Estate agent fees reasonable?

JQ.

Surely any business works on a % of profit on costs basis, mine certainly targets that as an objective. Is Estate Agency any different?

If you're in a market selling £100k houses I would imagine sales turnover (No. not value) is far greater than in the +£1m market. Therefore, in the £100k market EA's can afford smaller fees because turnover is greater. Their costs should also be lower, both occupational and employment. In the +£1m market I would imagine salaries are higher, occupational costs are higher as they need expensive high street locations in expensive areas, marketing budgets will be higher etc etc.

So an EA selling £100k houses completes 10 sales in a month at a profit of £500 per sale (£5,000 profit), the +£1m EA completes 2 sales at a profit of £4,000 per sale (£8,000 profit), but the costs of the +£1m EA are considerably higher so it transpires that both EA's have the same %profit on cost.

kingstreet

googler wrote: »

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?

No. I'm not. I picked a few figures out of the air. I haven't a clue what the costs actually are.

I'm genuinely interested in how you would make fees fairer to all, without overcharging the lower end and effectively using the upper end to cross-subsidise the others.

JQ - I'll accept different agents in different markets charging different fees because they have different cost bases.

Assume it's the same agent selling both types, not different agents. It is possible. Does the £1m seller paying £20k in fees get a service which is 20x better than the vendor selling for £100k at £1k fee?

Are the costs significantly different? If you tell me the £1m property will be marketed in a full page ad in Country Life while the £100k house will have 2 column cm in the local free paper I'd accept the costs would be higher, but will the general regional agent actually do that?

Please don't view this as an attack on estate agents. My view of agents, particularly local firms run professionally by chartered surveyors of my acquaintance is especially good.

googler

kingstreet wrote: »

No. I'm not. I picked a few figures out of the air. I haven't a clue what the costs actually are.

I'm genuinely interested in how you would make fees fairer to all, without overcharging the lower end and effectively using the upper end to cross-subsidise the others.

...and I thought that's what I was asking you, since you're the one who expressed dissatisfaction with both percentage based and flat fee examples......

As an alternative to what's already been discussed, would you pay an hourly rate, plus a surcharge to cover the EA's expenses unrelated to your property, or anyone else's? If so, what would you pay per hour?

kingstreet

googler wrote: »

...and I thought that's what I was asking you, since you're the one who expressed dissatisfaction with both percentage based and flat fee examples......

As an alternative to what's already been discussed, would you pay an hourly rate, plus a surcharge to cover the EA's expenses unrelated to your property, or anyone else's? If so, what would you pay per hour?

I know. Disgusting isn't it when people have contradictory opinions and not totally formed thoughts on a particular subject?

I'm not opposed to the flat fee idea per se. My original point was about certain national chains having a very high minimum fee at the bottom end of the scale.

In a way, the dual system is the agent having it both ways. I'll charge a flat fee, until it suits me to switch to a percentage. Is that fair, or am I being a bit picky?

What I've been trying to put across is the idea that fees should reflect the cost of selling a particular property (both fixed and variable costs) together with a decent profit margin. I'm not sure if that is the case if you take a very expensive property into the equation?

Hourly rate? It's a step in the right direction as far as rewarding the amount of time it takes to actually complete a job, but I'm not sure you can fit it to the selling process?

Like I've said before, and I'll ask directly, this time we'll use a percentage instead. 2% of £100k is a fee of £2k. The agent can sell the property, cover his costs and make a profit?

If the same percentage is applied to a £1m property, the fee is £20k, the cost of selling this property is probably higher but the profit (as a percentage of the fee) must be dramatically higher.

I can think of another example from my past. I once worked for a firm which advised a client (I wasn't the adviser) to invest £1m in a particular investment. The commission received by the firm was more than £50,000. Another client investing £10,000 in the same investment would have produced a commission of £500. The work required to complete the task is exactly the same, yet the client with more money effectively subsidised others.

Now, this client would opt for a fee-paying service and not have £50k of his investment wiped out in a bid and offer spread to fund the commission payment.

Is it possible that at some point agents might offer a menu of remuneration similar to the financial services industry, either by choice, or by some form of regulation, or is it simply a commercial transaction that should be the business of the agent and the vendor?

walletpains

I'm in the North East, and my property was valued at around £70k.

I had four EAs round to value: One wanted £1200, one wanted £1500, and two wanted £1800.. all with VAT on top and separate EPC and conveyancing.

PompeyPete

Sorry to gate crash.
We're just about to go on the market for £195K.
We're getting 3 quotes.
What's the highest % fee we should agree to with 3 months sole agency rights?

googler

PompeyPete wrote: »

Sorry to gate crash.
We're just about to go on the market for £195K.
We're getting 3 quotes.
What's the highest % fee we should agree to with 3 months sole agency rights?

Depends where you are in the country, as this varies by region. According to the OFT, the average in E&W is 1.6%, in Scotland 1.1%, if that helps

Doozergirl

kingstreet wrote: »

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?

My solicitor charges the same for either.