As investors, we really wanted to ask our secret agent the questions that we think all investors want to know about how to work with agents. We’ve shared this great feedback on this blog. We hope you enjoy it and find it useful. Get in touch and let us know your feedback.
Wendy: Tell us about your background?
Secret Agent: I was an Estate Agent working in a busy branch in South West London for the best part of 10 years. During this time I worked through all the market conditions from the peak champagne times of 2007 to the bleaker miserable times of the 2009 recession when nothing was selling. Overall, it was a fun industry to be involved in and I look back on this time fondly, as being an Estate Agent has taught me some valuable life skills including the all important art of negotiating.
Wendy: Can you tell us about an investor/developer that you have sold a property to where you would happily work with that investor again? What was it about that investor that made them good to work with and what attributes make you think they would be good to work with again in future?
Secret Agent: I have worked with many developers over the years but only a couple come to mind of whom I chose to work with again. I sold a few developments to one company in particular and although I didn't necessarily enjoy to work with them, I chose them again on the basis that they were well organized financially, experienced, creative when faced with problems and above all fast. This company would buy the property as seen 'warts and all' as they knew any lease complications or building issues could be overcome and what was vital was obtaining the asset in the first place. I knew that once this company had their offer verbally accepted they would honour it completing a few weeks later.
Wendy: Can you give us some examples of what your ‘pet hates’ were that investors or buyers would say/do?
Secret Agent: Some investors would call and ask if we had any 'bargains'. Quite a brazen question to ask considering that we do work for the vendor to achieve the best possible price for them. We would often make a joke about it and suggest we needed to implement a 'Bargain draw' exclusive to investors who wanted to make a quick healthy profit, unlike anyone else!
Buyers not providing feedback! Most buyers would happily take my call the next day or after the weekend to provide their thoughts good or bad on the properties they viewed, which we would in turn pass on to the vendors who were naturally curious. Some buyers unfortunately would not provide feedback and avoid my calls, messages and emails requesting feed back. However, this would mean that I would be less likely to contact these buyers when we listed new properties. It builds a much better relationship with an Estate Agent to speak to them after viewings and always provide honest feedback!
Wendy: What would make you pick up the phone to call an investor/developer if you had a property that you think would be of interest to them?
Secret Agent: If they had a proven track record with me, were charming or if they were persistent, still fresh in my head due to their weekly calls and emails (all tips if you're a budding investor/developer and want to try to jump the queue). The competition can be fierce and opportunities seldom so an Estate Agent does ‘hold all the cards’ and can literally take their pick of who they’d like to sell to.
Wendy: What would be your response if an investor/developer asked ‘do you have any properties that have been on the market for a while that you are struggling to sell that I/we could take a look at?’
Secret Agent: Over the course of the initial phone call, viewing and offer stage (if it came to it) I would remain entirely honest and transparent. I would happily answer any questions they had adding my own personal thoughts why I thought a particular property had been on the market for so long (normally it's a price issue but sometimes the reason can be more personal like a divorce or probate which wouldn't be apparent on the website). If they asked on the phone what the vendor would accept I would always avoid the question and invite them to view first. If they were still interested after the viewing, I would then guide them on price hoping to extract an offer so we can begin negotiations.
Wendy: Your advice to investors working with estate agents?
Secret Agent: Charm them or be persistent. Call the Estate Agent on a weekly basis, pop into the office with a fresh coffee for them, sit down and have a chat. If you get an opportunity, try to build a relationship with the Office Manager, as they will be the person valuing the properties. As already mentioned, competition can be fierce and opportunities are rare, so an investor will need to do most of the work if they haven't already established a relationship with an Estate Agent.
Wendy: Making a low offer is uncomfortable from an investor point of view, but a necessity in order for projects to make business sense. We all know that the money is made at the start. However, we understand that vendors want the highest price of course and an agent will make commission on the sale price so there is an incentive there. What is it like to work in between vendor and buyers? What is it like as an agent to present a low offer to a client? Could an investor help make the negotiation process easier in some way, to benefit all parties and achieve a WIN-WIN outcome?
Secret Agent: It was actually a lot of fun for me working between the two; otherwise you're in the wrong job. As an Estate Agent it is important to be objective, but at the same time work with the vendors best interest in mind. Even if the vendor thinks you are not! For example, when suggesting a price reduction, a vendor will naturally be reluctant to do so. However, that price reduction should generate more interest, which should in turn result in more offers for the vendor to consider that they weren't getting before. Presenting a low offer to a vendor is all part of the process and an Estate Agent is legally obliged to put forward all offers in writing within 24 hours of receiving it. It would be a very short conversation, so I didn't have any issue with it.
I don't think there is anything different an investor could do to make the process easier providing a WIN-WIN outcome, as essentially the investor would want to buy it at one end of the spectrum while the vendor would want to sell at the other end of the spectrum. Juxtaposition.
Wendy: Is a written offer preferable? What should this include to be taken seriously?
Secret Agent: It depends. If there is just one offer on the table then it is not necessary for the buyer to put the offer in writing providing the agent has taken down all of the information correctly. If there are multiple offers on the same property then I would always advise to put their offer in writing stating mortgage arrangements including deposit amount, solicitor firm, timescales and maybe a personal note of how they instantly fell in love with the property and would love to call it their home sweet home.
Wendy: I remember you mentioning an investor that would poke their head in the door and ask ‘got any bargains?' That really made me laugh! What was your response to this? Would you actually contact them if you had a bargain?
Secret Agent: Ha, yes a direct and brazen question at the best of times, but as we turned this into an office joke, we would just roll with the punches with a smile on our face. I personally wouldn't take them too seriously as an investor. An investor with credibility would never start a conversation in this way if they wished to be taken seriously and would adopt a more palatable approach.
Wendy: What information are you able to share with potential buyers? For example if you were asked what other people had offered, can agents declare this or are there some legal limitations?
Secret Agent: The agreed sale price is always confidential. I would be as candid as possible with all other vital bits of information, which I thought would help a buyer decide. In some cases if a buyer was concerned with the state of a building, I would obtain the old building surveyor report which I would let them read in the office, hopefully reassuring them one way or the other. I would also explain if applicable, why a previous sale had fallen through, so going forward they could take advice from their conveyance or mortgage broker who may offer the solution. You can declare what offers have been rejected as this saves time, but I would never reveal to a potential buyer what a vendor had accepted or previously accepted.
Wendy: Can you give an overview of how estate agents are paid and incentivised? How could potential investors work with agents to deliver the most benefit aside from just buying properties?
Secret Agent: Along with the basic salary, Estate Agents get a commission of the fee they manage to agree once the sale has exchanged, which is normally 1.5%. So if a property exchanges at £500, 000 the Estate Agent would bill the vendor 1.5%, which equates to £7,500 plus VAT. The Estate Agent who first signed up the vendor would get a ‘listers’ fee which would be about 10% and the Estate Agent who sold the property would also get a sellers fee, again 10%. This would be the commission structure until you hit a certain threshold or target on sales or listings when the commission would rise from the 10% to 15% and beyond up to 25% depending on the commission structure. You would also have cross sales to focus on selling legal and mortgage services, which you would also generate commission normally £50 per referral. Other incentives would be car up grades and trips abroad for the top sales people.
The best way investors and Estate Agent could work together would be if they had a mutual verbal agreement that if a property is acquired from that particular Estate Agent, the investor would in turn resell the developed property through the same Estate Agent once it was ready for remarketing. It wouldn't be entirely in either party’s control as the vendor selling would have the final decision with whom they wished to sell to.