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Selling second-hand residential: agent norm.

Covering Market, Trends, and Practical (but see LEMON-AID for Building & DIY)
brightncheerful
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Selling second-hand residential: agent norm.

#330864

Postby brightncheerful » August 4th, 2020, 2:47 pm

Ignoring investors into buy-to-let and company purchases for employee relocation, the demand for residential houses comes from renters (who may or may not be first-time buyers), first-time buyers and existing owner-occupiers moving up or down the property ladder.

There are two categories of buyer: cash buyers and buyers that can only afford to buy if they can borrow some of the money.

The residential property market has two strands: new-build (including conversion of existing buildings) and second-hand.

Generally, developers of new build sell direct to buyers. Sometimes agents are instructed, but the need only arises where the developer is rewarding the agent for advice on design, marketability and pricing, or the scheme is not selling as quickly as the developer would like either because the developer over-estimated demand or perhaps the local agents are advising buyers against it. By getting the local agents on side, developers remove that obstacle.

With a new housing estate, it is normal for developers to only be interested in accepting an offer (subject to contract) from a owner-occupier buyer whose existing property already has a buyer. Understandable:developers are not interested in who buys the property, only that it is sold.

Agents are only interested in commission and fees from selling. Agents are not interested in who buys (unless the agent is also instructed to sell the buyer's existing property and/or can cross-sell other services such as mortgages). The agent is also not interested in absolute pricing, only rate of stock turn. Agents also want to reduce the cost to the agent of the selling. The more straightforward the sale, the sooner the agent gets paid.

As is said in the commercial property market, valuation is not an exact science, it is also an art. In the residential property market, it is a subtle balancing act. No point in an agent deliberately underpricing: that would damage reputation and leave the door open for other agents to contact the seller with the lure of a higher price and so get the instruction. Similarly, no point in overpricing because the property sticks and the seller would have to reduce the price which from a marketing perspective looks like there is something wrong with the property; that doesn't stop sellers and their agents adopting that tack. Use of the auction terminology 'guide price' also gives buyers the impression that the asking price is flexible.

The aim is to be realistic so far as the agent is concerned, which basically means educating the seller to play the game. That is done by advising a reasonable acceptance price that the agent is certain would appeal to buyers, but if need be accommodating of the seller's preference for a higher asking price provided seller would have to accept (depending upon the figures involved) much less. Every 10K off equates at 1% commission to £100 less for the agent, but £10K gross reduction for the seller. How much the seller can afford to accept depends upon what the seller is planning to with the net proceeds. The rules of the game include linking the asking price to the pricing bands on Rightmove, etc. By putting the asking price into a higher band, sellers are assured that buyers who cannot afford it would view the higher priced property so as to make an offer at a level they can afford whilst buyers in that price bracket can bid lower in the hope of getting a bargain.

As i have said, it is understandable that developers will not accept an offer from a buyer unless the buyer's existing property is 'under offer'. or that the developer's inducements for the buyer, including arranging sale of the buyer's existing property usually at a price less than the buyer would want, would result in the developer achieving the developer's desire outcome.

Over the years, I have moved house on several occasions and each time I have found a house I like, agreed the price with the seller (through the seller's agent) and then put my existing house on the market for sale (though an agent). That was the norm.

Not now. Agents selling second-hand properties will not recommend the seller to accept an offer from a buyer unless the buyer's existing property is 'under offer'. I first encountered that attitude earlier in the year. Working from home for decades, I need certainty when moving house for operational reasons. Mrs Bnc and I having found a suitable property, I wrote to the seller's agent, explained the circumstances and in the hope the seller would be amenable we made an offer £5000 above the asking price. The seller's agent simply reiterated what he had intimated at the onset that he would not recommend the seller to agree but would put on a waiting list and keep in touch and let me know if another offer were received. I withdrew my offer (not wanting the seller to assume it was on the table). I heard from the agent once. Today the property is still on the market. whether the seller is banking on us returning, no idea. Had our offer been accepted we would've done what our utmost to get our house under offer as soon as, And to minimise delay got our solicitors onto the conveyancing. The disadvantage of the agent's recommendation is that we have lost interest in that particular property.

You might think my experience an isolated example. A neighbour tells me that an elderly relative of theirs had the same thing happen only the other day. The relative having found a house that suited was told that the offer could not be accepted or even considered until the relative's own house was under offer. Neighbour wonders whether the agent's recommendation is legal. I said I couldn't think of any reason why not. We agreed that the criteria is unethical and possibly slowing the market.

