Estate agent fees reasonable?

betmunch

Just to point out, as KingStreet did about the national chain with the minimum fee, the agent you have spoken to may have instigated their own minimum fee and may be prepared to walk away from the deal if you insist on a fee lower than this.

While some EA's might go down to 1% it doesnt necessarily follow that ALL will.

googler

kingstreet wrote: »

IMHO, agents have to do little more to sell a big, expensive property than they do for a little cheap one, so I am pretty much opposed to % charges.

Some of the larger chains, mentioning no names, want £2,800 plus VAT as a MINIMUM and that is absolutely obscene on a property they value at £100k.

So you're objecting to both % based AND fixed fee charging?

If you're opposed to % charging, what would you suggest is a reasonable 'one size fits all' fixed fee?

If £2800 is too much, what do you think is reasonable for a £100k house? Is that still a reasonable fee for a £250k or £500k house, or do you think it should be higher/lower?

kingstreet

I think I was advocating a fair fixed fee across the board?

I don't see a necessity for a higher fee because you are selling a bigger, or more expensive property, whether it be percentage based or a high absolute fixed fee.

Likewise, I'm flummoxed by the idea that a £2,800 + VAT fixed fee to sell a £100k house is in any way reasonable.

So there are things wrong with either method if it generates extremes at either end.

How about a percentage with a ceiling? For example, the highest fee I charge for mortgage advice and arrangement is 1%, with a ceiling of £495. That properly reflects the work required to take an enquiry through to completion, regardless of the amount involved, while covering the "fixed" costs imposed by regulation.

I did think my solution of a decent fixed fee with a bonus was quite reasonable. It rewards effort and it rewards success.

Although a financial services specialist, I've worked for three medium sized independent estate agents around the Midlands over the years and never saw a significant difference in the service you got if you ended up paying £1300, or if you paid £3900. Nor was there significant difference in the cost to the agent in marketing properties where the fees payable were significantly different.

I'm just chewing the fat over this issue and I don't have greatly formed feelings. I would however like to see a more structured approach, rather than the current ad-hoc arrangements.

betmunch

kingstreet wrote: »

Likewise, I'm flummoxed by the idea that a £2,800 + VAT fixed fee to sell a £100k house is in any way reasonable.

Its not reasonable, its business they dont want!

Crazy really, the more properties they have the more chances to get the mortgage on it!!!!

googler

kingstreet wrote: »

I think I was advocating a fair fixed fee across the board?

If so, then what would you suggest is a fair fixed fee for all prices of houses? If it has to be the same for everyone, what you would suggest is fair for both the owner of a £75k flat, and a £1.5 million luxury house?

kingstreet wrote: »

I don't see a necessity for a higher fee because you are selling a bigger, or more expensive property, whether it be percentage based or a high absolute fixed fee.

Likewise, I'm flummoxed by the idea that a £2,800 + VAT fixed fee to sell a £100k house is in any way reasonable.

So there are things wrong with either method if it generates extremes at either end.

It can't help but generate extremes. According to the OFT, average EA fee in E&W is around 1.6%. For purposes of illustration, let's assume that 1.6% is 'enough' for an EA to cover the costs of this one sale (if it completes), all expenses and outlays on this and everything else, and leave some profit on top.

Again for illustration, let's assume a projection of three sales, at £75k, £250k and £750k. If the EA charges 1.6%;

At £75k - fee = £1200
At £250k - fee = £4000
At £750k - fee = £12000

By your logic, it's unfair to charge the higher-value houseowners more than the lower. So if it has to be a fixed fee, and the EA is to maintain the same level of income after expenses, then you have to average out these three -

(1200+4000+12000) / 3 = £5733

The average results in a saving for the high value owner, but penalises the two lower value owners. How else would you do it?

kingstreet wrote: »

How about a percentage with a ceiling? For example, the highest fee I charge for mortgage advice and arrangement is 1%, with a ceiling of £495. That properly reflects the work required to take an enquiry through to completion, regardless of the amount involved, while covering the "fixed" costs imposed by regulation.

Yes, but you have a different business model from the EAs, don't you?

kingstreet wrote: »

I did think my solution of a decent fixed fee with a bonus was quite reasonable. It rewards effort and it rewards success.

Taking the illustration above, what would you suggest as a fixed fee plus bonus scale?

kingstreet wrote: »

Although a financial services specialist, I've worked for three medium sized independent estate agents around the Midlands over the years and never saw a significant difference in the service you got if you ended up paying £1300, or if you paid £3900. Nor was there significant difference in the cost to the agent in marketing properties where the fees payable were significantly different.

I'm just chewing the fat over this issue and I don't have greatly formed feelings. I would however like to see a more structured approach, rather than the current ad-hoc arrangements.

