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Last edited 05 Feb 2020
Estate agent fees
Estate agents are appointed by property owners to find purchasers (or sometimes tenants) for their property and then to facilitate negotiation and agreement of terms between their client and the purchaser.
Although acting as a negotiator between buyer and seller, estate agents are nevertheless appointed by the seller and so represent the seller’s interests. It is therefore inherent in their role that they should strive to get the best possible deal for the seller. This not only means a smooth transaction that sees the timely exchange of contracts and final sign-off, but should also mean getting the best price for their client.
Estate agents' fees are usually paid by the seller, and generally, the higher the sale price the agent negotiates, the more commission the estate agent receives. However, individuals within estate agent organisations may sometimes be under pressure (or be offered incentives) to achieve sales quickly, even where this may result in a lower price for their client.
Fees charged by estate agents vary, depending on the type of agent. In the high street, fees are usually calculated on a commission basis, i.e as a percentage of the price the buyer ultimately pays. This means that estate agents can potentially achieve high incomes given:
- They handle multiple clients and properties.
- Property prices have increased relatively consistently in the long term since the second world war.
- There is relatively little capital required to set up as an estate agent and operating costs tend to be fairly low.
Vendors should expect to pay around 1 to 2% of the property’s selling price as commission to a typical high-street estate agency. At, for example, 1.4%, this would see a sale price of £750,000 generate a commission of £10,500.
It may possible to get a lower rate by giving the agent ‘sole agency’ or ‘sole selling agreement’ thereby excluding other agents from selling the property. Conversely, if the seller appoints more than one agent (multi-agency), each of the agents will likely charge higher rates. Typically, multi-agent commission rates (at 2018 prices) range from around 2% to 3.5%.
- Sole agency agreements: if the seller finds a buyer (during the contract period), they do not pay the estate agent’s fees.
- Sole selling agreements: if the seller finds a buyer, they may still have to pay the estate agent’s fees.
A relatively low-cost alternative to the high-street are the Internet-based estate agents who charge a fixed fee (usually inclusive of VAT) as opposed to a percentage of the sale price. Generally, online estate agents’ fixed fees can be anything between £600-£2,000.
A significant number of home sellers (around 12%, according to a ‘Which’ survey of 2017) tend to be dissatisfied by the service they receive from their estate agent. Much of this may stem from the perception that estate agents demand high fees for doing relatively little – this may be exacerbated if the property sells very quickly and the agent is thought to have made a ‘fast buck’. Other factors could also contribute to dissatisfaction, such as a breakdown in the relationship between sellers and agents, and the generally poor image estate agents have in the minds of the public.
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