What A Joke - Estate Admin Fees

rtho782

There is one big difference.

Currently, the landlord shops around for an agent. He naturally chooses the one that charges him the least. Let's say 10% of the rent, rather than another that charges 11%.

However, the first one also charges the tenant £300. The second one charges the tenant nothing.

Overall costs (for LL and tenant combined) are lower for the 2nd agent, but the LL only cares about his own costs. If the tenant wants this house, he can't pick the agent.

In the end, all these fees are met by the tenant, so the tenant ends up out of pocket.

By moving all the fees to the LL, the LL will continue to find the cheapest agent, except that now it's the cheapest overall - less money for the T to pay.

Right now agents are incentivised to charge the minimum amount to the LL and extort the T as much as possible to win business from more LLs.

MyOnlyPost

You have a point but you generalise

I posted earlier a link to my agents fees and for each new tenancy I pay double the fees that the tenant does and I said at the time this was a choice on my part and I could have paid less elsewhere at the expense of my tenants

I may be in a minority of one which is why no-one agrees with me but that is how I operate

steampowered

MyOnlyPost wrote: »

I appreciate your analysis which is very good but as I said previously I am an economist so I am aware of the things you point out. I was saying, and have said multiple times that landlords (whos margins may be wafer thin if they have finance and are in the 40% tax bracket) will not absorb the costs if passed to them. I was not referring to estate agents.

Many thanks - however I would have thought that individual landlords are price takers, not price makers. Individual landlords don't have the power to increase rents beyond the market level.

The risk of the cost of a property exceeding the rent (taking into account finance costs, tax, void periods, maintenance etc.) is a risk that leveraged landlords take.

If the economics of the market change, then some landlords will exit the market - just like any other market.

yes there will be some tenants who will be better off paying a marginally higher rent and the average fees across the sector may well fall. BUT I have illustrated that some tenants may find themselves worse off if the fees are loaded to the rent instead of upfront. It is my hope that whatever the governement does about fees it shouldn't make any tenant worse off.

So you are effectively saying that 99 tenants should not be able to save money if 1 tenant happens to be worse off.

This sounds like a classic case of 'status quo bias' to me. Simply because the current state of affairs, is the current state of affairs, does not necessarily make it the best way of doing things.

I don't think the status quo, under which tenants have to pay extortionate fees with little ability to negotiate them and no up front transparency as to what the fees are, is justifiable.

I accept that fees hit disproportionately hit short term tenants and that long term tenants suffer less, but I'm not sure that is a good argument for fees being used to subsidise letting agent running costs and profit margins.

Its a bit like saying banks should be able to charge £100 if you go overdrawn by 1p in your current account, as the fees can be used to subsidise services for people who never go overdrawn. I don't agree with that either.

MyOnlyPost

steampowered wrote: »

Many thanks - however I would have thought that individual landlords are price takers, not price makers. Individual landlords don't have the power to increase rents beyond the market level.

This is an assumption based on a perfect market but housing is currently heavily weighted in favour of the supplier. As discussed earlier if the market rent is £750 and I put my property up at £800, when all the £750 properties are gone there will still be enough renters in the market that someone will take my price. Once enough suppliers have raised their price it becomes the new norm. Only when there is sufficient supply in the market that all (the vast majority) of renters can be provided for or the price hits the affordability ceiling will the upward cycle stop until market conditions change.

steampowered wrote: »

The risk of the cost of a property exceeding the rent (taking into account finance costs, tax, void periods, maintenance etc.) is a risk that leveraged landlords take.

If the economics of the market change, then some landlords will exit the market - just like any other market.

This is a sound principle and would apply to virtually any commodity or service that I can think of but there is an underlying assumption that the people in the supply chain are experienced business people. In the last 10 years a lot of people have jumped on the BTL train without really having any idea what they are doing, but it looks so easy on TV. It is estimated that between 80-90% of landlords have just one property and many of these will have had absolutley no business experience before investing. Whether they will exit the market to cut losses remains to be seen but if some do then theoretically supply will fall forcing prices up

steampowered wrote: »

This sounds like a classic case of 'status quo bias' to me. Simply because the current state of affairs, is the current state of affairs, does not necessarily make it the best way of doing things.

