- What is the role of an estate agent?
- Types of estate agent fees
- Estate agent fee calculator
- Unconventional Fee Arrangements
- Tips for negotiating with Estate Agents
- Things to Check on Estate Agent Contracts
- Selling via a quick sale company
- How Much Do Estate Agents Make?
- Why Estate Agent Fees Aren’t Normally Published
- Understanding Estate Agent Fees and the Law
- Should You Choose an Estate Agent Based on Cost?
Buying and selling a home is no easy task and that’s why so many people elicit the help of estate agents. Estate agents are experienced professionals with connections and in-depth knowledge of the real estate world. But some people are still unsure about paying estate agent fees when they can just sell or buy a home themselves.
Is hiring an estate agent worth it? What jobs do they perform and how can it help expedite the sale or purchase of your home? Keep reading for an estate agent overview and fee guide that’ll help you make an informed decision.
1. What is the Role of an Estate Agent?
So what exactly does an estate agent do? A lot of things!
The estate agent you hire is tasked with listing your home, helping you decide on a price, handling all inquiries, and settling all details surrounding the final sale.
Pricing Your Home
Choosing the right price for your home is a crucial step in the selling process. A lot of factors go into this decision and it can be an emotional one. Oftentimes, a seller thinks their home is worth more because of their emotional attachment to it. An estate agent offers an unbiased, objective opinion based on the current market value.
Agents can also provide sellers with comps or a CMA or comparative market analysis. This is a report of recent homes sold in your area. The report compares the size, location, and price of other homes like yours.
Your estate agent will consider the home’s specs, the number of days on the market, and the final selling price. This gives you a better idea of how much buyers are willing to spend based on the current market. The CMA is a useful tool for buyers as well and gives you leverage when it comes to negotiating a reasonable price.
Listing Your Home
Once you settle on a listing price, it’s time to advertise your home for sale. While this may sound simple, it’s actually quite involved and complicated. Some people choose to go it alone (or list their home as “for sale by owner”) but using an estate agent puts you in a better position to sell.
Estate agents have access to some of the most popular selling platforms, such as Zoopla and Rightmove, which puts your listing in front of countless prospective buyers.
Most estate agents are also part of a core group that shares information, resources, and listings. One of your agent’s professional colleagues may have the perfect buyer for your home. Many agents also do walk-throughs where all agents from their office or company walk through your home to see if it’s a good fit for their clients.
Estate agents have connections throughout the real estate world, which means more eyes on your home than you’d be able to obtain yourself. They also have resources for advertising to a select group of buyers, which many homeowners don’t have access to. Estate agents greatly increase your pool of prospective buyers.
Handle Inquiries and Organize Viewings
Once you list your home and your agent starts advertising it, the calls should start flooding in. Now it’s your agent’s job to not only field these calls but schedule viewings that coordinate with your schedule.
The homeowner usually isn’t home during the viewing. This takes the pressure off the buyer and allows them to freely explore the home without the homeowner looking over their shoulder. Your agent will check with you and schedule a viewing on a date and time that works for you.
Most people can’t be bothered with countless phone calls and scheduling viewings at their home. This is where an estate agent comes into play. Estate agent fees cover a long list of tasks including scheduling viewings and fielding phone calls for inquiries.
Most people who contact your agent are interested in seeing your home first-hand. You might be at work, on vacation, or tied up with other obligations. That’s why having an estate agent means never missing the opportunity to show your home.
Keep Things Moving
There will inevitably be a time during your house sale when things grow quiet. Whether it’s following an influx of interest but no offers or after an offer has been made but while inspections, permits, and paperwork are being drafted.
This silence can be torture. You’ll drive yourself crazy wondering if the buyers changed their mind, if their financing fell through, or if something else went wrong. Your estate agent acts as the go-between for your lawyers and the buyer’s realtor. It’s their job to keep the sale moving forward.
They’ll follow-up with any contractors involved, the other realtor, lawyers, and inspectors. Some people believe that the estate agent’s job is done once an offer is made and accepted, but the opposite is true. It’s during this crunch time that reputable estate agents really shine through.
Close the Deal
Closing a house deal requires specific paperwork, inspections, and other details that most homeowners aren’t familiar with. Property agents, on the other hand, know all the ins-and-outs of closing a deal.
They guarantee that no steps are missed and no-stone goes unturned. This is a benefit for both the buyer and seller. Your agent will also negotiate the price and deal. They are your point of contact and their fees cover all communication between you and the buyers. This helps maintain positivity during the sale and prevents any emotions from getting in the way.
