Estate agency fees have become a contentious issue in recent years. Traditionally, agents offer a no-sale no-fee model in which they take a small percentage of the sale value as commission. But the rise of online estate agents who offer a low fixed-fee pricing model has led many to accuse traditional highstreet agents of being overpriced.
In order to compete with online competition, many agents are dropping their fees. Some agents who would once charge as much 3% commission now charge as little as 0.75%.
As a result, when it comes to selling your home and you shop around your local agents, you’re likely to be presented with various different fee quotes, usually ranging between 0.5% and 2%, with the current average for England and Wales being 1.18%+VAT.
At this point, the obvious thing to do is choose the agent who offers the lowest fee, right?
Unfortunately, it’s not that simple.
You get what you pay for
When you hire an estate agent, you are doing so because they’re an expert. They can use their experience and knowledge to represent you in the complex world of property, making sure your best interests are always being protected and served. Because of this, you want to be represented by THE BEST agent possible.
And since when does cheapest mean best? The answer is, never. Not with lawyers, nor accountants; not with plasterers and not with plumbers. Never.
As with most things in life, when it comes to estate agents, you get what you pay for. A cheap agent will not give you the quality of service that a more expensive agent will. People who are good at what they do deserve paying for their work, and agents are no exception.
What are you getting for your money?
Let’s cut to the chase. If an agent charges less than 1%+VAT, you should be incredibly suspicious. Agents are providing a service, this means committing a lot of time and effort towards helping you sell your house. From booking and hosting viewings to marketing your home and offering valuable guidance at those times when you have a big decision to make, it can be weeks, even months, of hard work.
Agents are motivated to do this because, financially speaking, a successful sale is worth the effort. If they’re charging a pittance, it’s going to be difficult for you to feel confident that they are out there working hard to get you the best possible price for your home.
What’s more, cheap agents will often go on to charge a whole host of unexpected costs which a more expensive agent will include in their fee. Things like taking photographs, drawing up floorplans, even just sticking a FOR SALE board outside your home: an agent with low fees will charge extra for all of these things and, before you know it, the saving you thought you were making has evaporated.
Go for the sweet spot
At the same time, if an agent is charging more than 2%+VAT, they need to be offering a truly outstanding service, above and beyond anything their rivals are offering. Furthermore, they need to be able to demonstrate exactly why they feel they can charge a higher fee.
Is it because they have an outstanding track record? Or perhaps because they dedicate significantly more money and effort than other agents, thus finding a quality buyer in a much shorter period?
Whatever it is, ask them to outline their service offering before you agree to let them represent you.
We recommend that you look for an agent who charges between 1%+VAT and 2%+VAT. We would call this an honest and reasonable estate agency fee.
Is up-front fee a good option?
Some traditional highstreet agents have decided that the best way to compete with online competition is to copy their up-front fee pricing model. So, instead of charging a percentage of the sale, they will charge you a fixed fee, usually between £500-£2,000, which you must pay before they do any work for you.
If an agent offers this up-front fee model, should you take it?
Our answer is a resounding NO!
As we’ve already said, agents are motivated to work hard towards selling your home for the best possible price because, with their percentage commission, they don’t get paid unless they actually sell your house.
An agent who offers an up-front fee model, however, has very little motivation to work hard on your behalf because they’ve already received all of the money they’re going to get. Selling the house will make them no better off than not selling the house because they keep the money either way.
So, even though the up-front fee appears to be much cheaper and much better value, the agent will have already taken everything they want from you which means they’ve no further reason to give you any attention.
What sort of fee are you paying your agent? Do you think they’re earning the money, or could they be doing more? Let us know in the comments section below.
And if you have a fees-related question for our property expert, Russell Quirk, be sure to let us know in the comments section below and he’ll get back to you pronto.