How Much?
A recent Office of Fair Trading enquiry found that 38 per cent of us feel estate agents offer poor value for money. It hardly made the news.
In comparison with the legal and removals costs, estate agents' fees can seem excessive, particularly at a time when many people are financially stretched to breaking point anyway.
How much you pay for an agent's service will depend largely on whether you choose to entrust your sale to one agent (sole agency) or spread it among several (multiple agency).
Appointing one agent is the usual, and cheaper, option. The vast majority of estate agents charge a percentage of the sale price, currently somewhere between one per cent and two per cent.
Multiple estate agency agreements will typically charge from 2-3.5 per cent (paid to the agent who achieves the sale). It's more expensive,but a good option if you need a quick sale.
Percentage Or Fixed Fee?
The beauty of the percentage fee, as far as estate agents are concerned, is that selling an expensive house means a lot more money for the same work as selling a cheap property.
Sellers of studio flats, however, may suspect that they're not receiving quite the same attentive service as the owners of the mansion down the road.
So property at the cheaper end of the market is sometimes sold for a fixed commission. Do your sums though - sometimes the fixed commission fee can actually work out more expensive than a percentage rate.
Ignorance Is Costly
Sounds simple so far? Well, in principle it is, but without reading the small print and learning how to push for the best possible deal, you could still end up seriously out of pocket.
Stephen Carr-Smith, the Ombudsman who adjudicates on complaints against estate agents, believes passionately that British movers need to be more knowledgeable.
"The buying and selling public too often go into negotiations in a naïve way," says Carr-Smith. "They're involved in the biggest financial transaction of their lives. They should think about it a bit more, take advice, and negotiate."
Carr-Smith advises that you choose three agents and invite them to give you a market valuation and then discuss their charges.
"Valuing property is an art, not a science, and 10-15 per cent variation between agents is reasonable." If someone comes in much outside that range, be suspicious and ask to see evidence that such a price is achievable.
Sliding Scale
As well as three slightly different valuations, you will probably get three differing rates of commission.
"You will naturally be attracted to the one that offers the best combination of highest valuation and lowest rate," Carr-Smith notes. But there are other ways to proceed.
Until you've agreed terms, everything is up for negotiation. "Nothing is set in concrete at this stage. So, I always tell anyone who asks me for advice to suggest a sliding scale," says Carr-Smith.
So if, for example, the valuations vary from £180,000 to £220,000, and the rates from 1.25 per cent to 1.75 per cent, go to the agent that valued your home highest and say:
"If you get me £210,000 to £220,000 I'll pay you 1.75 per cent. If you get £190,000 to £210,000, I'll pay you 1.5 per cent, and if you get me more than £220,000 I'll pay you £1.85 per cent."
Carr-Smith advises: "If the first agent doesn't agree, go to another one. It's all open to negotiation. They might say they won't, but they will if they need to."
Top Tips: What To Watch Out For
Aside from these details of valuation and commission, there are other issues top bear in mind. Here's a useful checklist of what to watch out for:
1. Choose Well
2. Shop Around
- Invite at least three estate agents to quote. Haggle over the fee or try and strike tiered fee deal.
3. Read The Small Print
- Most agencies are honest, and use standard industry agreements. But always check carefully any documents you are given, and find out exactly what your estate agent will be doing for his or her fees.
4. What Is Included?
- Beware a very low percentage. Percentages can sound low, but they add up to a lot of money. Your agent should always illustrate how much it will cost you on the basis of the asking price. And don't forget that you will have to pay VAT on top.
- Some agents charge additional fees for advertising and 'For Sale' boards. If yours does this, make sure that you have in writing exactly how much your 'extras' will cost you.
5. 'Sole Agency' Or 'Sole Selling Rights'?
They sound similar, but under ‘sole selling rights’ only the estate agent has the right to sell your property. If you find a buyer yourself you will still be liable for the estate agent's fees.
Under ‘sole agency’ if you find your own buyer you won't have to pay commission, but you may still have to reimburse your agent for their marketing expenses.
6. 'Ready, Willing And Able' - Beware!
- And, above all, never sign a 'ready, willing and able' agreement. With this, as long as the agent finds you a buyer, you have to pay their commission whether you end up selling the property to that purchaser or not. You may need to withdraw your home from sale for any number of valid reasons, and you should not be penalised for exercising your right.
7. Worth The Paper?
- Once you've agreed terms you will usually be asked to sign an agency agreement. The law, however, only requires that the customer is made aware of the terms of business.
- So, even if you don't actually sign anything, your agreement will still be legally binding.
8. Pay Day
- Find out when your agent will expect payment. Normally fees are due when contracts are exchanged, but you don't pay until the sale is actually completed.
9. Changing Agents - Don't Pay Double, Negotiate
- If your house doesn't sell quickly, use it to your advantage. The end of your contractual period (usually 12 weeks, plus two weeks' notice) is a good opportunity to renegotiate a poor rate. If your agent refuses, look around for someone that will give you a better deal.
- But never change to another agent while you are still contracted to the first. Both agents could charge you commission if your property is sold.
10. Alternatives - Fixed Fees
Some estate agents have recently started offering fixed fee services.
Halfapercent.com's fee structure (which starts at 0.5 per cent) gives clients the option to keep fees low by taking on some of the non-skilled work and paying the ongoing expenses, while the agents focus on marketing and negotiating.
In London, We're Moving offer tiered charges from just £1,500 up to a maximum of £3,000 for roperties over £500,000 - and they're proving very popular with metropolitan movers. How do they do it? Low costs. Just one office with five members of staff, and clients who are happy being kept up to date via the internet and are prepared to show their own homes twice a week.
Nikki Sheehan
Review our guide to Estate Agents