I don't think the status quo, under which tenants have to pay extortionate fees with little ability to negotiate them and no up front transparency as to what the fees are, is justifiable.

I accept that fees hit disproportionately hit short term tenants and that long term tenants suffer less, but I'm not sure that is a good argument for fees being used to subsidise letting agent running costs and profit margins.

Its a bit like saying banks should be able to charge £100 if you go overdrawn by 1p in your current account, as the fees can be used to subsidise services for people who never go overdrawn. I don't agree with that either.

I do agree the status quo isn't good enough and I have not defended extortionate fees at all, in fact I am strongly opposed to them hence my own stance on the agent I use. I have said fees should be capped to cost + a reasonable amouunt for time/manpower. I then further went on to say that (if this is done) it won't matter whether fees are charged up front to the tenant or the landlord as either way it will be the tenant who is paying them in the long run through their rent and gave an example of how a long term tenant would be worse off assuming the same fees at the beginning of the tenancy.

steampowered wrote: »

So you are effectively saying that 99 tenants should not be able to save money if 1 tenant happens to be worse off.

Yes it does rather look like I support this, this is my fault because of an assumption I made and didn't show. There is a line somewhere that has to be drawn so for instance a system that means 40% of tenants are worse off for the benefit of 60% I would struggle to get behind but your example I would clearly support.

The unspoken truth in the whole problem is that EA's and LA's set their charges based on the percieved affordability of the area they operate in so it is currently the wealthier middle class areas that mostly see extortionate fees (whether the locals can afford them or not) whereas EA's and LA's in lower income areas tend to have more affordable fees because they would never be able to let a property otherwise. In the event of the changes to fees we have been discussing it is these lower income areas that will be worse off for the changes.

I suppose my overall stance therefore should be that the property crisis and letting fees crisis are a regional problem and should be treated as such. What may benefit one area may be detrimental to another. I am a northener who voted to remain but I understand that the majority of northeners feel disenfranchised and feel that governement legislates for the benefit of London and the South East (not my opinion, general consensus of the talking heads after brexit) and affordable housing is the latest issue that affects some of the population but by no means all.

WibblyGirly

I've struggled with this before. Some houses look beautiful which I would love to live in, the rent is right, the area great but the costs (almost £800 with one agent) put me off so many houses.
What I did was I googled all the local agent, calculated their fees and went and look the houses with the cheapest so that maybe what you'll have to do so you don't look on rightmove and see hows you can't have.

When I first started renting about 8 years ago I had a terrible time. Got given my notice to leave within 4 months of being in my first house We hadn't even bought a sofa before we had to move back home to save for a new deposit as we were on minimum wage.
Fortunately that agency weren't idiots and let us rent another house with them without us paying fees again and we had to do that twice with them as the second house that was supposedly long term also gave us notice at the 6 month mark as they wanted to sell. I did get pleasure seeing it for sale for months and being reduced in price

Sarah_81

One of the worst aspects of renting. I've had good, bad and awful;

24/7 - Brilliant. £100 fees, no annual renewal fees, repairs done within hours, got to know the staff well and they treated me absolutely great. Rent the same over 6 years, landlord also fab. Cried when I left (studio flat I had way outgrown with issues from the building next door) never charged me for reference fees, just telling me to let them know if I need anything and they'll sort it. Landlord told me to come back anytime (I plan on doing soon)

Bad: Robsons estates - £1000 upfront fees. £200 annual renewal costs. No copies of contract despite repeated assurances, repairs never done, email box never checked - emails sent bounced back as the 'recipient mailbox was full', many other issues.

Awful - Surprisingly, Your move. I thought these would be a good agency; professional and reasonable on costs. Nope. The highest yet; £1200 check in fees, and not only that, a £125 LEAVING fee! Yes, I actually had to pay to leave the property at the end of the fixed term. Goodness knows what their renewal fee would have been.

Now: With Merryweathers. £1100 check in fees. Property was repossessed 3 weeks after I moved in so no chance of renewing contract, Hoping there will be no check out fee and they will waive a reference fee now i'm putting up with viewings/inspections for the next 2 months.