Surely in your time in those agencies you must have realised that the agents don't just spend their time on the tasks relating to the properties on their books which proceed to a sale, and that a significant part of their expenses is made up of time spent with buyers who don't buy, sellers who get a free valuation but don't sell, etc. etc.?

Again, please suggest to us a structure that doesn't result in the higher-value owners getting a better deal at the expense of the lower and mid - as would happen if you fixed the fees across the board.

Greymarl

I'm in the Midlands, I got one agent down to 1.25% and the other (fixed fee) to what works out at around 1.1%. A third was obscenely high and I didn't like them for various reasons, so I didn't bother to negotiate.

Because of the same concerns as you I used the fixed fee as a point to negotiate. I have to say though I was confident that the price I wanted was reasonable and that my house was desirable and hoped it would sell quickly for a number of reasons, which may have helped.

I also agreed to a longer tie-in period than I'd have liked in order to get the fee down. And used only local small agents rather than the bigger chains, as I'd read on here they don't budge in the way the independent agencies do. Perhaps try a couple more?

kingstreet

googler wrote: »

If so, then what would you suggest is a fair fixed fee for all prices of houses? If it has to be the same for everyone, what you would suggest is fair for both the owner of a £75k flat, and a £1.5 million luxury house?

It can't help but generate extremes. According to the OFT, average EA fee in E&W is around 1.6%. For purposes of illustration, let's assume that 1.6% is 'enough' for an EA to cover the costs of this one sale (if it completes), all expenses and outlays on this and everything else, and leave some profit on top.

Again for illustration, let's assume a projection of three sales, at £75k, £250k and £750k. If the EA charges 1.6%;

At £75k - fee = £1200
At £250k - fee = £4000
At £750k - fee = £12000

By your logic, it's unfair to charge the higher-value houseowners more than the lower. So if it has to be a fixed fee, and the EA is to maintain the same level of income after expenses, then you have to average out these three -

(1200+4000+12000) / 3 = £5733

The average results in a saving for the high value owner, but penalises the two lower value owners. How else would you do it?

Yes, but you have a different business model from the EAs, don't you?

Taking the illustration above, what would you suggest as a fixed fee plus bonus scale?

Surely in your time in those agencies you must have realised that the agents don't just spend their time on the tasks relating to the properties on their books which proceed to a sale, and that a significant part of their expenses is made up of time spent with buyers who don't buy, sellers who get a free valuation but don't sell, etc. etc.?

Again, please suggest to us a structure that doesn't result in the higher-value owners getting a better deal at the expense of the lower and mid - as would happen if you fixed the fees across the board.

Like I said, this was a discussion point and I threw in an opinion, based on how I feel about the issue, from the point of view of a house seller and as a former estate agency employee. I don't own an expensive property either, so this isn't avarice speaking.

In any business, there are costs to be covered, both fixed and variable and I'm not particularly impressed with the current regressive system which charges more for the simple reason that some can afford to pay more.

Unless you're suggesting agents make a loss on low-fee sales in a sense of philanthropy, I'm pretty sure they make a profit on each sale and make a bigger profit on a bigger sale which commands a higher fee?

Let's say the fixed cost of running the agency is £500 per completed sale. The variable cost of a £100k sale is £100 and the variable cost of a £500k sale is £200. The cost range is therefore £600 to £700. If a fee of £1,250 is payable for the lower value sale, the gross profit is £650.

To maintain the same level of gross profit on the high value property, the fee needs to be £100 more but the current system appears to advocate a high profit on the basis purely of ability to pay?

Let's try a slightly different analogy.

I'm "normal" so I get to pay £10k for a Ford Mondeo. You're "minted" so you get to pay £15k for the same Mondeo, as you deserve to contribute more to profitability. Surely those paying more should get more for what they pay, or they should pay the same as everyone else? Is the service better at the higher cost?

evoke

A 1.5% fee or lower is reasonable in my opinion. Anything more and the EA is having a laugh.

kingstreet

My Mondeo analogy might be a bit poor, so let's look at solicitor's fees.

Anyone know what a solicitor would charge for a sale at £100k and a sale at £500k?

googler

kingstreet wrote: »

In any business, there are costs to be covered, both fixed and variable and I'm not particularly impressed with the current regressive system which charges more for the simple reason that some can afford to pay more.

Unless you're suggesting agents make a loss on low-fee sales in a sense of philanthropy, I'm pretty sure they make a profit on each sale and make a bigger profit on a bigger sale which commands a higher fee?

You're convinced that a fee of (say) 1%, on a house of £90,000, net income of £900, covers all expenses relating to that sale, and a proportion of all the expenses incurred by the EA during the time that property is on their books, with some left over to turn a profit?

You've spent some time within the business. How much of this would you say is left as a profit?