A Desk In The Sun

The idea of the estate agent who acts in the interests of the buyer may seem to defy logic, but bear with me for a few sentences. I’ll explain why both sellers and property purchasers are taken in by a delusion. And it’s the same whether you’re buying a home in the UK or overseas.

The basis for the illusion is straightforward. In a property transaction it’s the seller who pays commission to the estate agent, after their home’s been sold. “He who pays the piper calls the tune,” as the old saying goes. But in this case it’s wrong.

In an earlier article I described how estate agents add enough to the price of a property to cover their commission. It’s effectively the buyer who is paying the estate agents and, arguably, that means they’re not acting on behalf of the seller. Maybe. But it’s only part of the story.

Actually, estate agents don’t work for the seller or the buyer. They work for themselves. And it all comes down to maths, but don’t switch off now, this knowledge could save you a lot of money.

Getting the highest possible price for a property is a much less important part of an estate agent’s work than getting any sale at all. Certainly knocking money off the price is going to reduce their commission, but how important is that?

Let’s consider the example of an apartment costing 250,000 euros. If our property consultant gets 2% commission from his generous employer that’ll net a nice 5000 euros, not bad for a few hours work.

A buyer comes along and offers 225,000 euros, that’s 25,000 euros less for the seller which, incidentally, is around twice the average annual income people round here in Ibiza declare to tax authorities. Contrast that with the estate agent who, in this deal, will lose 500 euros in commission or about two weeks of average declared income.

Obviously the estate agent would like to get the whole 5000, but really losing a few hundred isn’t going to be such a big deal. And there can be additional pressures on him just to make the sale. Even estate agents have mortgages which have to be paid, even in a bad month. And there’ll quite possibly be other companies representing the property. If one of them gets the deal, it’s not just a matter of losing a few hundred euros, but the whole deal.

Estate agents overseas often have an additional power. The buyer and seller can’t communicate with each other because they don’t speak the same language. So both sides have to accept what the estate agent is telling them. That can help you in the game of bluff that is negotiating the price of a property. It’s much harder to drive a hard bargain if you’re on chatting terms with the people who will lose out.

Before you finally agree on anything make sure you get a good lawyer who is independent of both seller and estate agent. You might think you’ve got the estate agent working on your behalf, but you can never be sure.

Happy house hunting.