By Graham Norwood
Whether you are buying or selling, dealing with estate agents can be a trying experience — and, for sellers, an expensive one. Yet many agents are scrambling for business as the number of transactions falls: sales were 3.5% down last year, according to the latest figures from the Land Registry, and are predicted to drop again in 2018. So is now the time to negotiate down the fee?
Before you bullishly enter the fray, there are a few inconvenient truths worth noting. First, the lowest fee isn’t necessarily the top priority for sellers: fewer than 10% of homes are marketed via low-cost online agencies. Second, high-street agents have an incentive to charge a competitive commission rate — they earn their money by winning instructions and selling homes, so setting prices too high is counterproductive. Finally (and you may want to sit down for this), British estate agents offer good value, with an average commission rate of 1%-1.5%, compared with 4% in Canada, 3%-6% in Spain and 5% in the US.
Yet even a low percentage can lead to an eye-watering bill, simply because property prices in Britain are so high. The average home costs £220,962, according to the Halifax, despite a 3.1% drop in April. So, at 1%, the agent’s commission is more than £2,200, and at 1.5% it’s £3,314 — both excluding VAT, of course. If you’re selling a £1m home, which isn’t uncommon, it swells to as much as £15,000. A few high-end agents may ask fees of up to 2.5%, but these are rare.
How do I start negotiating?
Get at least three agents to provide valuations and their marketing strategies for your home. Check the small print in their contracts: if the charges are blank, they’re up for negotiation. Ask them to state the commission, but don’t commit before you’ve compared figures and strategies from other agents.
“While we occasionally see 0.75% commission, it’s actually more like 1.2% at the moment,” says Paula Higgins, co-founder of the consumer group Homeowners’ Alliance. Be sensible when trying to strike a bargain — remember, an agent needs motivation to sell, so an unrealistically low commission may mean your property won’t be their top priority.
What is included in the fee?
If you want real value for money, not just the lowest fee, check all aspects of an agent’s service, as well as their track record selling your type of property in your area. Most include preparing details and photos, placing them on portals such as Rightmove and Zoopla, and providing “For sale” boards within their standard fee.
What else should I watch for?
Find out if you will be charged extra for a premium listing on Rightmove (one that pushes your property towards the top of buyers’ searches). And ask whether your fee includes the cost of an open-house event and advertising in the local press — or, if you are flogging an estate, Country Life magazine.
Will I be free to switch agent if I’m unhappy?
Most sole agents have “lock-in” periods lasting 4-12 weeks — consumer groups say it’s unwise to accept longer terms, as it means you cannot easily switch agent if you’re unhappy.
Would it help to use an agent’s recommended services?
Agents typically get referral fees after telling clients about their partner mortgage or conveyancing firms, but compare rates and reviews before making a decision, and remember that you’re under no obligation to sign up. Declining to use these companies must not — by law — be an excuse for the agent to disadvantage your property sale or the purchase of your next home.
What if I instruct more than one agent?
“Rather than pay a multiple fee of 3% shared between them, no matter who finds the buyer, we adopt a winner-takes-all approach,” says Camilla Dell, managing partner of Black Brick buying agency and an arch negotiator with selling agents. She suggests saying up front that you’ll pay 2% or 2.5% to the agent who comes up trumps with a purchaser — and nothing to the ones who fail.
I’d like to incentivise my agent — am I allowed to?
You certainly are. So, if the agent would usually charge, say, 1.25% commission to sell your home with an asking price of £500,000, why not strike a deal saying you’ll pay 1% if they get a sale for less than £475,000, but 1.5% if they find a purchaser who’ll offer £525,000 or more? You can have these terms written into your contract.
How about using an online agency?
The savings can be large, but so can the losses. Most online firms charge about £1,000 if you pay upfront; in many cases, however, that’s lost if the agency fails to shift your home. Analysis by the investment consultancy Jefferies suggests some online agencies sell only 50% of the properties they list, and the unsuccessful vendors usually have to employ a traditional estate agent who charges commission — so they end up paying twice to achieve a sale.
