The sneaky clauses hidden in property agent contracts

When it comes to picking an estate agent, for most people their mind is made up long before the contract is signed.

They often focus – whether rightly or wrongly – on first impressions, who wheels out the most impressive sales statistics, or the one that promises the cheapest fees or the highest selling price.

But regardless of who they decide to go with and the reasons for doing so, when it comes to the contract – those tedious terms and conditions – most will glaze over, flick through the paperwork and sign on the dotted line.

And yet, no matter how much they might trust the smartly-dressed manager or valuer who won them over with their well rehearsed sales pitch – potential dangers lurk within that document that could come back to bite them.

It might tie them into the contract for many months, or exclude certain buyers who have not been ‘financially qualified’, and in some cases mean they end up being liable for two sets of agency fees.

Jeremy Leaf, north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, says: ‘When sellers and buyers sign up to an estate agent, particularly first-time sellers and buyers, they don’t necessarily expect to be put at a disadvantage so can be quite vulnerable to small print which turns out not to be in their best interests.

‘The only way to protect yourself is to seek as much transparency as possible. If there is anything you don’t understand in the contract, ask the agent to explain it to you.’

Leaf continues: ‘The trouble is we can get swept up in the emotion of buying a home. 

‘You may have seen a property you are desperate to buy so will sign practically anything – but this is the time to keep a cool head and not be pushed into anything.’

These are some of the dangerous clauses to look out for in an estate agent’s contract. 

1. Pushing buyers to their in-house mortgage broker

The first thing to watch out for is a clause which suggests buyers will need to be ‘verified’ by the agent’s in-house finance team, or a partner firm.

Checking the buyer has the required funds is one thing, but some agents may push buyers into getting a mortgage via their in-house broker or a connected firm in order to get a referral commission. 

This approach can put off buyers who may prefer to do their own research. 

Leaf says: ‘A seller may regard this as a positive, designed to weed out time-wasters. But how do you know that those finance brokers are the best available and will be able to access the necessary funding on the best terms?

‘The buyer might be better off sticking with their trusted, whole-of-market broker, for example.

‘Some agents take it too far and we know of those who are more interested in selling mortgages and other services rather than houses, particularly in quiet times.

‘We have also heard of agents who fail to submit a buyer’s offer to the vendor if the buyer doesn’t sign up with their particular mortgage broker.’

Paula Higgins, chief executive of Homeowners Alliance adds: ‘Although it makes sense for estate agents to request proof of funds to stop time-wasters, it’s important to clarify with your agent that they do not insist that all buyers use their in-house mortgage broker.

‘This is just a ploy to make money from the buyer via referral fees and could result in them filtering out offers from serious buyers who do not succumb to the pressure of using the estate agents’ own mortgage broker.’

2. Long tie-in periods

It is common for estate agent contracts to include a minimum time limit for how long you will use – and pay for – their services. 

‘Four weeks or 12 weeks are the most popular terms. More than this is unnecessary,’ says Higgins. ‘If you end up not being happy with their service, you will want to be able to terminate estate agent contracts within a reasonable timeframe.

‘We have found instances of sole agency agreement time limits of a 20 weeks tie-in period. 

‘Five months is a long time to be tied into an estate agent you are not happy with.’

3. Long notice periods

Another thing to look out for is how much notice you would need to give if you wanted to market your property with another agent. 

‘Another clause to watch for, one which is a real bugbear of mine, is what happens if you switch to another agent,’ says Leaf.

‘Some agents will insist on at least two or three weeks’ notice before your property can be marketed by your new agent in order to deter you from leaving, during which time you are in limbo and losing valuable marketing time.

‘This is an unfair clause but perhaps could be negotiated at the beginning of the contract – you could argue that if you did switch agents, then a few days’ notice would be sufficient.’

4. No cooling-off period

Estate agents can lay on the charm when pitching for your business, but you may decide after signing up that they weren’t right after all. 

That is where cooling-off periods come in. 

Higgins says: ‘The Property Ombudsman’s Code of Practice says that you have the right to a 14-day cooling off period if the contract was signed at a location away from the agent’s business premises – usually, this means if you signed the contract at your property.

‘But if you signed the contract at their offices you may be asked to sign away your right to the cooling off period in order to market the property immediately. 

‘If that is the case, take your time, and negotiate the terms of the contract you are not comfortable with before signing it.’

5. ‘Ready, willing and able’ clause

‘Some estate agent contracts may include a “Ready, willing and able” clause,’ says Paula Higgins.

‘This means that if someone is ready, willing and able to purchase your property – and even if an exchange of contracts doesn’t happen – then the agent will be entitled to a fee.

‘Do not accept this. It means you have to pay the agent for finding a buyer, even if you decide not to sell.’

6. Sole selling rights

Agents have an important role to play, but it’s entirely possible that you could end up finding someone to buy your home without their help. 

For this reason, you want to avoid signing a contract which gives them sole selling rights.  

Leaf adds: ‘If the agent has sole-selling rights, but you meet someone at the school gates who goes on to buy your property, you are still liable for a fee.

‘But if it’s multiple agency, you will only have to pay a fee if the buyer is introduced to the property by the agent.’

7. Continuing or lingering liability

Property sales don’t always go smoothly, and it could be that someone who first saw your home months or even years ago decides to comes back at a later stage with a winning offer. 

‘If you switch estate agents, be aware that the first agent can claim commission if you sell to someone who they originally introduced to your property, even if months or years have passed since,’ says Higgins.

‘Two years is fairly standard. Before signing the contract, make sure you understand whether you will have any continuing liability to the agent for a fee if you terminate the agreement.

‘Otherwise there is a risk that you will be liable to pay commission twice, to the first agent who initially introduced the buyer, and again to the estate agent who finalised the sale.’