Ratchet / tiered commission for house sales?

SouthLondonUser

In the US it is relatively common to negotiate a ratchet / tiered commission structure with the estate agent you appoint to sell your property. Do you know of any agent who agrees to this in London? I have never heard of it, and a couple of agencies I enquired with seemed reluctant at the idea.

For example, let's say an agent values my property at £300k and wants a 1.5% commission.

Paying 1.1% up to £250k, 4% between 250-275k and 5% above would mean:

sale price: £300k --> commission 1.66% (higher than 1.5%)
sale price: £ 275k --> commission 1.36% (lower than 1.5%)

but, most of all, the agent has more skin in the game, because every £10k a buyer knocks off the £300k valuation would cost the agent £500, not £150.

Or, I don't know, paying 0.5% - 5% - 8% means the same 1.5% on a £300k sale, but with steeper rewards/penalties for prices above or below.

Thoughts?

davidmcn

I thought it was relatively commonplace. Of course the risk is that the agent sets the bands at a level which they know is easy for them to achieve, whereas you're none the wiser because you're likely to be relying on their valuation.

martinsurrey

davidmcn wrote: »

I thought it was relatively commonplace. Of course the risk is that the agent sets the bands at a level which they know is easy for them to achieve, whereas you're none the wiser because you're likely to be relying on their valuation.

We did banded commission on our sale, and the EA rang the buyer out to hit the upper band.

Avoided the valuation issue you mention by getting 5 valuations, and researching the market ourselves, all in all they made some good money, but I believe I got value for money as well.

SouthLondonUser

Could anyone who did banded commissions in London, or with an agent who has a presence in London, be so kind as to share the agent's name? Maybe in a private message?

Thanks a lot!

eddddy

At what point are you trying to negotiate commission with the EA?

Typically, an EA won't negotiate commission until they have appraised your property, and explained their service etc.

For example, they almost certainly won't negotiate commission in an initial phone call, before they've even met you and seen the property.

(In that past, I have also offered 'bonuses' for achieving over a particular price.)

Mutton_Geoff

SouthLondonUser wrote: »

For example, let's say an agent values my property at £300k and wants a 1.5% commission

You appear to already be compromising with the escalation of the fee scale to pay the agent more than they are asking. In your example, I would get other valuations and do some homework to see that the £300k was a reasonable and achievable price. Then I would offer the agent 1% on £300k and 10% on anything above that if any other agents feel it's worth pitching a little higher.


The £300k and 1% would be baselines for me and incentives offered for achieving better than expectation. If they were then motivated to sell for £310k, the extra money in your pocket would cover all your legals, commissions and a good chunk of the stamp duty on your onward purchase.


It's easy to lose sight of the value of money when buying and selling property. Go to the bank, draw out £2,400 and put it on the table in front of you. See what it looks like then realise your proposal is to give that to the agent in addition to their normal fee (1%) for selling the property for the price they have already said it should achieve.


Oh, and yes, I have done this with agents but unfortunately the majority of them are employees that can't think out of the box and are not interested in constructive methods to help you achieve the best price for your property.

SouthLondonUser

@Mutton I was just throwing out random numbers. I'll think of a few proposals, and put together a simple script to plot total fee % as a function of sale price, with the idea that the total fee should be roughly the one they quoted for the valuation price or thereabout, with steep increases and decreases if the price is lower or higher than that.

@eddddy, the way I see it, the problem is that no agent would tell you: no, we'd never agree to a tiered commission. They will always tell you maybe, let's see, it depends, etc. Starting from a list of agencies which are known to have agreed to this might save some time.

Mutton_Geoff

SouthLondonUser wrote: »

@Mutton I was just throwing out random numbers. I'll think of a few proposals, and put together a simple script to plot total fee % as a function of sale price


Starting from a list of agencies which are known to have agreed to this might save some time.

You’re over thinking it. I would not select an agent based on whether they are known to have done this in the past. Once you have chosen and are in discussion with your agent, then that is the time. I am a great believer and advocate of “everything is negotiable”.

SouthLondonUser

Sadly it's not.
I have just told an agent to get lost because they wanted sole selling rights, they didn't agree to make their fee payable on completion only (so if a buyer exchanges but fails to complete I'd pay a fee on a sum I won't have received???), and because they verbally agreed not to show the property the the 4 people introduced by the previous agent but they refused to put it in writing.

While clearly banded commission is not the only criterion it is a criterion for me.

Norwooder

Also looking to sell my home in South London.

Does anyone have recent experience of what % commission can be negotiated in London? I'm talking about reasonable sized outfits, like Winkworth, Pedder, KFH etc. Property is worth in the region of £400k.

SouthLondonUser

1.3 to 1.5% + VAT.
1.5% seems to be the norm.