Can I offer my estate agent a £1,000 bonus if they sell our home for the best price?

Daily Mail​

5 days ago

We're about to list our home for sale and have agreed a flat fee with the estate agent firm upon completion.
I'm aware our selling agent will get commission, but can we incentivise him to sell our home quicker and prioritise us by giving him a cash bonus?
I thought I would offer £1,000 cash off the books to make our home his number one focus and get the price we want.
But is this unethical, or even illegal?
Ed Magnus of This is Money replies: This is an interesting idea, However, it needs to be kept above board, on the books and handled in the right way to be ethical.
It's worth remembering that a good estate agent shouldn't necessarily need to be given additional financial incentives to sell.
You would hope they would want to get you the best possible price regardless, as this often dictates their commission.
If a quick sale is what you are after, it might be a better strategy to simply price your property competitively.
Homes that receive an enquiry on the first day of marketing are 22 per cent more likely to successfully find a buyer than homes which take more than two weeks to receive their first enquiry, according to Rightmove.
Listing your property at a realistic asking price is also likely to attract more buyers. That means more interest, more viewings, potentially more offers and even a bidding war.
Buyers tend to become more engaged once they know other people are interested in a property and that 'fear of missing out' kicks in.
Will the bonus strategy work?
This will divide opinion and many will argue it won't. After all, a property is worth what a buyer is prepared to pay for it and ultimately, what price you accept is up to you.
But there could also be an argument for offering an incentive to the estate agency on the basis it is paid to whichever negotiator ends up selling the property.
You need to be clear about the terms. For example, you'll pay £1,000 if they sell for a certain price, or within a fixed time period.
If the estate agent is just a one or two man band, then I would question whether an extra £1,000 will make much difference to them personally as the managers of the business.
That said, most estate agent offices have a team of sales negotiators who get paid commission when they sell a property. Typically only the negotiator who sells a property earns the commission - the others get nothing.
Negotiators' commission is often 10 per cent of the fee agreed, albeit it can be higher than this.
This means for example if you agreed a flat fee of £6,000 with the estate agency, only £600 of that might go to the negotiator who sells your home.
Do the maths: Most negotiators will receive a percentage of your estate agent fee if they sell the property, but this will only be a fraction of the sale price
Most estate agents charge a percentage fee, rather than a flat fee, the average being about 1.5 per cent of the final selling price. This in theory incentivises each agent to get the best possible price.
However, the negotiator who sells the property may not be that fussed to negotiate hard on your behalf given they only receive a fraction of that.
For example, while the difference between you selling for £400,000 and £410,000 might be a big deal for you, for the negotiator it could make all but £15 difference to their commission, based on them taking 10 per cent of a 1.5 per cent fee.
Setting a target price for all the negotiators to target with the offer of an extra £1,000 incentive for anyone who manages to secure that price (or more) could in theory pay off.
After all, the worst kind of estate agent is the one that just waits for the incoming phone call via Rightmove or Zoopla.
A much better sales negotiator will pick up the phone, know their list of buyers and be able to create a buzz around your property from day one.
Some agents may even be able to find potential buyers looking in surrounding areas - if they have other offices nearby with a buyer database they can access.
For expert advice, we spoke to Mike Hansom, consultant for property litigation at BLB Solicitors, Jeremy Leaf, north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, and Matt Thompson, head of sales at Chestertons.
Is £1,000 cash off the books legal?
Mike Hansom replies: I am not sure what an arrangement 'off the books' would entail, but the extra fee you pay would be income that the agent needs to declare to His Majesty's Revenue and Customs.
I recommend you are vigilant in avoiding any transaction where you suspect the agent might not declare the income.
It could mean you are implicated and even prosecuted for an offence relating to tax evasion or avoidance.
Assuming the transaction is entirely legitimate for tax purposes, there could be a view that you are simply looking for a premium service, for which you are willing to pay a premium rate, and in principle that is not unlawful.
I also anticipate it is common for some agents to offer different marketing packages for different prices.
Jeremy Leaf replies: I am not sure it is a great idea for various reasons – first and foremost, there is the tax and transparency question.
Should the payment, if made, be disclosed to the tax authorities by the giver or receiver?
And what would the reaction be of other client vendors of that agency if they were to discover that sellers have been offering extra payments to promote their properties at the expense of others?
My advice is not to make the proposal as almost certainly trouble will follow one way or another.
The majority of negotiators are on individual commission anyway so will benefit if they arrange a sale.
You must be careful of offering one negotiator an incentive and not another because if word gets out, you may find the other negotiators disengage from trying to sell your home.
Is it unethical?
Jeremy Leaf replies: Any conversation would need to be had with the head of office or manager, explaining the circumstances and perhaps coming to a structured arrangement to incentivise the sale at a particular price, rewarding the successful negotiator who goes the extra mile.
In this way, transparency is maintained and everyone knows what is happening.
It may also depend on how big the agency is. A corporate structure might not be sufficiently flexible to allow for your proposal.
Matt Thompson adds: I understand you are in a rush to sell your property, however, offering your selling agent an additional amount of money 'off the books' is not something that an agent should accept.
Mike Hansom replies: In looking for an agent who prioritises your property over that of their other clients, you might struggle to find a reputable agent who will agree to work with you.
I anticipate most agents' standard terms and conditions say something like they will 'use their best endeavours to market and sell the property' of all their clients.
Agreeing something extra with you that puts their other clients at a disadvantage would breach that kind of term.
If word ever got out it would put the agent at risk of legal action from all their other clients. Perhaps more importantly it would cause them huge reputational damage.
What could they do instead?
Matt Thompson replies: What you can do is agree an official negotiator bonus.
I understand that you have agreed a flat fee with your agent. This may or may not be the best option for you as a flat fee doesn't really incentivise an agent to prioritise your property.
Instead, we would advise you to agree for the agent to receive a set percentage of the sales price which can range anywhere from 1 per cent to 2 per cent and present a bigger incentive than a flat fee would.
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