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Types of agency agreements

20 July 2012MeetMyAgent

Whether you are selling or letting your property, the terms of the contract are important when authorising an estate agent or letting agent. Remember, the vast majority of agents will not charge you an upfront fee and risk losing out on their marketing costs if they do not sell or let your property, so the contract sets out the terms under which they will work.

There will be variations from agent to agent so read the small print carefully, but generally the main types of agency agreements are:

Sole agency

This gives the agent exclusive right to market and sell/let your property, and will usually result in a lower fee. This means that if you appoint another agent within the contract period you would be liable to pay both fees. However, if you find a buyer or tenant privately you would not be required to pay the fee although you may need to reimburse the agent for their marketing costs. This type of agreement normally ties you in for a specified time so it’s a good idea to agree a time period that suits you, after which you can renegotiate the fee or change agents.

Joint or joint-sole agency

If you appoint two agents, often they will agree to work on a “joint-sole” basis. This type of agreement usually has a slightly higher fee than sole agency but a lower fee than a multi agency agreement as the agents involved split the commission regardless of who sells/lets the property. As with a sole agency agreement you would be liable to pay the fee if you appoint another agent within the contract period, but not if you find a private buyer or tenant.

Multi agency

Appointing multiple agents results in higher fees as only the agent who achieves the sale/let receives the fee, increasing their risk of financial loss. This may decrease the amount of time your property spends on the market, but consider this option carefully – buyers or tenants could see multiple “For Sale”/“To Let” boards and the same property advertised by many agents as a sign of desperation, which can have a detrimental effect on the price you achieve for the property.

Important note for sellers

If you are selling your home, watch out for the phrases “sole selling rights” or “ready, willing and able” anywhere in the contract.

“Sole selling rights” sounds similar to sole agency, but if this is included in the contract you would be required to pay the agent even if you were to find a private buyer and there may also be conditions where the agent would be paid even after the contract period ends.

“Ready, willing and able” is much more restrictive – you have to pay the agent as long as they find a buyer who is “ready, willing and able” to purchase your home, even if you withdraw from the sale and don’t exchange contracts. Remember, until contracts are exchanged you are under no legal obligation to sell your property and there could be a number of reasons you may wish to withdraw from the sale.