Estate Agency Fees - What are they for?

princeofpounds

For any economic enterprise, there has to be an appreciable return on invested capital. This is called economic profit.

This is similar to normal profit but accounts for the fact that there is an opportunity cost - if your capital wasn't in the business it could be put to work somewhere else with a similar risk profile and generate a return.

There isn't a lot of capital in estate agency business, a few assets might be purchased but often are leased, although there will be a substantial amount of working capital.

But there are a lot of costs, like wages, rent, petrol, advertising, utilities, taxes, etc.

If the revenues don't exceed these costs sufficiently to provide an economic profit then what is the point of the enterprise? None. The marginal players (those who don't generate enough profit or fail to manage their liquidity) will shut.

So what drives the price of estate agency work is nothing to do with what the activity is actually 'worth' or the services being directly performed - after all its little more than basic admin, some marketing and sales skills. It's all to do with the price level that allows the activity to exist on an economic basis at all.

Think about it in these terms - you would pay a lot to get a dead body removed from your house and the place cleaned. But it's not that much more difficult than the cleaner you get to sweep your floor skill-wise. But because the former is less frequent, needs to pay higher wages to get staff, needs some more expensive chemicals it charges a way higher rate.

(A lot of ex-cons going straight in that business and earning an ok wage from it!)

britcub

Not all estate agents are reputable, even in this day and age. This one blows the whistle on some dodgy tactics.. (have a search on YouTube for Red Roof Vlog 2)

confused31_2

MissMotivation wrote: »

Confused.

I invite you to spend a day in my office and accompanying me on appointments to see what we actualy do to earn our money.

I absolutely believe that will have changed your opinion by the end of the day.

no thanks id get bored of sitting on my arxe all day:p

only joking you might be a one off

googler

"80 percent of buyers who buy a house first see it on right move"

What's the source of this figure? Is it from Rightmove's own publicity?

Has it been independently verified, or is it just urban folklore?

googler

"I work and im paid hourly now if a estate agent sold a house for 200,000 pound and was charging 2 percent, they would make 4000 pound from the sale."

No they won't. The fee is their 'business income', not a salary.

They'll make £4,000 LESS all their costs and expenses, on this sale and on all the other houses that don't get as far as a sale and hence didn't yield any income for the effort that went into them

googler

confused31 wrote: »

Yeah so a esate agent sells one house at 2 percent and then they can afford to pay everyone for a month and keep the office going for answering the phone.

do you think thats fair?? and do you really think they have put that much work into selling the house to actually justify charging that amount??

its okay trying to keep people in jobs but if it means ripping people off its out of order.

Why do you think it's unfair?

Why do you think a fee that covers the costs of running the business and (hopefully) yields a profit to pay a salary is a rip-off? It's in the nature of any business - total income less running costs = profit.

chickmug

googler wrote: »

"80 percent of buyers who buy a house first see it on right move"

What's the source of this figure? Is it from Rightmove's own publicity?

Has it been independently verified, or is it just urban folklore?

Already asked that Post 29.

Not sure why there is no reply as that poster has a lot to say usually:rolleyes:

confused31_2

chickmug wrote: »

Already asked that Post 29.

Not sure why there is no reply as that poster has a lot to say usually:rolleyes:

okay then what over heads do they need to pay out of the 4000 pound???

at most 500 pound for advertising, or is the one sale supposed to keep the shop running for a whole month, as well as the other estate agents wages???

Its a known fact most people looking for a house look on right move before they start looking at shop windows, they may phone the estate agent up after but the first time most house buyers first see a house is on right move.

You havent got to agree with me, but if you ask most of people who are buying on here, they will look at right move, more than any shop window.

ill do a poll shall i??

googler

Yup, clicked 'reply' to his/hers before reading on to yours...... too hasty.

confused31_2

googler wrote: »

Yup, clicked 'reply' to his/hers before reading on to yours...... too hasty.

you need to get a grip, if you are a estate agent i bet your company use them, and i bet one of your selling points is we use rightmove the biggest house selling portal.

Or are you the only estate agent that doesnt use that line??