Property where “Buyers Commission may be required” - help

[Sweett00th]

Anyone have experience on this or can help me get my head around why seller isn’t paying fee. Below is statement in their property profile

“ Buyers Commission May Be Required*
Full details available upon request.
*This property is being marketed on behalf of the seller on the basis that the buyer pays our fee of between 2.4% incl VAT and 3.6% incl VAT of the net purchase price. Unless otherwise agreed offers will therefore be submitted to the seller net of our fee.”

So am I ultimately going to have to pay more? Or my offer to them takes away the agent fee. Very odd. Should I stay away

What a cheek!

It's not unusual for the solicitors to pay the EA straight out of the sale funds, so why that needs to be on the advert is beyond me.

You don't need to pay any more, but if you do offer I would specify that the full offer should be passed on (as required by law) and you have no interest in discussions they may have with the client about fees.

Also, what mug pays that much in EA fees?

Should I stay away

Not if you really like the place, just keep in mind that the EAs are idiots. Hopefully they will put enough people off that you bag a bargain.

It’s very annoying as I do like this place and viewing today as well another. I guess I don’t want to be too firm When offering as I plan to go slightly below asking price. It dropped now by £50k, another thing I’m going to ask their agent about. Completely agree- what mug would pay such high fees!

Both properties listed same price, the other very straight forward but this one talks of paying fees.

You can offer an all inclusive price at whatever level you would have offered. The seller loses out for not negotiating a better fee.

Remember the fee may impact on your deposit % as it will have to be paid cash (via bank transfer to solicitors).

So for example 103 total. Say 100k is Going to the owner -15% plus the 3k. Daft way of doing it in the current climate when deposit sizes are critical.

Remember the fee may impact on your deposit % as it will have to be paid cash (via bank transfer to solicitors).

Why would it need to be paid in cash? Once the seller's solicitor receives the money from OP's solicitors they can send it whereby they like.

It dropped now by £50k, another thing I’m going to ask their agent about.

I wouldn't ask about that, I'd just put in the offer you think and (unless it's a competitive market) start pretty low.

Has the EA put this on every property they're marketing? If so, then they're idiots who don't really understand things so that's a downside but not necessarily a huge one. If it's just on this property not all of theirs then it's something weird going on with the sellers and tbh that would seriously put me off as I think it's a red flag that they're going to be hard to deal with throughout.

A quick Google (kids woke me up early, it's either this or exercise) indicates it's Choices agency in London.

This seems to be something they do with everyone but are very inconsistent with putting on property details. Some put 'buyer's commission may be required', some put nothing and the numpty who put yours on copied and pasted the T and C's.

I think it's just a bullshit way of persuading gullible fools into thinking they are not paying commission, when they are really paying double/triple the going rate. You aren't paying it really, the sellers are, no matter who sends the money. I wouldn't be surprised if these grifters also charge an upfront fee.

Make clear you don't want to be on their marketing list and instruct your solicitors to send no additional fees to the EA and to flag up anything odd in the memorandum of sale.

Don't let it put you off, lots of EAs are shysters, that's why you have a solicitor.

Make sure you tell the agents, should you put an offer on the property, that it is inclusive of any 'buyers fees, including VAT'. And make sure whenever that offer is put in writing (should it be accepted) that is made clear.
It seems a very odd thing to do as the fees are far higher than what an estate agent would normally charge.

It's particularly that they're charging those rates on London prices! It's always seemed weird to me that EA fees are normally a straight percentage (I know some do flat fees) - I understand having an element of commission, as motivation, but it seems weird that we paid half as much to the estate agent as we would if our house was in the poshest bit of the town even though houses sell much easier and faster there so they had to actually do more for us.

It's always seemed weird to me that EA fees are normally a straight percentage

There is a very simple explanation: most people sell houses very rarely so few understand how the market works.

• They don't realise that person who actually sells your house probably sees very, very little of that commission.

• They don't realise that it's much more profitable for agents to shift houses quickly than hold out for slightly more commission, so they have a built in reason to get you to lower the price for a sale.

• They don't realise that the marginal cost of selling a house is almost nothing. Things like rightmove fees, rent, heating, lighting and staff costs are largely fixed, so every extra house they sell (even if they take a much lower commission on it) is profit.

• They don't realise this means that often the worst chains charge higher fees because it makes people think they are better.

This agency have hit upon a USP which will make them stand out to some mugs. The London market is big enough that this will get them some customers from this approach, and the profit from it high enough to make it work. Outside London they'd probably go broke.

@Hardbackwriter

Has the EA put this on every property they're marketing? If so, then they're idiots who don't really understand things so that's a downside but not necessarily a huge one. If it's just on this property not all of theirs then it's something weird going on with the sellers and tbh that would seriously put me off as I think it's a red flag that they're going to be hard to deal with throughout.

I’ve just checked on their website and looks like they do same with each property.

Ok so let’s say I offered 400k, does that mean I’d pay sellers fee on top or from the 400 the fee is taken from that. You’re right, definitely can be off putting, why oh why!?! And the fee is crazy. My agents fee are 1.25 plus vat. That’s very high from seller.

@raddledoldmisanthropist

A quick Google (kids woke me up early, it's either this or exercise) indicates it's Choices agency in London.

This seems to be something they do with everyone but are very inconsistent with putting on property details. Some put 'buyer's commission may be required', some put nothing and the numpty who put yours on copied and pasted the T and C's.

I think it's just a bullshit way of persuading gullible fools into thinking they are not paying commission, when they are really paying double/triple the going rate. You aren't paying it really, the sellers are, no matter who sends the money. I wouldn't be surprised if these grifters also charge an upfront fee.

