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When you choose an estate agent to sell your home you want to know they will be effective, operate in a fair open manner on your behalf and charge a reasonable fee for their services. In order to meet these criteria you need to make an informed decision which means knowing what the pitfalls are and how to avoid them.

Judging effectiveness

You come across the estate agents in your area in a number of different ways. Through local advertising, for sale boards, leaflets, property particulars, visibility on the High St, hopefully recommendation and eventually personal contact. If the estate agent with the best shop position, the most helpful friendly staff, the most dominant board presence and the largest amount of local advertising is recommended to you by a friend, you probably can’t go wrong.  Unless that is the manager leaves the day after you sign the contract and starts on his own up the road with all his old staff. In this not so far fetched example you will be left with the contract you have signed and a lot of empty promises.

Because it is hard to judge the effectiveness of an estate agents service until after you have instructed them, this guide will concentrate on helping you to tell a fair contract from an unfair one and how the different ways fees are charged can fundamentally alter the relationship you have with the estate agent.

Estate agency contracts

The law has done much to make things even trickier than they need to be. In  “The Estate Agents Handbook” published by Franey & Co Ltd in 1993 we find the following revealing extract.

Somewhat surprisingly, when a property is placed on the market for sale and instructions given to an estate agent to assist in finding a prospective buyer, there is no general duty in law on the estate agent to take any particular steps to find a buyer.

…… in general, unless the agency contract actually requires the estate agent to use his “best endeavours” to arrange a sale, he is not liable for lethargy. This traditional type of estate agency contract is not one of employment: it is  a one-sided obligation and only creates atake it or leave it or unilateralcontract

‘No obligation is imposed on the estate agent to do anything’ said Lord Russell in Luxor (Eastbourne) Ltd v. Cooper {1941}. Lord Romer added: (The agent was ) not employed to do anything at all, and would have committed no breach of his agreementhad he remained entirely inactive.

Sole Agency

The Estate Agency Orders 1991 required the following warning to be included on sole agencies, in England and Wales, if they gave the estate agent the right to charge a fee where a sale was made by another estate agent within the sole agency term.


You will be liable to pay remuneration to us, in addition to any other costs or charges agreed, if at any time unconditional contracts for the sale of the property are exchanged:

-with a purchaser introduced by us during the period of our sole agency or with whom we had negotiations about the property during that period; or

-with a purchaser introduced by another estate agent during that period.

Of course the misleading implication of these orders was that in future all sole agency agreements had to include the above wording by law.

Somewhat ironically estate agents all over the country, who had already abandoned these type of agreements, used the 1991 orders as an excuse to re-introduce to introduce them. So far from helping to stamp out a dubious, unpopular and perhaps unethical practice, the law served to first revive, then to fully establish it as the industry norm.

The truth is that it is still perfectly proper and acceptable for an estate agency to offer a contract without this heinous clause. They can limit their sole agency to a much more informal agreement, to offer a lower sales commission, while they are the only estate agent instructed on the sale.

The benefit of this less formal approach is that you, the seller, can decide whether or not the estate agency lives up to your expectations and if it doesn’t, choose to go elsewhere without any legal obstacles.

My advice is: do not sign an estate agency contract which contains the statutory warning.


One of the most powerful marketing tools used by estate agents to gain instructions is No Sale No Fee. The use of this description by estate agents who use a formal Sole Agency Agreement has recently come in for criticism by the Government trading standards organisation LACOTS.

LACOTS view was published after due consultation and went against representations made by the National Association Of Estate Agents.

LACOTS said that where the vendor may be liable for agents fees even if a sale did not result from the action of the agent statements such asNo Sale No Fee could amount to an offence under the Consumer Protection Act or a breach of the control of Misleading Advertisements Regulations

Something to bear in mind if you are being faced with the prospect of paying two estate agency fees. Did the Agent at any time use the expression ‘No Sale No Fee or similar? If they did then you may have some recourse under the law.

Having looked at the legal position, the next step is to examine the various fee arrangements you can make with an estate agent and how these may impact on their effectiveness.

Commission only

The most common types of commission only arrangements are:

  1. Flat rate
  2. Fixed fee
  3. Incentive based

Flat rate commission is by far the most common arrangement. 2% is the benchmark for a sole agency and 3% for a multiple agency.

The virtue of flat rate commission only is that it is simple to understand and provided you have not signed a restrictive formal sole agency, does not involve a commitment by the seller to any costs unless a result is achieved.

On the debit side flat rate commission does not offer much incentive to the agent to fight for the highest sale price.

The same thing applies to a fixed fee arrangement only more so. In this case there is absolutely no incentive for the agent to achieve the best price and for this reason such options are to be avoided.

Incentive base commission is a newer and potentially more favourable concept for the seller if the parameters can be worked out.

Mintel, the marketing intelligence group, have carried out research on the subject and advocate the introduction of incentive based commission. Under Mintels proposals the vendor and the agent would agree a benchmark price, normally the price indicated in the agents market appraisal.

The agent would receive no commission on 75% of the benchmark price, but 8%commission on anything above 75%.

If the benchmark price was set at £100000 and the house was sold for that amount the agent would receive 8% of £25000-£2000- the same as with a flat rate commission.

But if the property were sold for £104000, they would receive an extra £320, instead of £80 under a flat rate system. Benchmark prices should, Mintel say, be updated every couple of months or so.

Other arrangements

There are two other ways of paying an estate agent you need to understand.

  1. An up front selling fee
  2. A combination of up front money and commission.

Clearly if you pay an estate agent up front in full, you are not leaving them any incentive to do anything proactive about your sale- so dont do it.

On the other hand paying an estate agent something at the outset, while reserving the larger part of their remuneration until the end could have much to recommend it. After all no-one really likes doing work for nothing and under commission only, estate agents frequently set up sales which fall through because vendors change their mind and pay nothing.

By paying something modest towards the agents marketing costs at the beginning you should benefit from a lower overall fee and a better relationship with your agent into the bargain.

Finally, The good news for Sellers is that however you decide to pay your fees, a recent study established that in England and Wales, we pay less to sell our homes than anywhere else in Europe. Now there’s a comforting thought.

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