Types of Estate Agent's Contracts

A Seller of a property will usually engage an Estate Agent to sell the property on their behalf, The fees charged by the Estate Agency   for this service, are usually  based on a percentage of the sale price and are payable on the completion of the sale of the property.

There are different types of estate agency contracts, it is very important to be aware of the different types of estate agency contracts and when instructing an Estate Agent, read the terms and conditions of the contract carefully.

The different types of Estate Agents contracts are:

Sole Agency –  This is where the Estate Agent is the only Agent with the right to sell the property.  This means that if the seller finds a buyer themselves, the seller will not have to pay the Estate Agent their commission. The seller may, however, have to pay the for advertising carried out by the Estate Agency  and for the ‘For Sale’ board.

If a seller appoints more than one Estate Agent under ‘sole agency’ contracts, the seller may find that they will have to pay each of the Agents separately  for their advertising of the property and ‘For Sale’ boards.

Some Estate Agents may offer a ‘joint sole agency’ contract under which the  commission for selling the property is shared between more than one Agency

Multiple Agency – Under this type of contract, the seller is free to instruct several Estate Agents at the same time, and only the Agent  that actually sells the property will receive commission. The commission payable under a multiple agency contract is generally higher than the commission payable under a sole agency contract.

Sole Selling Rights - This is a type of Estate Agency  contract to be avoided. Under this type of contract, only the Estate Agent has the right to sell the property. This means, that even if it is the seller that finds the buyer personally or through another source, they will still have to pay the Agent their commission.

As with sole agency, if the seller has instructed several Agents  under sole selling rights contracts, they will have to pay commission to each of the Estate Agents regardless of how the eventual buyer of the property is found. This means that if for example, a seller instructs two Agentss under ‘sole selling rights’ contracts, and then finds a buyer themselves, they will still have to pay the two separate Estate Agents their  commissions.

Ready, Willing and Able Purchaser- This type of Estate Agency contract should be avoided. Under this type of contract, if the Estate Agent finds a buyer who is ready willing and able to purchase the property, but the seller has to withdraw the property from the market or are unable to sell the property to that buyer for any reason, the the seller will still have to pay the Agent their commission.

You may have to withdraw the property from the market for any number of reasons, for example, a related purchase may fall through, you may become ill, or lose your job – as such circumstances cannot be foreseen at the beginning, it is important that this type of estate agency contract is avoided.

Preliminary Deposit - Finally, beware of the preliminary deposit. Some Estate Agents require a preliminary deposit of around £300-£500. This is usually stated to be to pay towards advertising costs. This should be avoided, however, should you agree to pay a preliminary deposit check that this is refundable and that it is deducted from any final commission payable to the Agent on completion; it is particularly important to get a receipt. Under the Estate Agent's Act 1979, the Agent does not have to pay any interest on deposits under £500.00.

Which Type of Estate Agent’s Contract to Choose?

With a sole agency Estate Agent contract you only have to deal with the one Agent who will handle all of the sale of your property. If however, the chosen Agent not performing or the seller falls out with them for another reason, the seller is  stuck with them until the end of the contract and cannot resort to another Estate Agent. In light of this, it is important to make sure that the period of the contract is not too long. An Estate Agent contract of around eight weeks is usual- it may be possible to negotiate this down to say, one month.

A quicker sale is likely to be achieved through a multiple agency contract. The downside is that you will have to keep tabs on several agents at once – this can be confusing and time consuming. In addition to this you may incur more than one advertising fee. A multiple agency   contract attracts a higher commission and will cost you more than a sole agency Estate Agent contract.

A good compromise between a sole agency and a multiple agency, may be a joint sole agency Estate Agent contract.

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