Who can I trust when buying a property?
Answer
Unfortunately no one ... not even family and friends!
Yes there are the obvious ones:
- Your solicitor - gets paid (in most cases) whether you buy or not ... but can't get sued if you don't buy
- The surveyor - gets paid whether you buy or not ... but can't get sued if you don't buy.
- The estate agent - only gets paid if you do buy
- The financial adviser or lender - only gets paid if you do buy
But what's this with family and friends? Its the biggest mistake many buyers, especially first time buyers, make.
Your friends and family members are not you. In many cases they don't share your tastes or ambitions and yet I see no end of buyers asking just those people if they should buy "this" property.
A daughter that loves the hum of the city and is thinking of offering on a flat in a busy street asks her mum for advice when her mum loves the peace and quiet of the countryside.
A buyer who loves period properties asks the advice of a friend who is a minimalist if he should offer on a period conversion.
They end up going round in circles, sometimes even buying places they don't like only to sell up shortly afterwards.
Only you know you and what you want so when it comes to buying a property its time for a little self trust!
To learn more about who is involved in a property purchase and what their motivations and hidden agendas are pick up a copy of my ebook How to Really Buy a Property.
Search Results for 'commission' in
How to Really Buy a Property
Chapter 4:
Understanding the Property Market
"... the simple issue of supply and demand is expected to get worse. As of 2021 it is estimated that, for example, London needs 94,000 new homes to be built every year but only about a third of this is ever managed. Way back in October 2012 the Future Homes commission concluded the UK as a whole needed 300,000 - 330,000 new homes every year. And how many were built in 2012? Just..."
Chapter 10:
Working with Estate Agents
"... always that the individual negotiator is usually paid on commission and they know they are more likely to get that payment (i.e. get a property to exchange) from a buyer who is prepared, focused and listening than someone who thinks they are fantastic and knows it all. The latter will often end up on an endless and fruitless..."
"... an example a negotiator may be registering ten new people by 'phone every day and getting two emails from applicants who want details sent in the post because they are thinking of moving in the next three months. Who do you think he will spend time with? This is also the reason why so many potential buyers never receive the details they request. Its not excuse making, it is simply the reality of a market where you are dealing with people paid on commission for what they sell...."
Chapter 11:
Sorting Out Your Mortgage
"... it may be an even better deal with another.
Different financial advisers are paid different commissions on the various products which, although they shouldn't, can tend to make them push you gently towards products most profitable for them.
If you are offered financial advise by an Agent..."
Chapter 15:
How to Really Make an Offer on a Property
"... put it another way if the Estate Agent is being paid 2% of the sale fee and the negotiator is getting 10% of that then on a £240,000 flat the negotiator is going to be paid £480. If you have offered £235,000 and the negotiator is trying to get you to the asking price he is not trying to get £10 (the commission he would earn on the extra £5,000), he is trying to make sure you do not get..."
Chapter 16:
Who to Trust When Buying Property
"... differently from the reality
To put it another way:
The buyer does not trust the agent because they believe the agent is only trying to get the sale through in order to earn some commission (see Working With Estate Agents)
The buyer does trust their solicitor even though, in most..."
"... people are fully aware that estate agents work on commission - no sales, no income - and so their motivation is almost always clear. Get the sale through. If they achieve this they will have no risk of any legal action unless you can prove they mislead you or withheld important information that was also no bought to light in the legal..."
Chapter 23:
Why Vendors Choose Bad Estate Agents
"... their staff the wrong way;
Why sales fail more at some agents than others;
Big agents, small agents and the right agents;
The different types of commission a vendor pays;
What a property on the market with a number of agents tells you about the property;
Why vendors change..."
"... sale completes.
The key is not always how much you are going to pay the agent, but to find out if that money will be well spent.
- Types of commission -
The first step is to be sure that the staff are motivated to sell. For this reason avoid agents that operate a "pooled commission". In..."
"... first step is to be sure that the staff are motivated to sell. For this reason avoid agents that operate a "pooled commission". In this situation the fee goes into a central pot and then a percentage of that is shared between every negotiator who works there, whether or not they were involved in that particular transaction. The result is that the moment one negotiator has interest in your property the other negotiators lay off, knowing they will get a percentage of the deal. To them this is a simpler option than coming out at eight in the evening with an alternative buyer even if they might offer you an extra five or ten thousand pounds. That alternative buyer may be desperate to buy your property and more financially sound but they will never be told about..."
"... commission paid to a negotiator not on pooled commission is usually between ten and twenty percent of the fee the agent is charging. As such negotiating a low fee is not always as clever as you might think. If you feel very pleased with yourself for having bargained with a dozen agents and finally found one you could twist down to 1% consider..."
"... The fee on a £250,000 flat at 1% would be £2,500 of which a negotiator on 10% commission would get £250. If you pay 2% the negotiator gets £500. Which property do you think the negotiators will work harder on, not only to sell, but to ensure the agreed sale progresses to exchange?
If..."
"... agency. There are three other scenarios that any vendor should be aware of, at least one of which should be avoided:
Joint Sole Agency
Split commission
Multiple Agency
- Joint Sole Agency -
This is a fallacy and a very glossy way of saying you are on with two agents. You are either..."
"... advertising the words "joint sole" can be used to make the property sound exclusive in some other way than having to say "multiple".
- Split commission -
This will often happen without the vendor knowing it and works something like this:
You instruct Agent A to market your property..."
"... after deciding they are the best to represent you.
Agent A calls Agent B and offers to lend him your keys on the understanding that if agent B sells the property Agent A will still get part of the commission, and often vice versa.
You come home one night to find agent B showing someone..."
"... A will justify this scenario by telling you that you have the benefit of two agents or more for the price of one but there are downsides. Firstly, if the commission is being split on a regular basis then by definition the staff must be poorly paid, with all the problems that have been covered earlier. Secondly, you have no idea who actually has keys and an agent you may have decided to avoid is actually on the..."
"... has keys and an agent you may have decided to avoid is actually on the case.
Split commissions are most often found in very small agents where they do not have the staff or resources to market effectively.
- Multiple Agency -
Most agents will try to make you feel bad about going on..."
"... enough the latter part of that sentence is exactly why you should be going on with someone else. A higher fee means their staff will get paid more if they sell your property and neither agency wants to have their nose rubbed in it when the other agent gets you an offer. More motivated staff, more commission on offer and an adversarial environment are all more likely to get you the best possible price and hence why you will find most professional developers and investors almost always use two or three..."
"... have not had many viewings - If the negotiators are motivated and the agent is solid then the staff will be busy. They will know that poorly qualified applicants result in lots of viewings but very little business. If the staff are paid on commission they will want to stay focused on only taking the right people to the right properties. A classic case is the vendor who has a two bedroom flat where the second bedroom is very small. A bad agent will drag every two double bedroom applicant round there and then tell you the feedback is that the second bedroom is too small. A good agent will ask the applicant, at registration, why they need the second bedroom. If it is too rent out they will discount your property. Much fewer but much more focused..."
