Today, the gap between estate agent fees charged by online agents and the traditional high street chains is higher than ever. It ranges from under £1,000 on a modest property to as much as £40,000 for a £1 million home.
It stands to reason that most of us want to make sure we’re paying the best price when it comes to employing an agent to sell a home. So it’s really worthwhile to have a clear understanding of what estate agent fees actually cover before you settle on an agent.
What do estate agency fees actually cover?
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Estate agent fees are part of the cost of moving house. For your fee, you should expect:
- A visit from the agent to your home, to arrive at a realistic valuation based on recent local sales, the status of the location and the property’s specification and condition
- A photographer to take marketing images and a draftsperson to draw up a floorplan
- A detailed written description to attract potential buyers
- The creation of an online listing, combining the written description, images and floorplan
- Marketing your listing via online platforms such as Zoopla or Rightmove, together with the agency’s own website and direct mail to its customer base
- Managing viewings (some agents offer a discount if you want to do this yourself)
- Liaising between you and prospective buyers and negotiating on offers
Are the fees negotiable?
Don’t be afraid to find out! Online agencies are unlikely to negotiate on fees. This is because they’re so much lower than traditional agencies’ fees.
High street agents, on the other hand, are increasingly open to negotiation, as their market share comes under threat from online competitors. They will quote 1 or 1.5 per cent, but may well accept a lower figure. This is especially true if a rival has made a better offer. Pointing out the enormous difference between what they charge and what online agent charge can exert pressure on agents to reduce their fees.
Some agencies will propose a higher percentage fee if they can make a quick sale. This then reduces if the property takes longer to sell.
How are the fees calculated?
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Online agencies calculate their fees based on broad price bands. They may have different flat fees for, say, properties under and over £1 million. They may also vary their fee according to whether you’re using their recommended legal adviser. Plus whether you’ll be showing potential buyers around the property yourself. They typically offer add-on services such as mortgage finance, for additional fees.
High street agencies will charge a percentage of the eventual sales price. This percentage may vary according to factors such as the sale price of your property, the level of local competition and whether they’re your only agent. Whether you’ve engaged several firms to try to sell will also impact the fee. Agencies charge a higher percentage if another agency is involved.
Agencies such as Savills or Knight Frank, which sell more expensive homes, are likely to quote higher percentage fees (up to 3.5 per cent). They justify this by pointing to their databases of wealthy potential customers. Other agents may not have these resources.
Are online estate agent fees cheaper?
Image credit: Future PLC/David Merewether
In theory, yes. Online estate agents typically charge a flat fee, ranging between £1,000 and £2,000. High street agents charge a percentage of the eventual sale price, typically between 0.75 per cent and 3.5 per cent. This means the fees for even relatively modest property transactions will be higher.
Who pays – the buyer or the seller?
The seller pays the estate agent’s fees, even though agents theoretically ‘work’ for buyers and sellers. With online agencies, the fee is payable in advance, or sometimes within 10 months of the property going on sale. High street agents are only paid once a property is sold.
Are there any hidden costs a seller should be aware of?
Beyond the initial fee, some agencies charge extra for services such as photography, floorplan drafting, showing potential buyers around, mortgage finance arrangement and legal work. Ask for a list of what the fee includes before you instruct an agent.
Should I choose an online option or high street estate agent?
Image credit: Future PLC/Simon Whitmore
Arif Rizvi of the estate agent Christopher Charles in North London reckons online agencies only sell around 25 per cent of the properties that they represent, whereas he claims to sell 95 per cent. ‘We know the local area far better than an online agency, where one person covers a whole region,’ says Rizvi. ‘Plus we’re more likely to achieve a higher valuation for our clients, because we can negotiate with buyers.’
That can be important. If, say, you’re paying £10,000 more to a traditional agent than you would pay online, but the former sells your home for £100,000 more, you’re far better off.
Online agents typically charge an upfront fee, which may not be refundable if you don’t get a sale, while the traditional model is to only make a charge once a transaction completes. That makes the decision something of a gamble – do you go for a lower fee with no certainty of a sale?
Some sellers fear that once online agents have had their money, they don’t have much motivation to market their property. But Tom Cottrell of online agency Yopa responds: ‘I wouldn’t be in business if I had a reputation for not selling property: last year, 60 per cent of my business was from referrals, so I’m far more motivated than I ever was as an employee of a corporate agency.’
Online agencies argue that they can attract a wider selection of potential buyers through digital marketing, and that their low fees mean you will have more money to spend on your next place.
One final point: the longer a sale takes, the more expensive it is likely to be: you may have to re-arrange finance or engage a new agency. So price isn’t the only factor to think about when choosing an agent – above all, you need a firm that will work hard on your behalf to achieve a prompt sale.
The post Estate agent fees – what can you expect to pay and what does the fee cover? appeared first on Ideal Home.
