Almost four in ten sellers are now choosing to use a Sale by Tender process being offered by an estate agency group – and for which they pay just £150 plus VAT as an admin fee.
The buyer pays a 2% fee plus VAT, with £2,000 as the minimum charge.
David Lench, group managing director of south-east independent Arun Estates, said: “Last year we made hundreds of sales using the method and achieved 99% of the guide price. This year, we are achieving in excess of it.”
He said that Sale by Tender is being offered through all 115 branches and all Arun Estates’ brands, including Ward & Partners, Cubitt &West, and Douglas Allen.
Lench said that all vendors are offered the option of the scheme, with current take-up being 35% to 40%.
He said: “There are vendors who do not like the idea of paying £150 upfront and who tell us they would prefer to take their chances with the normal private treaty.”
Lench said that the scheme was introduced partly as a way of dealing with a low-stock market and an instruction-getter, and partly because it adds transparency to the process.
He said: “As agents, we try to preserve our fees, but the reality is that in a low-stock market, agents do reduce them. We introduced this scheme because it is totally relevant to the marketplace we are in.
“There is limited stock and buyers are able to look at very few properties. What does an estate agent advise the vendor to do? Accept the first offer that comes in at full asking price? But then another offer comes in gazumping the first, and the original purchaser comes back with a higher offer still.
“That way, as the agent, you are almost guaranteed to get a complaint because someone will feel hard done by.
“With Sale by Tender, there is a six-week process that includes two open house days. All the tenders come in at the same time as sealed bids, and all are opened together. We encourage the vendor to come in to our offices to watch.
“It means there is complete transparency – and it works very well.
“It also fits in with the company ethos, by which we do not favour one buyer above another.
“Another benefit is that because there is a six-week programme, it slows the whole process down. One reason that vendors are nervous about putting their home on the market is that they are worried they will not be able to find anything to buy. This gives them more time.”
Lench added: “We have had some issues with it, notably Stamp Duty. We had buyers’ solicitors questioning whether by the time you added 2% back in on to a £249,000 purchase, it took the price into the next Stamp Duty level.
“However, we have now had a letter from HMRC confirming that this is not the case.”
He added that the scheme had been widely misunderstood, leading to accusations – notably by Labour shadow business secretary Stella Creasy – that the firm is double charging. However, Lench said that this was totally inaccurate.
He added that other agents could benefit from offering the scheme. He said: “It is certainly another weapon in agents’ armoury, but the emphasis must be on doing it properly.”
An interesting article.
Open days, open houses and bloc viewings have been an integral part of our business model for some time now and there are few agents (that have the resources to cope) that are not advertising this service to prospective clients.
We have operated a similar approach with our "closed marketing” where no offers are considered for an agreed period, normally 2-4 weeks, to ensure that every aspect of our marketing has been given the chance to take effect in order to pull every possible buyer from the market place, before the vendor client is asked to make a decision.
In regards to this sale by tender proposition and upon detailed investigation and research over recent months, as with all "too good to be true" propositions, the finer detail is that whilst the fee charged to the seller is fixed, if the price achieved falls below the target figures, normal agency terms then apply with the vendor paying standard fees. To me this is then more about sleight of hand more than it is real innovation. This is demonstrated by the fact that by using freely available statistics via RM Plus or Zoopla Pro we can see that whilst the agent in question remains strong in their areas of operation, the wider market has not embraced the proposition as new instructions to my firm and others operating in the area have not suffered. This is further illustrated by the fact that two thirds of their own clients have been too sceptical or uncomfortable to take up the offer.
I have no doubt that our industry is going through a transition with many looking for ways to innovate and differentiate themselves in the market place. Those that don’t may, sadly, fall by the wayside. This said, with big new internet only players coming in this year, agents mutual and many other changes a foot, 2014 will be an interesting year. I for one believe that change is a good thing if it moves us as an industry forward but anyone who’s opening statement to the market is “sell your house for £199” is only adding fuel to the fire of those detractors who feel that we all charge too much for doing too little. Ours is a people business where, I believe service will always be paramount so how we as agents conduct our business, deal with clients, purchasers and the offer process, will always be held to account and scrutinised, but I don’t see that as a bad thing. The best service, the best marketing and the best proposition to the client, for a fare fee…
For some clients I have no doubt that the sale by tender approach has worked but for others I’m sure they may be wishing that they had reviewed the contract presented in more detail before signing…
In regards to the purchasers, it creates potential issues if they fail to disclose the fact that the purchase price may include the payment of a fee to their lender…I'm sure that happens in every case though …
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During the past week, on two posts on here, I stated Ward and Partners (part of Arun Estates) were charging buyers 2% introduction fee as part of Sale by Tender. Great the story has now been picked up.