2. Types of estate agent fees?
When looking for the best letting agent or estate agent, fees aren’t the end all and be all, but they are probably the biggest factor!
Now that you understand the role an estate agent plays and their importance in the buying and selling process, let’s talk money. And no, we don’t mean the sale price of your home. We’re talking about how much estate agent fees are and if it’s worth it for you to hire one.
A quick search online will show you a wrath of estate & letting agent marketing, focused on bringing in customers based on low fees. So let’s dig a bit deeper on the prices on offer.
How Much Do Agents Charge?
Estate agent fees range from 1% to 3.5% depending on the location and value of your property. You must also consider VAT fees, or value-added tax, which can tack on another 20%. VAT taxes, also known as consumption taxes, are added onto any product that has a value from the production stage to the sale.
The percentage an property agent charges isn’t a direct reflection of their level of service but is usually based on the type of contract you enter into. Be sure to read the entire contract before signing. If you don’t understand any part of it (including specific charges) ask your estate agent to explain. A few things to look for when examining the contract are:
- Am I locked in with just one estate agent? What are the penalty fees for changing agents?
- What happens if I find my own buyer without the help of the agent?
- If I’m unhappy with the agent’s performance, how quickly can I terminate the contract?
As with letting agent fees, estate agent fees are negotiable, so don’t be hesitant to haggle or ask for a better deal. Just avoid insulting an agent with years of experience or a proven track record of fast sales. You can also use an estate agent fee calculator to give you a better idea of how much a quality agent will cost.
Additional Services Estate Agents May Charge Fees For
Estate agents do more than just market and sell properties. For additional fees, estate agents offer a wide range of services, including but not limited to:
When you hire an estate agent, you get access to more than just their personal knowledge and experience. They often have relationships with other professionals in the field, like mortgage lenders.
Not only can estate agents offer their own expertise on obtaining a mortgage and current rates, but they may refer you to a specific lender who can help.
Some agents charge a fee for this service while others get a kick-back from the lender. Research the mortgage lender your agent suggests to ensure they’re qualified and reputable.
Surveying and Conveyancing
Every property needs a survey prior to selling. The purpose of a survey is to verify the property lines and boundaries.
A surveyor will provide a legal description and documentation of the results. Some estate agents offer this service or know someone who does.
Once you’ve obtained a buyer and the sale is almost complete, you’ll need a conveyancer to legally transfer your property to the new owners.
Most estate agents work closely with one conveyancer, saving you the time and hassle of finding your own. Similar to a mortgage lender, most agents receive compensation from the conveyancer for the referral.
Property Improvements and Upgrades
Does your home need a facelift? Is it in need of major renovations or a few repairs or upgrades?
In the interest of getting a higher asking price, some estate agents will help with improvements and upgrades. This doesn’t mean the agent will pay for these changes, but instead, lend advice and recommendations for improving your chances of getting your asking price.
Many estate agents have good relationships with contractors in different industries from landscaping and plumbing to electrical and even general contractors. For an additional fee, you can not only get professional advice on money-making upgrades but also access to qualified professionals to get the job done right.
Renting or Letting Property
If you’re ready to move but not ready to sell your home just yet, a qualified estate agent can help you rent or let out your property. With thousands of renters in the UK, letting out property is a great investment opportunity.
Earn passive income to use towards your next dream home. Estate agents can help find and reference tenants, collect rent, and even perform maintenance and repairs.
Of course, all of these services come at a cost. Fully-managed services will cost you more than individual, fix-fees but mean less aggravation and stress.
Sit down and do the math to make sure letting your property makes more financial sense than selling.
Are Online Estate Agents Fees Lower?
The biggest difference between online property agent fees and high street agents is that through an online service you’ll pay fixed fees for specific services, whereas high-street agents charge a percentage. Online agents also deliver basic services and usually deal with high street agents anyway. Most online agents work through websites and call centers.
There are two common types of online agents: online-only agents and hybrid agents. Here’s the difference.
Online-only agents require you to perform most of the work yourself. You’re tasked with taking photos, creating the advertisement, handling inquiries, conducting viewings, and even negotiating final offers.
Hybrid agents do most of the work online but also hire local property experts to conduct viewings, field inquiries, and negotiate offers.
Because online agents charge a fixed fee rather than a percentage of the sale, sellers with high-value homes will pay less using an online service. However, you may not get the extensive, hands-on service offered by high-street agents. This is why many sellers opt for a hybrid service that offers the best of both worlds.
