Are Estate Agents Fees Excessive ?
I will always be in favour of a free market economy and therefore I would never advocate only one approach to business. Competition and alternative methods are a healthy way of ensuring optimum performance and client focus. However, I do feel that the estate agency profession is ripe for review, reassessment and even stricter regulation.
First and foremost, estate agents are responsible for selling most people’s largest asset. On this basis, my primary concerns whilst choosing an agent would include:
- That my chosen agents attitude and approach were focused on my best interests.
- I would also be keen to hire the sales agent with the most proven and successful record of success.
- I would expect value for money and to be charged a fair and justifiable fee.
Agent property magazine ‘The Negotiator’ printed an article in their March 2012 edition titled ‘Agency Fees Top Cost of Moving’. It highlighted a recent survey conducted by RBS discovered that agent’s fees had increased by a staggering 69% in the last 10 years, which rather interestingly coincides with a 64% increase in house prices during the same period. It is worth noting that agents operating costs certainly didn’t increase by a similar figure during this same period. In fact by contrast, the surge in dominance of website portals as a marketing media have enabled reduced operating costs. I am therefore forced to wonder whether an agent who insists on hanging firmly to these accidently gained profit margins can simultaneously claim that they act in their client’s best interest ahead of their own. This extraordinary rise in agent’s fees has created a protective blanket for some agents, enabling them to appear ‘bullet proof’ in light of the rapid decline in the number of property sales and mortgages being agreed in the current market! I would sincerely hope that their existence is the result of their sales skills and business acumen rather than through the subsidies unwittingly gained from hefty fees.
Interestingly, in my experience, increased fees do not usually increase an agent’s desire or ability to sell. Most employed estate agents work for a company who pay a basic salary plus a small bonus. As a result their gross earnings fluctuate very little alongside increased sales results. It is only the minority who rely on large commission payments. Secondly, because the transaction time from listing to completion can be several months, agents are often involved in a lot of work without any tangible or immediate feeling of financial return. As a result, usually money hungry sales people sell products with a quick transaction time and fast pay-out in order to gain their commission fix. And finally, if a sale falls they get nothing for their work. So actually, increased fees can subsidise a business and allow an agent to become complacent.
As an agent, I charge ½%+vat as my standard sales fee. I run a market leading business which is selling the majority of properties in our chosen post code sector. My service extends beyond the norm (including business hours of 9-9, 7 days a week, the employment of high calibre staff, free accompanied viewings, no contractual tie in or withdrawal fee) and 75% of my property listings are the result of a recommendation.
My fee structure represents a simple formula:
Agents Fee = Agents Cost + Profit.
Therefore a large fee can only mean an agent has unnecessary costs or unnecessary profits……
Or both!
My advice to the public therefore is simple: don’t be fooled. In my opinion, Estate agents who charge a fee of 1% or above are making huge and unnecessary profit margins. It is true that gone are the boom years, yet the inefficient, ineffective and outclassed agents managed to survive…
How? Have their inflated and unjustifiable fees allow them to? Ultimately the future path of our profession is in the hands of vendors and they will no doubt decide whether they are willing to pay over the odds for the unclear benefits of a glossy and ‘reassuringly expensive’ agent …..
Written by Gareth Jones of Red Hot Property; leading North East Estate Agent.
First published on Red Hot Property Blog – Should Estate Agents Review Their Fees?
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