Sally asks: “It goes without saying. Estate agents are ******* *****. Can I deal directly with the seller to buy the house and not deal with the ******* estate agents?”

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Q&A 60 – Can I Buy A House Without Estate Agents? – Shownotes

Happy New Year everyone. I hope you’re all feeling motivated and excited for the New Year ahead. However, I imagine that a lot of you are listening to this a few days later after struggling to get through New Year’s Day following the night before. You’re not alone!

Anyway, to kick the New Year off in style, we have a question today from potty-mouth Sally. One of my favourite questions for a while and a cracker to start the New Year off:

It goes without saying. Estate agents are ******* *****. Can I deal directly with the seller to buy the house and not deal with the ******* estate agents?

 

What Do Estate Agents Do?

I’m sure that many of our listeners will agree with Sally’s thoughts here on the frustration of dealing with estate agents and the level of fees that they receive for doing relatively little.

To answer your question directly Sally: yes, you can deal directly with the other party to directly buy/sell a house, but before you do, there are some things to consider.

The job of the estate agent can generally be broken down into:

• Listing and marketing the property for sale through their agency and online (through sites like Rightmove and Zoopla which do not allow sellers to list their properties individually)
• Showing prospective buyers around the property
• Managing the “project” for both the buyer and seller. This includes helping organise surveys and keeping on top of the solicitors for both parties to ensure that the sale completes in the expected time frame.

Because estate agents are paid a % of the sales price by the seller, they are primarily focused on earning as much as they can for the seller of a property and hence for themselves.

 

Do Listed Properties Sell For More Money?

Therefore, for the seller, it may be beneficial to use an estate agent to achieve a higher selling price. There is a widely quoted “fact” that:

“Houses which are listed with an estate agent sell, on average, for X% more than those which don’t”

Firstly, finding a reliable figure for this percentage from actual research data is VERY difficult. Now this figure differs depending on which estate agent is saying it. The most reliable I can find is that For Sale By Owner properties average at $208,000 in the US in 2013, whereas the typical home sold by an agent fetched $235,000, which is a $27,000 difference.

But, even with these figures, you ask questions. Let’s say we believe them and the figures are fact. Well, say estate agents fees are 3%: that is over $7,000 on the sale of the home.

Also, you need to consider what is included in these figures. Firstly, remember that estate agents will generally charge 1-3% of the sales price for their services and hence you can take this off the X% noted in the “statistic” (I use that term lightly) above.

Furthermore, think about what type of sales won’t be using an estate agent through necessity rather than through choice. People selling to friends or family members, properties being sold directly at auction, properties in foreclosure, sales of properties to investors using lease options or other methods. All of these sales will generally be for less than the market value because of the nature of the transaction rather than the involvement of estate agents.

Finally, remember that this information comes from the “National Association of Realtors”! I’m sure they are not at all biased to show that estate agents are good value for money.

What we need is a statistic that compares sales prices obtained when using an estate agents and those equivalent sales (arm’s length standard market transactions) where an estate agent is not used due to the preference of the seller.

However, sadly for the fan of transparency, this type of survey or research will probably never be completed as the only party who would be interested in doing this type of research is the estate agents who will always manipulate the data to provide the “Houses which are listed with an estate agent sell, on average, for X% more than those which don’t” type of conclusion.

Perhaps eBay, Gumtree or a similar site that offers direct sales might complete this research in the hope that the findings may question the value that comes from estate agents. But, probably not!

 

A To-Do List If You Don’t Use Estate Agents

So, what do you need to do if you don’t use an estate agent?

Well, as a vendor you will need to market your property to the relevant audience. This is currently very difficult as most people who are willing to pay full market price will restrict their searches to Rightmove and Zoopla given their market dominance, and all these sales require a registered estate agent. However, options such as the aforementioned eBay and Gumtree do exist and there are other sites out there which offer similar services. However, with eBay, you’ll have to pay them a fee and hence this may negate some of the benefit from saving the estate agent fees.

For the buyer, you’ll need to find a property which isn’t marketed through an estate agent. This is the same challenge above, but you also have the benefit of knocking on doors, leafleting in areas that you are interested in or word-of-mouth that you are interested in buying a property without using an estate agent.

You’ll also need to take care. A major benefit of going through an estate agent is using their experience to make sure you haven’t overlooked anything important (surveys, searches, etc) which you might forget if you are an inexperienced buyer or seller.

Additionally, there is a much higher probability that you’ll suffer issues with your conveyancer (solicitor) if they are not managed by your estate agent and there is a much higher proportion of transactions that will be fraudulent by working outside of estate agents so you’ll have to be careful of that.

So, whilst they are annoying to deal with, if you can see through their jargon and desire to get the best price for the seller (and hence maximize their own commission) it may be worth sucking up having to deal with them. However, if Rightmove and Zoopla lose market share, or allow vendors to list properties directly, this could all change.

Housesimple.com have also released a very useful infographic highlighting some key facts and figures surrounding buying or selling a house without using an estate agent:

Provided by HouseSimple

 

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