What Add-On Options Are Available for My Listing?
If you feel that a basic advertisement or listing isn’t enough, you can add certain features to make it more appealing. Premium listings offer perks like listings toward the top of the results page, better quality images, and reach a wider audience. While you’ll have to pay for these bonus features, it’s worth it for motivated sellers who are eager to make a deal.
Other add-on options include virtual tours and open houses.
3. Estate agent fee calculator
Use our estate agent fee calculator below to see how much it will cost you to hire an estate agent You can also select additional services to calculate your cost of moving.
4. Unconventional Fee Arrangements
Not all estate agent fees are created equal. Sometimes, it takes a bit of creativity to create an arrangement that works for both you and your agent.
If an agent is presented with one deal where they’re guaranteed a 2% fee or a second deal with a 2.5% fee and another 20% for anything over the asking price, which deal do you think they’ll work harder for?
Money talks and the more opportunity you offer your agent, the more likely they are to give your house sale all of their effort and attention.
In theory, all estate agents are obligated to act in your best interest and do everything they can to secure you the best price and results. In fact, many agents take pride in doing just this (especially if they’re collecting commission).
Unfortunately, no one policies this aspect of the sale process, which means not all agents are this honest or this proud. In either case, adding motivation and incentive for agents will no doubt positively impact your sale.
Think of this small investment as insurance that you’ll receive the agent’s best service and performance.
So, what type of unconventional fee arrangements can you make? Let’s take a look at the options.
Sliding Scale Fee Incentive
This payment option motivates estate agents to get you premium pricing for your property, fast! The sliding scale rewards agents who sell the property for above the asking price, but also penalizes them if they fail to do so.
For example, if your home is priced at £450,000, the agent will receive the standard fee of 1.5% for getting the asking price, but will only receive 1% if they fail to meet this threshold. In turn, they can receive 2% for getting over £450,000.
You can change these stipulations, as long as both you and the agent agree upon them. You can also add in a timeline that rewards the agent for selling your property in less than 6 weeks, for example.
The agent can also be penalized for not selling your property in the time frame promised.
This incentive works well with agents who guarantee they can sell your home for top dollar and quickly. This sliding scale forces them to put their money where their mouth is — literally!
The agent’s reaction to this arrangement will tell you a lot about their abilities also. One who agrees without hesitation is confident in their abilities, whereas an agent who falters may not be as good as they claim.
Profit Share Incentive
In this scenario, if your home sells for above the targeted price, the agent receives a percentage of this additional money. This method is sometimes combined with the sliding scale incentive to penalize agents for not reaching the targeted price.
Profit share is sometimes used to negotiate a lower base fee while also motivating the estate agent to reach the target price or above.
Some people find this payment option a bit ruthless, but it’s essentially a matter of winner takes all. You hire two estate agents and whichever one gets you the best price, “wins”.
You might be tempted to let the 2 agents share the fee but this isn’t recommended.
Many professionals take the multi-agency approach, and here’s why.
Competition is one of the greatest motivators — especially when it comes to money. When one estate agent is battling another for the claim to your sale and profit, they’re inherently motivated to work harder and faster. It’s like a race to the finish!
This competition also encourages agents to see every prospect to the end and fully negotiate all offers. If they don’t, their rival has a chance of getting the upper hand and stealing the deal from underneath them.
Be prepared though, this approach can be extremely stressful! This option is best for sellers who have experience working with multiple agents at once.
For sellers who want to sell their property fast and need the agent’s undivided attention, you can offer a personal cash bonus from your own pocket.
For example, you can offer the agent an additional £500 if they sell your house in 2 weeks or if they find a buyer willing to pay the asking price.
Just be sure that all cash or personal bonuses are cleared through the agency owner or manager before proceeding.
5. Tips for negotiating with Estate Agents
If you’ve decided that using an agent and paying estate agent fees is right for you, you could probably use a little advice on how to deal with agents. While you both share the same goal — to sell your house — you don’t want to overpay estate agent fees and the agent wants to get paid. Here are a few tips for dealing with agents so you don’t get take advantage of.
How to Get a Better Estate Agent Fee Rate
We already mentioned the biggest difference between high-street estate agents and online agents is that online rates are generally fixed whereas high-street agent fees are based on the home’s value, location, and other factors. If you want the best rate for agent services, it’s best to opt for an online or hybrid agent.
Hybrid agents give you the best of both worlds. Not only do they work for a fixed fee (which is often easier to negotiate) but they perform the tasks of both online professionals and high-street agents.
