It is time to sell your pub. And the crucial decision is to choose an agent to market and help sell the property. But there are some unscrupulous agents out there who will not be acting in your best interests.
They will give you an artificially inflated valuation, ask you to sign an onerous contract, offer exceptionally low fees to sell the property and then add on additional bills at a later date. These agents’ headline fees appear cheap but they can often charge marketing costs running into thousands of pounds.
WHEN MEETING THE AGENT
- Is the agent asking you detailed questions regarding the property and accounts to fully understand your business?
- Has the agent explained and justified the advice being provided with evidence of market deals actually achieved?
- enquire whether the agent will be your contact throughout the sale process. Too many agents are never seen again and the property is simply listed on a website and enquiries processed by inexperienced people.
- Ask how long the agent has been involved in the licensed market.
- Ask to see the sales literature including examples of details, copies of the marketing magazine, statistics as to what has sold and where buyers come from.
Advice from Simon Hall at Fleurets
Such agents also have limited knowledge of the licensed sector and to top it all, they are less likely to get viewings and to meet the ultimate goal of selling the property.
Selling and buying a property is one of the largest investments most licensees will make. So it is essential that any seller avoids these rogue agents and does their research to ensure they are dealing with a reputable operator.
Simon Hall, director and head of agency at property agent Fleurets, says: “I continue to be amazed by the number of publicans who are taken in by the bad practices of a few very unprofessional agents who are still working in our market.
“It saddens me to hear so many horror stories about the high-pressure sales tactics, massive over pricings and penal contracts. It’s akin to cowboy builders and it shouldn’t be allowed.”
He advises licensees to avoid the agents who are incentivised by commission for listing the property as opposed to selling it and warns against signing restrictive contracts, which are very difficult and expensive to get out of.
“Simplistically, most vendors want to sell for the highest price achievable in the market within a realistic marketing period. This is not always the case as other factors could equally apply, such as timescale, security and confidentiality. A good agent will take time to understand your requirements and preferences, before they confirm their marketing advice,” he says.
He also advises licensees to look for specialist agents within the sector and to question whether the company is well-known for selling the same type of property. It is also important to consider whether the agent has the right local and national coverage to maximise the exposure of the pub business to the most appropriate buyers.
Davey Co managing director Paul Davey says agents that are not licens-ed property specialists are “a jack of all trades and a master of none”.
The onerous contract is one area where Davey argues the licensee can be “stung”.
“Some of them have agency agreements of 12 and 18 months. They really do tie them in and if they don’t sell it, and take it off the market, the licensee still has to pay them,” he warns.
“They don’t have any credibility. They employ a lot of very sharp salesmen who are good at selling contracts, but don’t have any depth of knowledge of the licensed property market or the valuation side of things, how transactions work or how leases work.”
He admits that reputable agencies, in some cases, do ask for a small upfront fee for marketing because it shows a gesture of commitment from the client.
“But what a lot of the sharks and disreputable agents do is concentrate on that as it is their principal sort of income,” he warns.
Offering a high valuation of the property to impress the seller is one of the tactics used by these companies.
“That flattery soon turns to realisation that they have been stung,” Davey says.
Stephen Taylor, managing director at Guy Simmonds, agrees that these unscrupulous agents often offer in-flated valuations.
“Beware of any agent that advises you to inflate ‘the correct valuation price’ to an unrealistic level, and then insists that you should pay a large upfront sum, stating that is the only method in which this particular agent operates,” he warns.
“There are agents who have a policy of taking substantial non-refundable deposits from potential purchasers. This, of course, is not ‘standard commercial practice’ and can actually act against the best interests of a vendor client, whereby they are contractually ‘locked in’ to a proposed future transaction that never goes any further, due to financing, legal issues, etc.”
Any reputable agent should also be able to provide an immediate and longer-term exit strategy, discuss all selling/leasing options available and never pressure the licensee into arriving at a selling decision, he warns. It is essential to research these companies and any agent should be able to prove comparables of actual businesses they have sold, and give a valuation based on these and the pub’s trading accounts, he argues.
Do your homework
Doing homework into the background of the agent is an area that Christie & Co also supports.
“We would advise every licensee looking to sell their pub to do their homework – look at agents’ websites to check for professionalism and check the trade press for their media and advertising presence,” says Neil Morgan, managing director of pubs & restaurants at Christie & Co.
“When you meet them, any good agent should provide solid credentials and testimonials from similar properties they’ve sold in the area so you know that they have local knowledge and contacts, have relevant data to base their valuations on and can see the job through from beginning to end.”
One essential function that the agent should fulfil is to go through the accounts so there is an agreed adjusted net profit to help arrive at a realistic price.
“If you’re in doubt about their experience or way of working, always get a second opinion. If their fees seem too good to be true, they probably are,” he says.
While the British Institute of Inn-keeping (BII) does not recommend specific property agents, it advises tenants and freeholders to approach bone fide agents that operate in the pub sector.
BII chief executive Mike Clist says licensees should talk to other publicans and check to see that the agent belongs to a professional body such as the Association of Valuers of Licensed Property or the Royal Institution of Chartered Surveyors.
“It is always wise to ask what geographical areas the agent covers so you are aware of how far and wide the property will be advertised and ask them for the names of recent properties sold and pick one or two you can contact as a reference,” says Clist.
“Lastly, make sure they will stay in contact with you regularly and not just put the property on a website and – as with all contracts – don’t sign anything until you are certain of and happy with the package.”
According to the experts this is very much a situation of ‘seller beware’. Make sure you do your research, that the agent has a strong reputation for selling within the sector and don’t sign anything unless you are sure it is right for you and your pub.
- Interested in running your own pub? Then take a look at our pubs for lease and tenancy on our property site.