When the time arrives to sell your house, hiring an estate agent is the most common method of doing so.
Estate agents will often ask you to sign a contract surrounding the sale, outlining the terms and conditions. Part of this may include a ‘Sole Agency Agreement’.
So, what exactly is a Sole Agency Agreement? And should you avoid them? Keep reading to find out.
What is a Sole Agency Agreement?
A Sole Agency agreement means only that specific estate agent can sell your property. They will receive the commission when they find a buyer.
This is a common type of agreement with an estate agency, as they want to be sure that you will not sell the house using one of their rivals.
The terms will outline the length of the contract – and whether you consider this timeframe acceptable is up to you.
You should read the Sole Agency agreement and get a conveyancer to help you. They can state whether everything is as it should be, along with any details you might’ve missed.
Look out for the commission rate that the estate agency is charging, and make sure that this figure is as expected.
If you have received verbal offers from other estate agencies, you might want to compare these figures to see which will cost you the most/least.
Alternatives to a Sole Agency Agreement
Although a Sole Agency agreement is the most common, it is not the only type of contract you can enter into.
Joint agency agreement
A ‘Joint Sole Agency’ agreement means that two estate agents can be hired to sell your house.
It can be useful if you want to appoint a local estate agent who has local knowledge and also a national estate agent who may have a broader reach. But, although it might increase your chances of a sale it can cost you more.
Multi agency agreement
A ‘Multi-Agency’ agreement means that you can hire as many estate agents as you wish to sell your house. Only the one that completes the sale can get the commission.
This might encourage the estate agents to work harder and compete for the commission. But it can sometimes complicate the process and result in some tough decisions.
Ready, wiling and able purchaser clause
Some estate agents might try to get you to sign a contract with a clause about a ‘Ready, Willing, and Able Purchaser’.
This means that you have to pay the estate agent once a “ready, willing and able purchaser” has been found.
You should avoid these types of contracts, as you will still be liable to pay the fees even if you change your mind about selling the house.
Advantages of a Sole Agency Agreement
A sole agency agreement can sometimes work out cheaper. An estate agent might incentivise you to sign this contract by offering lower commission rates. You should try negotiating on this point if you can.
Alternative contract types that involve many agencies will cost you more. So, a sole agency is often less expensive in this sense, too.
Keeping only one estate agent involved can simplify the process. It also means that you can build a relationship with that one agency, which can help to make the process easier.
Disadvantages of a Sole Agency Agreement
Some house sellers feel that a sole agency agreement causes the estate agent to get complacent. Since they are not competing with anyone else, they might relax and take longer to push the deal along. Some healthy competition can be brought in with other types of contract.
Being stuck with one estate agency can be frustrating if you receive poor service. You might feel misled by the company, or a new opportunity presents itself.
As a third drawback, if you try to force your way out of the contract, it will usually cost you a lot of money.
What if I want to Leave a Sole Agency Agreement?
Before you sign a Sole Agency agreement, you should get a clear understanding of the terms under which you can/cannot leave it.
In most cases, you can cancel your agreement within 14 days of signing the contract. After this point, there will be a sizeable cancellation fee. The terms of your agreement will specify how much this is.
Sometimes, sellers consider the cancellation fee worthwhile. This happens if another opportunity immediately appears.
You should also be wary of contracts that renew without you acting. This can make the situation even worse. Speak to a conveyancer for advice and guidance if you are unsure.
Should I enter into a Sole Agency Agreement?
If you trust the estate agent that you are selling with, Sole Agency agreements might not be such a bad idea. It can help you and them to focus, plus keep your costs down.
With nationwide chains that you trust, or with experts that you have worked with before, you may feel comfortable with this route.
The length of time that the agreement is for will also make a difference. For example, if the contract duration is six weeks, then you may feel that that is a reasonable timeframe. But, if you are tied in for a year, it could become unacceptable.
Consider your experience with other contract types in the past, and whether they have worked for you. You should also ask people you trust for their opinions on this subject – such as positive or negative experiences they’ve had.
Are the terms of a Sole Agency Agreement negotiable?
It is rare for a Sole Agency agreement to be impossible to negotiate. The company wants to sign you as a client, so there may be some wiggle room.
You should outline your request, and what aspects of the deal you feel unsure about. Also get a conveyancer in your corner to make sure you aren’t exploited in any way, and so you know what is/isn’t legal.
Once you have signed the contract, you become more restricted, so do the negotiation in advance of this.
Things to look out for with estate agent contracts
You should clarify whether the quoted commission figure from the estate agent includes VAT. Otherwise, it might end up being 20% higher than you expected.
Don’t be afraid to negotiate, especially on the duration of the contract. The shorter you are tied in for, the more comfortable you are likely to feel.
Some estate agents create a contract that renews if you don’t take action. This is immoral, but not illegal, so get a conveyancer to proof-check that this isn’t the case before you sign.
You may want to adjust the amount of commission you give the estate agent according to how good a job they do. One way of doing this would be to offer 1.25% if they reach asking price, or 1.5% if the final price is above asking price.
