BY KARA GAMMELL
While your estate agent may have helped you find the house of your dreams, don't assume that they are always acting in your best interests. While most are honest professionals, these sales people make a living by squeezing every possible penny from each home they sell. What is more, some rogue agents have been known to lure buyers and sellers into using expensive legal or financial services.
"You would think that in the current market - in which demand for homes far exceeds supply - estate agents wouldn't have to work too hard to attract buyers," says Jonathan Hopper, managing director of buying agent Garrington Property Finders.
"But there are a few perennial tricks that estate agents use both to drum up greater interest, and to encourage would-be buyers to make higher offers."
Buying or selling a house is probably the biggest financial decision you'll make in a lifetime, so it's important you feel at ease with your estate agent. Here are seven tricks of the trade - and how you can avoid them.
1. MAKING LOFTY VALUATIONS
Valuing a property is more of an art than a science, thanks to variables such as supply and demand and wider economic conditions. But it is not uncommon for estate agents to overvalue properties in a bid to secure business.
Some agents will then advise sellers to cut the price when the property does not sell. This is particularly prevalent where a property's price falls just above a stamp duty threshold - for example, at just over £250,000, when stamp duty increases from 2% to 5% for any amount you pay over £250,000.
To avoid losing business, agencies will commonly sign you up to a 12- or 16-week contract - possibly even as long as 26 weeks - and leave you out of pocket as a result. Make sure you read your contract carefully and compare several valuations before you sign on the dotted line.
2. USING SMOKE AND MIRRORS IN ONLINE LISTINGS
Most buyers start looking for properties online - and estate agents will take advantage of this, using crafty photography and generous measurements as bait to get you through the door.
"A wide-angle lens is the estate agent's friend as it can make the images they take of the property look very flattering," says Mr Hopper.
“The right photo can make a bedsit look like a palaceso buyers should take them with a pinch of salt."
Focus on the property's location and layout as much as the glossy photos.The measurements given on a property listing should not be taken as 100% accurate - they are just a guide. Estate agents are allowed a 10% 'margin of error' when listing a property's dimensions, and inevitably they may be tempted to round up by a few inches.
3. GIVING THE WRONG IMPRESSION
Some agents will persuade interested parties to make an offer by inventing phantom offers to drive up your price says Mr Hayward.
"This is in contravention of Consumer Protection Regulations, which is put in place to prevent these instances of bad practice," he says.
If you suspect a false bid, ask to see proof in writing that this third party exists and they are willing to make a higher offer.
Open house and sealed bids are similar techniques designed to pressure prospective buyers. Both can lead would-be buyers to increase their offer for fear of losing out to someone else.
4. NOT GETTING THE BEST PRICE
Even when you have sold your property, it doesn't always mean your agent has secured the best price for you. But why would an estate agent, who earns commission, sell your house for less than it is worth?
Fees for estate agents vary enormously, but consumer group Which? says the national average is 1.8%. So while you might make an additional £10,000 by selling at £190,000 rather than £180,000, at 1.8% an estate agent will only receive another £180.
To encourage your agent to sell your property at a higher price, the Homeowners Alliance suggests asking for a sliding scale of commission. For instance, if you think your home is worth £300,000, you could negotiate a 1% fee if the agent sells your home for less than 275,000, 1.25% if it sells it between £275,000 and £299,999, 1.5% for a sale between £300,000 and £325,000, and 1.75% for a sale over £325,000. You can also use incentives to get a quick sale.
5. PUSHING THE IN-HOUSE MORTGAGE BROKER
Fewer completed sales mean many agents have turned to offering home loans in an attempt to boost their income. Some agents put on pressure to use their mortgage service, saying you will get preferential treatment or, worse, that you will lose the chance to buy a property if you are not using their mortgage adviser.
Typically, agent-based advisers work off a limited panel, rather than the whole of the mortgage market, which means you may not get the best deal available for your circumstances. You could also be subjected to elevated prices and hidden fees. Worse still, putting undue pressure on you in this way is illegal.
"It's important for buyers to speak up if they feel they are being trapped or lured in some way by their estate agents," says Mark Hayward, managing director of the National Association of Estate Agents. “While the agent has a duty to assess the capability of a prospective purchaser to proceed, they cannot make it conditional that they use an in-house financial services arm or conveyancer. Under the 1979 Estate Agents' Act, all offers must be referred to the seller regardless of whether or not additional services will be used."
If you do sign up to your agent's favourite broker, then they will find out almost everything about your finances. In the past, there have been accusations of mortgage brokers and estate agents working closely together, openly discussing potential buyers' budgets in order to get as much money out of the buyer as possible.
Avoid this issue and find a good mortgage broker and estate agent who will work on your behalf. It's worth a look at London & Country Mortgages (Lcplc.co.uk and 0330 3030 036), which operates over the phone. Its advice is free and it's a regulated 'whole of market' broker. This means it will check the vast majority of deals available to brokers, but won't check direct-only deals, so you'll need to check the remaining ones yourself. If you would prefer a local broker who will sit down with you face to face, you can find one through Unbiased.co.uk/find-an-adviser.
6. THE HARD SELL ON HOME COVER
Some estate agents will offer buildings and contents insurance or mortgages through their preferred providers, but chances are you can find a better deal yourself. Tim Larke from independent regional insurance brokers UNA Alliance says: “It may be convenient and appear less hassle to go with your estate agent's recommendation, but you should do so with an idea of how much insurance cover you need and take some time to compare it with some alternatives you've obtained yourself."
It makes financial sense to obtain insurance quotes before you exchange contracts to ensure suitable cover is available. This could flag up issues: for example, if the property is in a flood-risk area.
Figures from the Association of British Insurers show you can save more than a third by comparing as few as five insurance providers; and with more than 350 insurance providers, competition is fierce. You can compare home insurance quotes at Moneywise.co.uk. Some insurers, such as Direct Line and Aviva, don't appear on comparison sites, so you will have to contact them directly for a quote. You can check the level of cover and the star rating from statistician Defaqto (Defaqto.com/star-ratings/), which analyses the quality of financial products.
Another way to cut costs is to pay your premium in full. Do not be tempted to pay for insurance cover monthly because it seems more manageable. You may be charged interest as high as 24% a year.
You can add to your savings by buying your insurance through a cashback site such as TopCashback.c
om or Quidco.com. which list retailers and product providers and get paid if you click through them. They then give some or all of this cash to you - often around £50 a policy.
Most policies include a voluntary and/or compulsory excess charge (the amount you pay before the insurer has to cough up in the event of a claim). If you're prepared to increase this slightly, you can get a reduced premium.
7. EXPENSIVE PROTECTION FOR YOUR FAMILY
If you die, mortgage life assurance ensures your dependants needn't worry about repaying the mortgage. Policies aim to pay off the remaining debt on repayment mortgages if you die during the mortgage term.
"Buying a new home is one of the most common occasions when people consider financial protection," said Emma Thomson, head of customer care at LifeSearch. "Not only do you have all that new debt, but the chances are you have a partner and children, or at least you might have children in the future."
If you have no dependants and are single, then you'd be right to question why you would bother to get this policy.
If you opt for your agent's offer, it is likely you will end up forking out more than you should, so shop around before you buy a policy, using comparison sites such as Comparethemarket, GoCompare and MoneySuperMarket. Never assume that your bank or broker will offer you the best deal as many are tied to one provider and can be expensive. Be honest in your answers to questions on the application-for example, your medical history - or the policy could be worthless.
Source Moneywise
