Q: I placed my hotel on the market six years ago and paid an expensive up-front marketing fee. Since then, we have not had one show-round and have decided to pass the business on to family. My ‘professional’ agent has now demanded a further £1,000 ‘withdrawal fee’ to leave the contract. Do they hold us to ransom for the rest of our lives?
A: Absolutely not! When you enter into a contract with an agent, it is likely that they will have clauses in the contract to cover the up-front marketing costs such as advertising (which you paid), and then an exit fee should you choose to leave the agreement early and / or no longer sell through them. This is to cover their overheads in the event that you switch to a competitor. In exchange, the contract guarantees certain aspects of their service, including the advertising and the viewers.
Obviously, I am not a contract lawyer and I haven’t seen your specific contract, but there is no way I would pay this fee, on principle, let alone anything else. The agent is unlikely to have met their contractual arrangement, and even if they have delivered on the legal terms of the contract, they haven’t delivered you a single viewing, let alone a potentially interested buyer. I would contest this with a firmly worded letter, highlighting why you will not be paying it, and if necessary appoint a lawyer if they choose to pursue you.
Things to think about and perhaps include in the letter are:
- Pricing / valuation:
- Whether you put it on at the price they recommended and / or whether they have since suggested a price reduction
- Whether you considered other agents, what their valuations were and how it compared to the price with this agent
- Did they give you an indication of how long it would take to sell?
- Did they commit to getting you a certain number of visits?
- What did they promise you that made you go with them?
- Have they organised viewings which you have refused?
- Have you had the same account manager or different ones?
- Have they given you progress reports / updates?
- How regularly have they consulted with you about the sale?
Q: I have had two widely varying valuations; how do I know what is realistic? We turnover circa £800k per annum, with a large property and 71% gross profit. One valuation put the business at £900,000, the other at £1.7million?
Wow! I’ve heard of slight variations in value, but nothing quite that big. First thing I would do is to go back to the two agents you have approached, ask them to justify the valuations, explain how they established it, and ask for examples of businesses they have sold either in a similar location, or with a similar profile. After that, I would also get a third national company in to value it (to get a good average), and then I would get one or two local estate agents through the door to value the property rather than the business. This will tell you the local value of the property, as well as the national value of the business. You can also work out a rough valuation of the assets within the property e.g. the equipment etc. yourself, as well as the earning potential over the coming months and years. All these questions will enable you to objectively assess the valuations you are given, as well as seeing whether their explanations are reliable.
From there, you also have to decide what figure you are comfortable with and what is your nice-to-have. If you put a property on the market, you can’t push the price up, you can only come down, so it is worth trying for the highest and knowing what you will accept as the lowest. Obviously you do need to take guidance on the valuation (you can’t just decide you want £3 million when someone values it at £500,000), but if they give you a range, you can start at the top end and then agree to review it and come down.