When is a private buyer, not a private buyer?

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It’s a question often asked by agents and house sellers alike but what, in fact, is a private buyer?

To answer that question, a great deal will depend on how the buyer found out the property was for sale and, the wording of the agents’ contract.

Agents trying to claim they are entitled to a fee when they are not can, rightly, land them in a lot of hot water. However; what many sellers may not realise, is that by deliberately trying to avoid paying an agents fee by claiming a buyer is a private buyer when they are not, could land them in front of the police under section 11 of the Fraud Act!

The acid test is usually how the buyer became aware that the property was for sale and whether the agents’ contract covers that form of introduction. For example; a buyer knocks on a seller’s door because they see the property via the agents’ website without going through the agent.

In the example above, the agent will be able to claim a commission if his contract shows that he is entitled to a fee if he introduces a buyer through his actions. His ‘actions’, in this case, being the advert on the website.

Many agents’ sole agency agreements allow for genuine private sales (to a family member for example) and do not charge. However, many also have contracts which allow them to charge no matter how the buyer is introduced. These contracts are often referred to as ‘sole selling rights’ as opposed to ‘sole agency’.

Fee disputes (such as private buyers) are, in fact, relatively rare in most good agents’ offices but they can almost be eliminated entirely if the agents’ contract terms are explained and easily understood by the customer.

Agents are obliged under TPOS code of conduct to write their contracts in plain and intelligible English but; I have read many other agents contracts in my time and it is clear that many of the solicitors who draw these contracts up clearly struggle with that concept. It also has to be said that a large minority of agents also happily hide behind small print and pages of gobbledygook in the hope that customers won’t bother reading just what they are signing up to.

Here is how my company defines what introduced means as part of our sole agency contract. Written in plain English, it holds a clarity and honesty mark from the Plain English Campaign.

Introduced – anyone who has been made aware of your property being for sale through:

  • advertising (newspapers, window displays, websites and so on);
  • promotional literature (trade leaflets and so on);
  • ‘For sale’ boards;
  • press coverage;
  • electronic advertising (text messages, e-mails, websites and so on); or
  • another person (for example, your neighbour sees your property in our newspaper advert and tells her friend that your home is for sale).

A very simplistic definition of what a private buyer is from my company’s viewpoint is as follows: If you are one of my customers and your Aunty Betty rings you up, out of the blue and asks if there are any nice places for sale in your town as she is thinking of moving and you tell her that yours is then; that is a private sale under the terms of my contract and I would not charge you. BUT, if Aunty Betty had rung me first and I had told her about your property then a bill would definitely be heading your way on exchange of contracts.

From an agent’s standpoint; proving that you are entitled to a commission when you believe a seller is apparently fraudulently claiming a private sale might seem, on the face of it, an uphill struggle. However, it needn’t be so. If you genuinely believe you are entitled to a fee and, the seller is simply trying to pull a fast one; your first port of call is to the buyer. Talk to them. Nicely. Most just want to buy the property and don’t want to become involved in a fee dispute. Ask how they became aware of the property in the first place and make notes of what they say. Next, chat to the seller. Explain the facts as you know them and ask the seller to see things from your point of view. You are entitled to earn your living and they employed you to do a job. It’s pretty much guaranteed that they would not like someone trying to do them out of their livelihood and a little nudge that this is exactly what they appear to be trying to do to you may just prick their conscience and lead to a swift, peaceful and honourable resolution.

If the buyer has been offered a discount to ‘keep quiet’ by the owner (or vice versa), it does make things more difficult but, in doing so, they too are party to an attempted fraud and, in my experience, the mere combination of the words ‘police’ and ‘fraud’ in a sentence to buyer and seller has always had the desired effect. Yes, it is a nuclear option and you won’t see those customers come back to you in a hurry but; do you really want people like that back as your customers? I don’t and, for the record, it works.

Sellers: Good agents won’t try and rip you off. They will have worked very hard to build a good reputation around town and won’t want to spoil it for the sake of one sale. If you think you have a private buyer, talk it through with your agent to avoid any problems at the earliest opportunity. It will avoid complications and may even work to your advantage in the long run.

