What’s Your Stake? Probably More Than You Realise.

What’s Your Stake? Probably More Than You Realise.

What’s Your Stake? Probably More Than You Realise.

Previous posts have often featured the quote from Warren Buffett: ” Risk comes from not knowing what you are doing”.

Risk.

A probability or threat of damage, injury, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through pre-emptive action.

Risk is not to be confused with uncertainty, where neither the probability nor the mode of occurrence is known.

Vendors might be uncertain of which estate agency to choose and who can blame them?

The majority of estate agencies do very little to inspire any homeowner.

Vendors carelessly instruct an agency even when they know very little about the probability of that agency selling their home.  How much the agency will achieve for it.  Or even whether they are a good fit.  That’s being uncertain.

The risk, however, on the part of the homeowner, comes when pre-emptive action isn’t taken to avoid the uncertainty.

The homeowner who appreciates the absurdity of an agency offering their services for £895.  And yet, instructs them.  Regardless.

It seems too good to be true, but the reviews on TrustPilot and Feefo are all amazingly positive. Let’s give them a chance.

Said differently.  Let’s take a risk.

Pre-emptive action, designed to reduce risk, might include learning more about a particular agency.  Digging deep instead of relying on the social proof of uneducated,complete strangers.

It might include agreeing a sliding scale fee with the agency. In the event that the property does not achieve the asking price, the fee is proportionately reduced.

But the biggest risk of all comes when you instruct and agency based solely on their fee.

As a vendor, you been attracted by their advertising of a cheap fixed fee.  You’ve even been persuaded by their sales pitch.  And you’re nearly ready to sign on the dotted line.

Ladies and Gentlemen, place your bets.

What you are now entering into is risk.  A probability of loss caused by external vulnerabilities.

Because?

Because the odds of a successful outcome are stacked against you.

If the agency has a cheap fixed fee, especially one that is not conditional on the sale, á la PurpleBricks, the eventual price achieved for your home is of little concern to them.  Or, even whether it sells.

They may claim otherwise.

But as Many Rice-Davies so eloquently put it:

“They would say that, wouldn’t they?”

Contrast that with a high-street agency that doesn’t get paid a penny unless they achieve a sale.  And the nearer to the asking price they get, the more they earn.

They have a stake in the game.

The online and cheap fixed fee agencies have stacked the odds in favour of the house.  Just not your house.  They’ve won the game before it’s played.

If you still insist on using these opportunist online agencies, it’s important to understand the concept of value.

Your own assessed probability of a successful sale being achieved at the asking price.  And within your timeframe.

If the online agency has persuaded you to cough up the cash, the focus moves from fee to the essential issue of valuation.

Let’s play a quick hand.  Red, or black?

You’re happy with a cheap fixed fee agency.  You even like the person they sent round.  You think your home is worth £250,000.  The agency in question thought £260,000.

The other ‘old-school’ high street agents thought nearer £240,000.  You’re not about to pay 1.25%, or £3000 + Vat for an agency to achieve less than your home is worth.

Money for old-rope.

Not when the modern-breed can achieve more and we only paid them £895.

£260,000 less £895 .  Sounds much better than £240,000 less £3,000. (vat excluded in all examples)

And when your home goes on the market and achieves zero viewings in the first two months?

A price reduction.  Still happy with £250,000 and still saving money on the fee.

The professionals have a term for this.

Sunk costs.

You’ve paid up-front, or will eventually have to pay, whether you sell or not.

You’re chasing the game.

And guess what?

Your agency couldn’t care less.  Their negotiation efforts could not be described as resolute.

They’ve been paid. The ball’s in your court.

What you going to do about it?

Stick with the same agency and reduce the asking price further still?

Or, change agencies and write-off the £895.

Let’s imagine your home finally gets an offer at £240,000.  You accept.

Only 4% less than you had originally hoped.

Net result.  You have £239, 105 left in the pot.

Here’s the flip side.

Your home was accurately valued by the high street agency.

It attracted more interest in the critical first two months of going on market.  Because it was attractively priced.

It attracted three interested buyers.  The winning offer was £245.000.

Because the high street agency negotiated up from £240,000.

Your agency fee was £3062.50

Net result.  You have £241, 937.

That online cheap fee that was the deciding factor in your choice of agency?  The couple of thousand pounds that you would ‘save’ by instructing the cheap fee agency?

It just cost you.

£2832 worse off by using the online cheap fee agency.

It’s possible to play around with a multitude of options.  Getting the valuation right, first time, is the number one goal.

The fee?

Pretty irrelevant in the overall scheme of things.

If you want to reduce the risk, however,  ask the agency for a sliding scale fee.  So that if your home doesn’t achieve their valuation, the agency fee reduces in line with reduced offers.

Reducing the risk is common sense. But you have to know what you are doing.

Avoiding uncertainty requires more effort on the part of the homeowner.

A sense of certainty when you instruct an estate agency is a great feeling.  And there are high street agencies that can provide that certainty.

Some agencies will focus on providing as much information as possible for the vendor. About their agency.  About the sales process. They will answer every question and even suggest questions for you to ask.  An ideal fit for those vendors that want to dig deep.

Other agencies will focus on the competence.  Providing examples of previous instructions where they were genuinely able to make a difference.

Whatever the agency focus, it has to align with the vendor’s values and convictions.  They have to be a good fit.

And when they are, there can be a sense of certainty that you have a great agency.

A sense of certainty.  Together with reducing the risk of external vulnerability.

The odds become stacked in your favour.

Of course, we’d love to improve the odds even more for you.

Check out our site at www.agencynegotiation.com

We guarantee to save you money.  If we can’t, there is no fee.

Ever.

And we don’t just negotiate the fee as low as possible with the agency.  We encourage them to achieve more for your home.

We manage the relationship and provide impartial, unequivocal advice.  Whenever you need it.

Get in touch.  Either by calling Chris on 07875 141436 or email: [email protected]

Thanks as always for reading.

 

Chris.

 

 

 

 

 

 

 

 

 

 

 

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