Make clear you don't want to be on their marketing list and instruct your solicitors to send no additional fees to the EA and to flag up anything odd in the memorandum of sale.

Don't let it put you off, lots of EAs are shysters, that's why you have a solicitor.

That’s them! Honestly I’m stumped and not sure what to do now on this.

I offered yada yada but what conditions should I tie. I think I’ll also speak with my agents too

Yes it will be Choices.

I think sellers who have hard to sell properties often go with them, or those who might be facing issues with threat of bank repossession.

It is sold to sellers and saving them the agent fees....but of course, because they only receive the selling price net of fees, they essentially pay more commission as 2.4_ 3.6% is much more than most people pay.

From a buyer view, it shouldn’t make a big difference as you can insist (and their practice seems to be) to make the offer to include the fee. Buyers can then have the price minus the EA fee as the official price and this can reduce stamp duty paid as it won’t be included in the EA fee part of the offer. So it can actually save a buyer some money if they request that the fee to go to the EA isn’t included in the actual selling price which is sent to HMRC for SDLT purposes. And of course, the buyer shouldn’t be paying tax on the full amount because that isn’t what the seller is receiving from you.

It is an odd practice. Personally I wouldn’t sell using that method although I would consider buying if the right property was available there through them. It seems to be sellers that lose out through it.

I wonder how this deal is sold to sellers?

Is it that the agent tells the seller that if the property sale falls through, they will still owe the EA fee....and some sellers fear that they just don’t have the money to pay it unless the sale completes. With this odd method, the burden feels like it’s not on them to pay but the buyer. Although of course, if it falls through the buyer won’t be paying anything anyway.

I don’t know anyone who has sold through this method, but I did know someone who bought through something very similar.

I wonder if it's because the property is in negative equity so the seller won't have the cash to pay fees

@WombatChocolate

Yes it will be Choices.

I think sellers who have hard to sell properties often go with them, or those who might be facing issues with threat of bank repossession.

It is sold to sellers and saving them the agent fees....but of course, because they only receive the selling price net of fees, they essentially pay more commission as 2.4_ 3.6% is much more than most people pay.

From a buyer view, it shouldn’t make a big difference as you can insist (and their practice seems to be) to make the offer to include the fee. Buyers can then have the price minus the EA fee as the official price and this can reduce stamp duty paid as it won’t be included in the EA fee part of the offer. So it can actually save a buyer some money if they request that the fee to go to the EA isn’t included in the actual selling price which is sent to HMRC for SDLT purposes. And of course, the buyer shouldn’t be paying tax on the full amount because that isn’t what the seller is receiving from you.

It is an odd practice. Personally I wouldn’t sell using that method although I would consider buying if the right property was available there through them. It seems to be sellers that lose out through it.

Thanks so much, ok then if I do offer I’ll mention that would inc fee too

Buyers can then have the price minus the EA fee as the official price and this can reduce stamp duty paid as it won’t be included in the EA fee part of the offer.

If that were so then everyone would do it. The gubbins on their website makes clear that HMRC aren't idiots an in fact it works just the same as any other EA.

If you don't pay the fee it just gets taken from the seller end. Literally the only difference is that it could be sent by your solicitors instead.

Personally, if it gets to sale I would not send them any money or have them mentioned on the memorandum of sale, because I wouldn't want any confusion if there were issues after sale; but in practice it makes no difference at all.

So how would the memorandum of sale appear in such case whereby fees take from buyers offer which gets accepted

It can appear on the Memo if sale as the price that the vendor will receive...because that is the price and offer that is put forward to them by the agent and the price they receive.

Tax is then paid on that amount. Clearly this will be a lower amount if tax than if the price to include the agents fee was included.

This does not seem to be illegal.

I think agents who use this system might well be selling houses in negative equity/under repossession orders as others have mentioned. I suspect they sell a lot to cash buyers for investment purposes and these people negotiate the prices down and benefits from paying a bit less stamp duty by being able to have a Memo of sale which details the price the vendor receives.

I don’t think the EA could put the figure without commission on the Memo of sale if it was illegal could they? There must be auditing that goes on.

Possibly this is a loophole that these agents have spotted.

I really do think there is any benefit for a standard seller at all and lots to lose in terms of essentially paying higher commission via the commission being taken from the price offered and then receiving a lower asking price. The gain seems to be for the EA in particular and potentially a small gain for the buyer.

Perhaps I have misunderstood it.

Sorry.. DON’T think there is any benefit to the standard seller (who isn’t faced with negative equity or repossession etc)

Tax is then paid on that amount. Clearly this will be a lower amount if tax than if the price to include the agents fee was included. This does not seem to be illegal.

As I said above, even their own website says not. If it were that easy everyone would do it.

OP, don't worry about details like the MOS right now. Just make clear your offer is it and you aren't paying any extras.

It's a marketing gimic for sellers, it makes no difference to you.

iv) You must be aware that HMRC have indicated that the commission fee will be considered as part of the ‘chargeable’ consideration for the property and may therefore be included in the calculation for any stamp duty liability which you will pay on transfer of the property to your ownership. For example under the new stamp duty reforms, if you purchase the property for £200,000 plus a buyers fee of 2.4% inc VAT = £4800, you will pay £1,596.00 in stamp duty (according to your circumstances).

www.choices.co.uk/buyers-terms-and-conditions/

Thanks for the clarification. Seems I misunderstood it for MoS and tax purposes.

As you say, it is a marketing gimmick and one which results in those EA getting significantly higher commission....but it is the seller who loses out not the buyer. Probable lesson is just don’t ever sell via this method.