Good luck.

www.pdq-estates.co.uk

Chris Wood

I welcome feedback so please feel free to leave constructive criticisms or ask questions below. If you could also take a second to rate my blog and pass it on to others who you think may find it interesting that would be great. Thanks.

Chris Wood of PDQ Estates Ltd

PDQ Estate Agents website

About Chris Wood: Chris is an estate agent with over 25 years of property experience. His business, PDQ Estates Ltd is based in Penzance and Helston, West Cornwall. He has worked with all sizes and types of businesses from single office independents to the management team and board of RBS and Tesco. A former President Elect of the NAEA and board member of NFoPP until he resigned in 2009, Chris has always championed the highest professional standards forestate agents in the UK. No stranger to the media, he has appeared on various programs including BBC, News 24, ITV, independent and BBC radio and is a regular contributor to trade journals, local and national Newspapers. Chris is on KloutLinkedIn Ecademy Facebook and Twitter Married to Amanda, they live in Penzance with their children who are slowly flying the nest, along with their three spaniels. In his spare time; Chris likes to keep fit and is a long-standing member of the Territorial Army. In 2010 he mobilised for a tour of duty in Afghanistan with 1 Rifles as part of 3 Commando Brigade.

Please support the men and women in my unit, The 1st Battalion The Rifles, who become casualties in the line of service during their tour of Afghanistan by making a donation here www.swiftandbold.org

10 thoughts on “When is a private buyer, not a private buyer?

  1. This is very useful. I have read the TPO guidelines around this but it isn’t specific whether the 2 year clause for private buyers is 2 years at date of offer / exchange or completion. Unfortunately I am dealing with very sharp Estate Agents based in Gloucestershire who clearly don’t value their reputation particularly. I have a scenario where a buyer has decided to speculatively approach me approx 2 years following my house being on the market and it makes a difference if it’s 2 years at date of offer or 2 years at date of completion.. As they were my rental agents, prior to the offer I shared the fact that I needed access to the property to show a potential buyer around and I wasn’t asked for any other details until the sale had been negotiated by me and the surveyor was in collecting the keys at which point he unprofessionally shared the information on the buyer and the purchase price with the Estate Agent, without the buyers permission. They then approached me for commission. If they had sold the property for me, then I would have no qualms about paying commission but they didn’t and I incurred my own expenses showing the potential buyer around as she had not previously viewed the property and did my own negotiations. I was not aware of any liabilities to ongoing commission following dis-instruction. Any insights gratefully received on the 2 year rule.

  2. Hi Chris, thanks for an interesting article.
    My Mum may have have a private buyer in the next few days. We haven’t signed the Estate Agents contract yet (we only instructed them before the weekend) but Mum is concerned that we may lose out by not sending her private buyer to the agents anyway and just paying the fee for peace of mind re the chain and whole buy/sell process. Any thoughts? Thanks, LM

    • Hi Leisha
      I’m afraid I can’t give specific advice as I haven’t seen the contract your Mum has been given but, as long as she has not given a verbal ‘OK’ to start marketing or, allowed viewings to take place, my view would be that the agent is unlikely to be able to claim a fee. If you are unsure, you should speak to trading standards or citizens advice. I hope this helps.
      Regards
      Chris

  3. As an agent in Scottish Borders I have come across this issue and our marketing agreement has grown or is that groaned with additional wording in an attempt to cover the situation. My basis rule is fairness. Another factor is reputation and if you are perceived to be taking advantage or even ripping off a seller seeking money for nothing this won’t wash. Distant selling and the right to cancel is also a factor and we don’t use doorstep agreements so clients are given time to think. The downside is that some will use your advice on valuation and selling and try to sell themselves through an on line portal etc but generally that doesn’t achieve the result they expect. However if you offer free valuation you have to expect that from time to time and the vast majority can see the value of a professional service and the need to pay a fair fee to cover the services provided. It’s not all about price.

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