re at risk of losing money with a solicitor and broker costs. So, what you can do to introduce what’s called a Goodwill Charter where you would pay some money upfront to the agency and they would hold that money showing you’re serious. But you’ve got to build good relationships.
What you can also do is have what’s called a lockout agreement with the agent and the homeowner stating that you have been given period of time to buy the property before they allow anybody else to view the house.
I always try and use something like this with an agency which then prevents anybody else coming in and offering more than me on a property purchase which can happen quite a lot.
- Never let an estate agent know your bottom price.
Okay, number three is to never let an estate agent know your bottom price when selling and your top price when buying. Remember they get paid a commission.
If they know your bottom price when you are selling a house or your top price when buying, you’re basically making their job easy for them because they will push for a sale or a purchase at the price.
Why would they do that? Because back to the same reason as before they stand a better chance of going through to completion because at the end of the day a bid is just a bid, It doesn’t mean that the deals going to go through to completion. In fact, two out of three sales probably go through one out three falls through between bid and exchanging and agents will give these facts to homeowners.
And they could say that the higher bid is more risky and recommend the homeowner take the lower bid. But remember there’s a chance that the property may go back on the market and by then the person with the lower bid will have gone and bought something else. So don’t let agents use this trick on you and make sure you stick to your guns and make sure that if you are selling a house, you take the highest bid.
- Negotiate your fees with the agents
If you are selling a property, it’s always a good idea to agree a fixed flat rate fee with the agent plus commission and the commission will be based on how quickly they can find you a buyer or how high of a price they can get for the property.
Don’t fall for them telling you that their fees are fixed. The fees are never fixed and are always negotiable, so haggle with them to get your fees structured in the way that you want them
We want to pay the agents and we want to pay the agents well, but we want to pay them for doing the job that we want them to do for us.
Quite often I’ll give them a bonus payment at the end of a deal and they’ll know about it and upfront give them stuff when you sell the house, bring them in a bottle of champagne or chocolates, whatever it may be because remember, you’re not just going to be selling one house with them, over your lifetime as a professional property investor, you’ll be selling and buying a number of properties through the agents in your area. So always look after them always make sure they’re paid well, but don’t pay them well for not doing the job that you want
- Incorrect valuations
Okay, number five is incorrect valuations, this means they’ve made a mistake, it’s not a trick. Let me explain, so agents have a policy where they will offer homeowners an evaluation that’s above market value in a long-term contract or sole agency for say six months by promising them that the house is worth x amount and they can achieve that sale price.
Now, what that agent does is get the owner of the house tied into that fixed six-month contract and then manage their expectations down on price over time. Once they’ve got the property on the books in a contract they have the opportunity to sell the property but in reality, for much lower than they originally valued it at.
So, you’ve got to be aware of agents overvaluing your home and be wary of the agents without many properties in their window as they will generally be chasing the money. The most trustworthy agents are those that generally value the house correctly at around the average price those house types are selling for in the area.
Another type of agent tends to come so they do not have to manage you down on price over a six-month period but they get the property secured at an achievable price and get it sold quickly. They’ll come in with a low valuation and aim to get you tied into a contract and then get the property onto their window, sold and off their window with the Commission in the bank as quickly as possible.
It’s always a great idea if you’re selling a house to make sure that you get three different estate agency quotes for your property and you’ll start to see the difference between the three and then pick the one where you get in the round the average because it’s going to be the most genuine.
Make sure that you are aware of the different type of agencies in the town. So, over time I’ve generally asked every agent in our town to value a house for me so I know the prices of the houses on my streets and what they’re worth.
- Estate agents getting you to sign a long-term sole agency.
Okay, trick number six is estate agents getting you to sign a long term sole agency contract and charging you upfront. Don’t be fooled into sign in a long-term contract as generally, these tend to be 6-12 months and they’ll tell you that you have to sign the contract but you absolutely do not.
You never want to be tied into contact with an agent who’s not performing and doing what you’ve asked. Make sure you’ve got the flexibility to be able to move agents.
Now, you also need to avoid paying upfront, this mainly happens with the online agents as high street agents tend to sign you into long-term contracts and charge you at the end once they’ve got the sale but a lot of the online agents do is they charge you upfront but at a fraction of the cost of what a High Street agent would sell the property for. So they entice you in with the lower fees
But in fact, by paying an online agent upfront means they have not incentive to sell or advertise your home, you’ve already paid them.
I love online agents because quite often we will market the direct to vendors properties of an online agent and when we speak to the vendors or the homeowner, they’re very often disheartened with the whole process, they feel they’ve spent money and they’ve got nothing for nd now they can’t afford to go to the High Street agent
What we can do is secure and negotiate creative deals such as no money down type strategies with these properties where the owner gets the price they’re looking for and we get the opportunity to control and own that property over a period of time.
- Estate agents convincing you to use their recommended broker.
Okay, finally trick number seven is estate agents convincing you to use their recommended mortgage broker. One of the first questions that estate agents will ask you when you come into their shop is are you a cash buyer or do you need a mortgage?
The main reason that they ask you that question, is they’re trying to find out if you need a mortgage and if they can offer their in-house mortgage broker and earn an extra commission.
They get paid by the seller, but getting you to buy the house using their mortgage services means they get paid by the buyer also so they getting a double commission. The problem is that if you end up using their in-house mortgage broker they quite often don’t have access to the whole of market lending which means there’s a limited number of lenders that they can go to on your behalf. And this will cost you more money, not just on the fees, but it costs you are not being able to get the best mortgage product for you at the time.
I’ve only ever paid a mortgage broker to get me a mortgage when they have got access to the whole of market lending and whatever the agents tell you it is not always best to use an in-house broker and it won’t speed the process up any more than using your own broker.
Now, there are scenarios where it’s beneficial to use an in-house broker if you’re purchasing a repossession because the agents have to be seen to get the best price possible for that house with the best and most suitable buyer.
So, that’s the seven tricks that you’ve got to be aware of when dealing with estate agents and letting agents.