Having considered the reasons, I don't think that morality comes into it. It is not compulsory for sellers to sell to the first person that makes an acceptable offer. Also, sellers do not have to care who buys the property. What is driving the change, whereby the agency method of selling of second-hand property has latched onto the developer method, is agent-led, not customer led.

It might be wishful thinking as I am that whomsoever buying our house would continue improving where we have left off, or whose personalities would fit in with the road. - another neighbour has said what they'd like of our replacement: quiet, friendly, no disputes, no screaming children, no loud music, no barbecues - but as far as I am concerned, I would much rather accept an offer from someone intent on buying despite not yet having found a buyer for their existing home than take my chances that someone else in the market might come along whose circumstances would enable them proceed immediately.

Intent creates an emotional connection but proceeding immediately is a misnomer. Given that some 25% of under offer transactions abort, it seems to me that it makes no sense to refuse to accept an offer from someone just as serious about buying as soon as, as from someone just as serious about buying assuming their own sale proceeds without any issues.

Long ago, properties were 'under offer' : a system of selling and buying that enabled the 'subject to contract' system to work well for decades. Nowadays, they are SSTC (sold subject to contract). Whether 'subject to contract' does deter gazumping - a misused term that in popular parlance has come to mean another buyer muscling in with a higher offer than the 'under offer' figure. Ok, some buyers don't care that some sellers break their word and accept, thereby creating problems for the previous buyer and all concerned, not to mention agents in the firing line of public opinion, but only as another example of falling standards.

So this time, we are doing as we are told and setting out to find a buyer before actively looking for somewhere else to live. A factor that plays havoc I suspect with advice to buyers that it pays to ascertain the seller's plans when viewing so that any offer can be pitched to capitalise on the seller's circumstances.

It seems to me and my neighbour whose relative is also having to do as they are told has no choice. In my view, selling one's home requires a different mindset to that of a developer. We buyers do like to know that having expended time, cost and effort on finding something suitable, in due course it would become ours.

scrumpyjack
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Re: Selling second-hand residential: agent norm.

#330878

Postby scrumpyjack » August 4th, 2020, 3:30 pm

The agent must notify the seller of any offer received, unless the seller has notified the agent specifically not to notify offers where the buyer has not sold their existing property.

per Trading Standards
9a By law, you must tell sellers as soon as is reasonably possible about all offers that you receive at any time until contracts have been exchanged unless the offer is an amount or type which the seller has specifically instructed you, in writing, not to pass on.

Howard
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Re: Selling second-hand residential: agent norm.

#330889

Postby Howard » August 4th, 2020, 3:54 pm

I once was faced with a potential buyer who couldn't go ahead. I had instructed the estate agent to let potential buyers know that I was selling the house as a result of an employment move, so would be expecting the purchaser to exchange contracts quickly.

We were selling a nice house in pristine condition at a competitive price. I was puzzled when a couple offered the asking price, but hadn't even put their house on the market. They were upset when the agent passed on our message that we weren't taking the house off the market, but would be happy to sell to them if they were in a position to buy within a few weeks. I was disappointed to upset them, but looking dispassionately at the situation, they had wasted Mrs H's time hosting a couple of viewings and had not been open about their inability to purchase in a reasonable time.

The house sold quickly (in less than a month) for a slightly lower price. We then found our current home. The seller asked us to exchange contracts within 10 days and we did it in nine.

I've also had to sell a couple of houses as an executor and applied a similar principle. If a buyer is serious, they will be able to proceed fairly quickly. At the very minimum, one would expect to see them committing some expenditure by having the house surveyed, instructing a lawyer etc. within a week or three.

For someone selling a house now, time is money, surely? One has to evaluate the risk of a prospective purchaser delaying the process until winter is near when prospective purchasers may be few and then dropping out or finding reasons to make a lower offer.

However, there may be some folks selling a house who aren't in a hurry and are happy to take all the risks. We are all different ;)

regards

Howard

brightncheerful
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Re: Selling second-hand residential: agent norm.

#330906

Postby brightncheerful » August 4th, 2020, 5:49 pm

scrumpyjack wrote:The agent must notify the seller of any offer received, unless the seller has notified the agent specifically not to notify offers where the buyer has not sold their existing property.
per Trading Standards
9a By law, you must tell sellers as soon as is reasonably possible about all offers that you receive at any time until contracts have been exchanged unless the offer is an amount or type which the seller has specifically instructed you, in writing, not to pass on.


The issue is not about reporting an offer to the seller but reporting it and not recommending the seller to accept.

The agent would be in breach if he had not reported the offer to the seller but told the offered he had.


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