Thinking we are saving money at the time (super proud of our little selves!), but then it massively back fires and ends up costing us more money down the line! And let’s not forget the humiliation that often comes with it, with the stick you then get from friends and family! Yes, annoyingly we’ve all been there. Some more than others!
Speaking of that, a quick story to make you chuckle...
A close family member recently booked a Groupon deal to Fuerteventura. Absolutely delighted with the deal he’d found for £375 for two, for a lovely week away, he couldn’t wait to tell everyone and spread the word about the brilliant deal he’d booked. To cut a long story short, when the tickets arrived, he had only booked for one person, failed to read the small print as the deal was based on a single traveller. Unable to get a refund, the entire holiday ended up costing a small fortune, for what was supposed to be a very cheap week away in the sun! (I shouldn’t laugh!).
Moral of the story, always read the small print, do your research and remember if something sounds too good to be true, it normally is!
From cheap loo roll, cheap paint (yes, the type that crumbles!), unused gym memberships, DIY home décor when you know you struggle to hang a picture (and will ultimately end up getting a professional tradesman onto the job), the list is endless!
Then of course there are more significant false economy traps, such as only paying the minimum amount off your credit card each month, failing to take out the right holiday insurance, interest only mortgages, sellers thinking all estate agents are on Rightmove, so it doesn’t matter who I choose to sell my house!
One area where you simply can’t afford to fall into the false economy trap, seriously, is your house move!
If someone were to ask you, would you rather have £1 today, or £10 tomorrow, what would you say?
In this blog, we are going to think about why taking the £1 on offer today isn’t always the best option, and how waiting for the extra £10 tomorrow can make a huge difference to your overall equity pot and ultimately your bank balance!
Selling your home, and buying your next home is a process that you probably aren’t going to do that often. Well, unless you are serial mover and move around a lot. In which case, you will appreciate most of the points we are going to cover. So therefore, getting it right, bearing in mind selling your home will in most instances be your biggest asset, is crucial!
The estate agency industry has been disrupted massively in the last couple of years, with the rise of online DIY agents entering the market. Their fees at the outset appear to be a much cheaper option, and for all you savvy sellers out there, this was probably a hallelujah moment, right?
However, considering most of their fees are paid upfront, you are essentially paying for a service you haven’t yet received. £600-£1000 upfront, for a service that hasn’t been fulfilled is a little bit cheeky and risky, surely? Plus, where is their incentive to get the property sold for you?
I can’t remember ever paying for a meal, before enjoying the food and service. Can you?
Of course, there is an option with certain online agents to defer this fee. However on the agreed tie in that you are obliged to use their in-house conveyancers, which judging by the trust pilot reviews and customer feedback, is where there is a big spike in the costs, in comparison to using a local solicitor. Therefore, a costly exercise. False economy trap again, right there!
It is probably worth a reminder at this point however, that your estate agency fees, regardless of which estate agent you choose, are just one aspect, that can affect your overall equity value.
There are many more, including: -
· The price you ultimately achieve for your sale
· The purchase price you agree on for your next property
· Your new mortgage deal and term
· Your solicitors fee
· Stamp duty
· Removal costs
Let’s look at an example…
Seller A - chooses an estate agent based on the cheapest fee on offer, to sell their house.
Seller B - chooses the estate agent they feel most confident will achieve the best price possible for their home, and hopefully help them achieve the maximum overall equity value from their house move.
Estate agent fee - £900 + VAT upfront = £1080
Asking price - £220,000
Sells for – £212,000
Mortgage owed - £150,000
Buys at - £322,500 (on a house advertised at £325,000- seller negotiates their own purchase)
Mortgage – 15% deposit on new house = £48,375
Stamp duty - £6125
Overall equity achieved = £6,420
Estate agent fee – 1.5% + VAT (at selling price inc VAT = £4050)
Asking price – O/O £220,000
Sells for - £225,000
Mortgage owed - £150,000
Buys at - £318,500 (on house advertised at £325,000 – their estate agent negotiates their purchase)
Mortgage - £15% deposit on new house = £47,775
Stamp duty - £5925
Overall equity achieved = £17,250
Difference in fees at very outset - £2970
Difference in overall equity achieved at the end - £10,830
This example demonstrates, how falling into the initial false economy trap surrounding estate agency fees, could end up costing you in the long run, and make a significant dent in your overall equity pot that you can expect to take from your move.
£10,830 is a huge difference, and just think about what you could do with that extra money? New furniture? Savings nest egg? Deposit towards a buy-to-let investment property? Family holiday to Florida after you’ve settled into your new home? (Watch the Groupon deals though!)
The above example, demonstrates the difference in fees, versus the overall extra equity value you can achieve, by working with the right, qualified and experienced estate agent, who knows the local property market and is a skilled negotiator from years of experience, which they use to their advantage.
As shown above, there are lots of other factors that contribute to improving the overall equity you can expect to take with you going forward, and the right estate agent, will work with the right property professionals to help you achieve just that.
I have said it quite a lot recently but remember this…the estate agent who feels the need to keep reducing and reducing their commission fee to win your business, is giving you a very good insight into their negotiation skills. The same negotiation skills that you will be relying upon to achieve the best-selling price for your property….
So, the next time someone asks you would you rather have £1 today, or £10 tomorrow…..what will you do?
Because I have been luckily enough over the last 14 years to help thousands of homeowners on their moving journey, I am able to offer a tailored marketing and service strategy, that helps my customers to maximise their overall equity pot achieved from their house move, which I am sure you can tell by now, is something I firmly believe a good estate agent should do!
If you would like to avoid the false economy trap and want to protect those many years of hard work, home improvements and lots of mortgage payments, then we should talk!