Imagine the buyer, selling through another agent and paying for the sale of their own property and then to purchase another.
This will add to the calls of regulation against such practices and gives estate agency a bad name.
Why?
A buyer is paying £5,000 on a £250,000 property to have an estate agent open an envelop and tell them they have secured the right to buy. Whilst legal, it is unethical and will pour petrol onto the flames of the fire of those that say traditional estate agents are not providing a value for money service.
Sale by tender in asking the buyer to pay is just that. It is NOT the same as a buyers agent being employed to source properties, do initial viewings, write reports and make recommendations and to then arrange viewings for the buyer, with which the agent will accompany and then progress the sale as the instructed party on behalf of the seller.
In sale by tender where the buyer pays, the agent is acting on behalf of the vendor, progress the sale for the vendor yet the buyer is paying. It is a total conflict of interest! The agent in law is bound to act in the vendor's best interest as they sign the contract, yet they know they now have to 'act' for the buyer also in order to get paid.
Typical Arun Estates!
John
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John,
I did indeed pick up this story from your posts, so very many thanks for what turned out to be a particularly interesting lead.
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Great that you did Ros – Ward & Ptns are the leading agents re: market share in Kent and are very good at what they do – however, this practice really is not in the best interests of the industry.
£2 – £5k average purchasers fee will be coming from mortgage funds. When the mortgage companies suss this out, there will be an outrage. Buyers don't save £5K as fees to buy properties – it will end in a scandal.
JM
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It is similar to Northern Rock offering 105% mortgages – only this time the mortgage companies are not aware they are paying for buyer's fees!
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Something that has just come to my attention is that Ward & Partners demand the tender fees at exchange of contracts not completion. This means that the buyer is unable to add the fees onto a mortgage and is expected to stump up thousands of pounds in cash prior to receiving the equity in their sold home or the keys to their new one!! If you're unable to pay the fees at this time then you'll be charged 3% per annum above Barclays Bank base rate in interest. I wonder how these clowns sleep at night…!
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Beware of some agents charging the buyer fees to buy your house
Some agents have started charging £150+vat to sell your home, then charging a buyer 2% + vat of the selling price.
The £180 charge they say is for admin but the real reason is the agent feels you won’t get rid of them as you are scared to waste this money.
Many buyers will need to knock 2% + vat off the asking price to be able to afford the purchase. But the agents say we get more than the asking price!
That’s because the asking price is set lower than market value “to encourage bidding”!
With less buyers the offers will be lower.
Most buyers need a mortgage, the mortgage will not cover the purchasers fee (mortgage lenders will not permit this) so the purchaser will need a deposit + mortgage + purchase fees of 2% + vat.
The traditional route of paying an agent to sell your home will always get the best price.
When you sell you don’t want buyers put off by having to find more money – this system only benefits the agent using it and no-one else.
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I cannot see how Arun estates would be looking to achieve the best price or act in the best interests of the seller, surely this is the role of an 'estate agent'. They are no longer estate agents and are instead 'relocation agents' acting on behalf of the seller.
It will never take off.
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Woops I meant acting on behalf of the buyer!
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Only the struggling corporate agents in my area are turning to this method of sale. Can't see it catching on.
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In Arun's contract they state they are working for the seller, but we all know they only care about profit
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“With Sale by Tender, there is a six-week process that includes two open house days. All the tenders come in at the same time as sealed bids, and all are opened together. We encourage the vendor to come in to our offices to watch.
“It means there is complete transparency – and it works very well."
What happens if the vendor of a property is just starting their 6 week tender and wants to offer on a property that is 1 day from the end of their tender….Do Arun say "ignore their offer as it will take them at least 6 weeks to sell their property"?
Also surely complete transparency is gained from "offers in excess of" over say a 2-4 week period…….surely a higher price would be achieved for the seller this way as no purchasers would be put off by having to pay £1000s in fees.?
Its one thing to say you have a great idea but to say it is totally transparent and the vendor achieves the best price cannot be true.
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