Multiple Agency Dangers and Opportunities

RAT 23 (Rawlings Agency Tips) Avoid or Embrace Multiple Agency?

Good morning,

Last week, the RAT looked at the advantages of not having a fixed long-term sole agency period. Thanks for the positive response, summarised by one of my clients who said: 'I just wanted to add my voice to your recommendation for a zero length of sole agency. I have been doing this for several years and have found it to be a very successful instruction-getter. I also agree that the end of another agent's sole agency period is very often a prompt to change agent and yet I very rarely suffer from a withdrawal and transfer of agency to someone else.'

But what about multiple agency? Most areas of the country tend only to have sole agency (and if that's you then you should read on anyway!), but some, including many areas of London, still give sellers the option, at a higher fee, to instruct more than one agency on a winner-takes-all basis.

However, whilst the higher multiple fee may seem attractive, if you do the maths, the figures don’t stack up. I was doing some consultancy/training work with a client of mine, a progressive independent agency, in Wisbech a couple of weeks ago, where multiple agency is common. Part of our training focus had been on raising fees, and a couple of days later I followed up and the principal was delighted to tell me that they had secured an instruction at 3%, albeit on a multiple agency basis. I think she was a little surprised when I told her that I would rather have had it at 2% on a sole!

The reason is this. Statistically, if two agents are appointed by the seller on a multiple agency basis, you halve your chances of making a fee from that potential sale (although the cost of servicing/marketing the property remain). So the “opportunity value” of the contract is half of the 3% you might make. You effectively have an “opportunity index” of 1.5. However, you would have kept 100% of the 2% fee on a sole agency basis, so your opportunity index in that instance would have been 2 - some 33.3% higher than the multiple agency opportunity. Good agency is as much about harnessing such business metrics as it is about getting instructions!

I would only take on a multiple agency (and at a MUCH higher fee), if I felt there was an overwhelming chance that I, rather than the other agent, would sell it! And with most buyers likely to come from the same pot via the internet, I’d still be nervous!

HOWEVER! There are times when a multiple agency can work to your advantage. How about when another agent has an instruction that they are failing to sell? Many people think that they can only appoint another estate agent at the end of their sole agency period. But is not true! A seller can appoint other agents within a sole agency period - BUT in so doing must consider the terms of the first agent’s contract. In the worst case scenario there is no death penalty for appointing another agent as well as the first agent - just a potential liability for two fees. Frankly, when people are reducing their prices by up to 20%, an additional 2% fee is probably an easier pill to swallow, especially with double the marketing effort!

Remember also that many of your competitors’ contracts simply state that their fee will rise to their multiple agency rate if they sell the property where another agent has subsequently been appointed as well.

So if you wish to help your competitor to drown, by sticking a hosepipe up his/her nose, when you hear that the other agent got the instruction instead of you, or know of a seller who is probably becoming disillusioned with their agent, why not encourage the seller to consider the multiple agency route? It will probably only cost them another half a percent. If you don’t do this your opportunity index is zero. If you do, then it is probably half of 2.5%, ie 1.25. Cool! But only as a last resort after you have fought for the sole agency first.

If you’d like to know more about how to blend such science with the art of agency, I’d be happy to work with you and your estate agency, large or small, under an intensive one/two day consultancy/training package. Please drop me an email here for a quote.

Finally, thanks to all of you, in both sales and lettings, who have embraced the Weekly Editorial Programme which seems to be hitting the spot to help you get instructions in this market. If you haven’t checked this out, please feel free to do so by hitting the purple 'Property Article Programme' button on your left