Our thoughts

Pecking order for buyers of residential property

Ray Boulger, a senior mortgage expert at John Charcol, said last month that estate agents are pressuring house buyers into using their in-house mortgage advisers rather than allowing them to seek independent advice. If buyers declined the in house advice, he said, they risked not seeing available properties. In fact potential house buyers are often not informed about properties, that match their criteria, for a number of reasons.

If you have ever had dealings with estate agents you may be familiar with the experience of telling them what you are looking for, only to find a few weeks later, your ideal home listed as “sold” in their shop window.

Estate agents are supposed to act in the best interests of their client, the seller, but may not entirely share those interests. They may be keener than the seller on getting a quick sale and avoiding non-sales in order to control costs and boost turnover.
A buyer’s ability to move quickly and what their plans are for the purchase, ie whether buying to resell, stay long term or let, may mean the difference between a successful purchase or never hearing from the agent in the first place. As a buyer you may feel somewhat indignant when asked by the selling agent why you want to buy. You may feel this is none of their business. But that is where you would be wrong.

Estate agents grade both their buyers and sellers and mixed in is the element of risk. How much time, effort and money an agent puts into both parties will depend upon a number of inter-related factors. It all ends up with you, as a buyer or seller, fitting into a pecking order.

This table outlines who is top of the pile, who is bottom, and why. Where do you fit in?
Position who? Why?

Developers with cash or cash buyers represented by a buying agent. Repeat business. Known source. Vetted buyer. Less risk of falling through.

Sellers who have exchanged contracts already but not yet completed. No mortgage required. Arguably more attractive than cash buyers who are renting because those renting can pull out and still be comfortable renting.

Cash buyers. Renting. No mortgage.

Cash buyers staying with friends. No mortgage. However comfortable it may be to rent, the buyer may feel uncomfortable being out of the market.

Own property under offer with same agent. Potential for 2 fees if the agent successfully finds a property for the seller to move to. But chain situation can often lead to a fall through.

No property to sell. Cash plus mortgage agreed in principle.(using estate agent’s in house mortgage advisor) Anyone borrowing finance is immediately pushed down the order.

No property to sell. Cash plus mortgage agreed in principle.(not using estate agent’s in house mortgage advisor) Those not using the in house mortgage advisor maybe pushed further down the order.

Property under offer with another agent. Only one fee for the agent to focus on here and chain situation means there is always a risk of a fall through.

Property on the market with the same agent but not under offer. Agents are always keen to secure two fees if at all possible, even if both fees are abstract.

Property on the market. Not under offer. Geographically inside agent’s selling zone. Potential to win/nab instruction from another agent.

Property on the market but outside target zone. Nearly bottom of the pile.

Property not even on the market, but it needs to be sold before any purchase can be made. No prospect of the agent selling the property. Congratulations. You are bottom of the pile.

Future plans Add to this pecking order the reason for the purchase and the order may change. Of most interest to the estate agent are those buyers who will sell the property within say two years, raising the prospects for a second fee. Of less interest are those who want to live in the property long term.
NB Buy to let Buy to let investors who have a large portfolio and retain the same estate agent to manage their properties are likely to be higher up the pecking order. The management income often keeps estate agents in business if their sales department is struggling.

Other factors may come into play but the above is a standard classification. Appreciating where you fit in, and understanding the negotiating process can save thousands of pounds.