Estate agent contracts & things to check

All estate agents must follow the laws and guidelines outlined in The Estate Agents Act of 1979 (EAA 1979) and the Estate Agents (Provision of Information) Regulations 1991.

These documents require agents to provide specific information to sellers which are known as information obligations. These include an explanation of all terms used in the contract between the agent and seller client in regards to what payments and remuneration the agent is entitled to. 

All estate agents must provide clients with the following information:

• The circumstances around which the seller must pay remuneration to the estate agent for carrying out their work and services, the amount of the payment, and the manner in which it’s calculated. 
• Any particulars surrounding other remuneration that doesn’t fall under the category of “carrying out estate agent work” and how these other payments will be made. 
• The amount of all other payments, an estimate of this amount, and how it will be calculated.

How The Ombudsman Handles Fees

All estate agents must belong to an approved redress scheme, with The Property Ombudsman (TPO) being the most popular scheme for 95% of UK agents. 

The TPO outlines an approved code of conduct that all members agree to and must follow. The TPO includes rules and guidelines for charging estate agent fees. Knowing what these are, helps protect sellers from dishonest agents. 

• All agents must disclose their Terms of Business which includes all fees and charges before you commit to a contract or have a liability towards them.
• All additional costs and fees must be clearly and fully explained in writing before a seller commits to the terms of the contract.
• All quotes for agent fees that are based on a percentage must also include VAT. 
• It must be explained that the agent’s commission is first based on the asking price of your property but may go higher or lower depending on the sale price.
• For agents that charge a fixed fee, this price should also include VAT. The contract must state that the fee won’t change regardless of the final sale price.
• Commission fees are due upon exchange of the contracts. The only exception is any previously agreed upon added fees.
• If you terminate your contract with the agent, they must clearly state, in writing, any continued liability you have including commission fees. They must also outline under what circumstances you must pay more than one commission fee. 
• The amount of all other payments or an estimate of this amount and how it will be calculated. 

Things to Check on Estate Agent Contracts

Estate Agent Glossary

This estate agent glossary will help you better understand the language agents use in their contracts.

Here are some of the most common terms you’ll come across and what they mean.

Fixed Fee

If you’re considering an online letting agent, you’ve probably already heard this term. Fixed fees are prices tied to specific services like premium listings, viewings, and sale boards. 

The agent’s contract should list each service with a fixed fee attached to it. Fixed fees are usually required upfront and paid regardless of if your home sells or not. 

Open-Ended Agreements 

Open-ended agreements protect the agent. If your property sells to someone they originally showed it to, they can collect the commission even if months or years have passed. 

Notice Period

This is the period of time that passes between you informing your estate agent that you want to terminate the contract and it actually happening. 

Most agents require two weeks’ notice for termination. You must also consider the tie-in period when giving notice (more on this in a minute).

Tie-In Period

This describes the duration of the contract once you sign it, or how long you’re “tied” into it. If you cancel or terminate the contract prior to the end date, you may face additional fees.

Most contracts are at least six weeks long. Avoid committing to anything longer than eight weeks to give yourself flexibility. 

This period also includes the two-week notice period.

Terms of Payment 

Most estate agents charge interest. Find an agency that offers a several-day grace period for transferring money before charging interest. 

Multi-Agency Agreement 

Some estate agent companies have several agents working on your property sale at once, This agreement ensures that only one agent (the one who sells your property) receives the commission. 

Multi-agency agreements generally cost more since you have several agents working on your behalf. 

Sole-Agency Agreement 

Different from multi-agency agreements, sole-agency contracts mean that only one agent is allowed to sell your property during the contract term.

The benefit of this agreement is that if you find a buyer yourself, you don’t have to pay the estate agent fees which typically don’t exceed 2%.

Sole Selling Agreement

Similar to a sole-agency agreement, only one agent has the right to sell your home. The selling estate agent can claim a fee of 1-2%, even if you find your own buyer.

Ready, Able, and Willing Purchaser

This is one important phrase to look out for in any estate agent contract. This clause requires you to pay the agent fees even if you withdraw from the sale or your situation changes. 

Know Your Rights

You have certain rights when dealing with an estate agent. Knowing these rights will protect you from being taken advantage of.

For starters, all contracts must be written in clear terms. There are certain duties that all estate agents have to perform including:

• Reveal all financial or personal interests they have in all offers made on your property
• Respond to all offers promptly in writing 
• Keep detailed records of your sale progression for six years
• Provide information on which government-approved scheme they’re a member of (The Property Redress Scheme, Centre of Effective Dispute Resolution, or The Property Ombudsman).

If you have any complaints about your agent or their practices, confront them first. If the agent is unresponsive after eight weeks or you’re not satisfied with their answer, you can (and should) take your grievances to the appropriate scheme. 

In case of a grievance, it’s important you keep detailed records of all exchanges with your estate agent.