When it comes to fees, you get what you pay for.
(Don’t forget to look at our example at the bottom of the page of how you can do the math to decide if the estate agents fee is right).
You may feel like many other sellers, that the only way to differentiate between so many estate agencies that appear to offer similar services is to go with the one offering the lowest commission.
More often than not this strategy backfires. Time and time again we see sellers losing literally thousands of pounds using a cheap agency. Low commissions are only possible if comers are cut. There may be little or no sales training for their staff or after-sale support for you, which results in missed offers, a slower sale and a lower sale price.
In these circumstances, why would anyone spend the time negotiating on your behalf for every penny? You can usually spot them by the fact that they have early closing hours, little or no weekend and late evening viewings, no regular contact with their customers, photocopied (rather than nicely designed and printed) details with hard-to-see photos (if they have proper photos), scruffy-looking boards and adverts with pages and pages of houses all crammed into as small a space as possible. To guarantee a certain level of profit in the business, agencies offering low commissions need to secure a high turnover of properties to keep going. With so many properties on their books, they simply don’t have the time to ensure clients have the best possible care during one of the most stressful periods of their life.
You really don’t want your property just sitting there amongst a pile of others. I heard one agent describe his process as “throwing as much muck at the fan as possible and seeing what sticks”. Please keep away from this type of agent – it’s not healthy!
In addition, you will frequently find that these agencies place great importance on the number of boards they display. This is obviously no indication of how many properties have been successfully sold through to completion, only that the property is currently for sale or that the sales process has begun. The same applies to any adverts. Just because one agency saturates the them with properties, it doesn’t mean that your property will be easy to see. In fact, the reverse is likely to happen.
If you really are anxious about agents’ fees, you can always offer them a money incentive (such as £1,000) if they sell your property. This will focus the agent’s mind considerably and ensure that your details are on the top of the pile to show a prospective buyer. Remember if you do this, you must lay out exactly what you expect from them in return.
Rule number one: don’t expect a good agent to tell you over the phone what their fees are.
Like most industries, you can’t expect someone to give a quote for work if they have not seen what they are dealing with – you wouldn’t expect a decorator to quote before seeing the room. The same applies for quality estate agents – if you want them to do a fantastic job then let them tell you what the investment will be – and of course listen to how they earn that fee. I promise you, they are not all the same.
Low commissions (or budget agents as they are sometimes referred to) are not a good sign; they have to take on a lot of properties to reach a certain level of profitability and you can expect little, if any, service as a result. In this case, what seemed as the outset to be a bargain may ultimately cost you much more than you planned to spend in money, time and stress.
If you are paying a higher commission, you have the right to complain about poor service from your agent (and then negotiate a lower fee if you feel necessary)
If you have a discounted rate, it is much harder to complain. What does a low fee say about the agent’s confidence and negotiating skills? I would rather pay just that little bit more for an agent that I know was going to perform, stick up or me, and negotiate a higher sale price.
Here is an example of how you can check to see if the agent is worth the investment.
Ask each agent you speak to, what their average asking price achieved is. This is key to working out what your return on investment is and it is always different from agent to agent.
Let’s say you have three estate agents out;
- Agent One: Charges 1% +VAT and on average, achieves 94% of the marketing price.
- Agent Two: Charges 2% +VAT and on average, achieves 97% of the marketing price.
- Agent Three: Charges 1.25% +VAT and on average, achieves 95% of the marketing price.
Now let’s assume they all value your property at £400,000. Who is offering the best value for money here?
- Agent One: Fee= £4,800. Price Achieved: £376,000. Total walkway price for you: £371,200.
- Agent Two: Fee= £9,600. Price Achieved: £388,000. Total walkway price for you: £378,400.
- Agent Three: Fee= £6,000. Price Achieved: £380,000. Total walkway price for you: £374,000.
So despite Agent One being £4,800 cheaper than Agent Two, the vendor would actually be £7,200 better off with Agent Two.
This is such a simple exercise that you can do on a valuation and it will also give you a good opportunity to see if the agent in front of you knows anything about their own business or what they can offer their clients.
You may also find that some agents charge a fixed fee. This is okay too, and don’t feel disheartened and think they are not motivated to achieve you the best price because it is not based on the final price achieved, any professional, quality agent will want to achieve the best price possible so you walk away from this journey feeling like you’ve had good value for money and are happy to recommend their services.
Remember, using a cheaper agent will not always save you money, in fact it can cost you thousands – but make sure that you understand the value and convenience that is being offered to you.