This includes fielding inquiries, scheduling viewings, and negotiating pricing. Although high-street agents will handle the sale from start to finish with minimal effort on your part, you’ll pay for this luxury. And sometimes, the percentage is simply too much for homeowners to swallow. This is especially true if you need to income from your home sale to make your next real estate purchase.
There are a few ways to negotiate the best rate including:
- Don’t negotiate until after your meeting with the agent. At this point, they’re more invested in the project (and are seeing dollar signs), which means they’ll be more willing to negotiate.
- Don’t simply ask for a lower rate. Be prepared to haggle and play hardball.
- Don’t insult the agent or they might walk away altogether!
- A 1% fee is reasonable. Act shocked if they propose something much higher. Lowball them if need be with your end-game focused on hitting that 1% mark.
- Mention that you’re considering other agents with lower rates (even if you’re not).
- Be honest with yourself about the value of your home and the selling price. Negotiating when your home is already priced too high won’t end well.
At the end of the day, you want an estate agent you’re comfortable with and who is invested in selling your home. This could mean paying more than you want for their services. Decide how much you’re willing to pay before heading into negotiations and determine how valuable your time is.
Using Multiple Agents
One thing most people don’t realize is that you can use multiple ages at once and shop around. You aren’t limited to just one agent unless that stipulation is listed in the agent’s specific contract.
There are pros and cons to this approach. The benefit of using multiple agents is that you’ll have access to a larger pool of potential buyers.
The more agents involved, the more knowledge, expertise, and resources available to you. On the other hand, if an agent knows you’re working with others, they won’t feel as committed or loyal to you.
They may also offer contradicting advice which could ultimately confuse you. Regardless of how many agents you use, only the one who sells the property will get the commission.
This could lead to some healthy competition among agents, making them more aggressive about landing the sale. You can also use one or two agents and actively advertise your house yourself. If you find the buyer, no agent gets any commission, which could save you a hefty amount of money.
Shop Around for Estate Agent Fees That Make the Most Sense for You
Are you torn between selling your home yourself or hiring an estate agent? Do estate agent fees seem too steep for you? At the end of the day, it’s all based on how much time you have to dedicate to the sale of your home.
Most people would prefer to hire an agent to do all the leg work. You’re also paying for their knowledge, connections, and industry experience. But that doesn’t mean you have to settle on a high commission rate or a fixed fee.
Consider a hybrid agent or online services if you think a high-street agent’s fees are too much. Or, take things to the negotiating table to settle at a reasonable price that works for you both.
Should You Choose the Cheapest Estate Agent?
Are you trying to sell your home and save money at the same time? If so, you may be considering hiring the cheapest estate agent you can find. People say you get what you pay for. The same holds true when hiring an estate agent, which is why you shouldn’t settle for the agent with the lowest price tag.
The truth is, the most qualified estate agents will charge slightly more for their expertise and services. Do some research before making a decision. Which agents are selling properties and fastest and for the highest price?
Sometimes, paying a higher fee upfront means getting a higher offer. Look at it as more of an investment than an expense. Aside from price, you also need to consider the agent’s personality, marketing tactics, and approach to your house sale.
After all, you’ll be dealing with them on a regular basis and need to see eye to eye on most issues. It’s also important to note that you may end up dealing with different agents at different times in the sale process. The expert who performs your home valuation may not be the same one who conducts viewings.
If estate agent fees are your biggest concern and you’re worried about paying a high commission on your property, you may be better off hiring an online estate agent. These agents charge a flat fee for individual services rather than a percentage of the sale.
6. Things to Check on Estate Agent Contracts
The only way to guarantee you get what you pay for and don’t overpay estate agent fees is to read the contract carefully. Be sure to ask all your questions before signing on the dotted line.
Here are a few specific things to look out for:
- Can I use more than one agent?
- What happens if I find my own buyer?
- How quickly can I end the contract if I’m not satisfied?
Estate Agent Glossary
This estate agent glossary will help you better understand the language agents use in their contracts.
Here are some of the most common terms you’ll come across and what they mean.
If you’re considering an online letting agent, you’ve probably already heard this term. Fixed fees are prices tied to specific services like premium listings, viewings, and sale boards.
The agent’s contract should list each service with a fixed fee attached to it. Fixed fees are usually required upfront and paid regardless of if your home sells or not.
Open-ended agreements protect the agent. If your property sells to someone they originally showed it to, they can collect the commission even if months or years have passed.
This is the period of time that passes between you informing your estate agent that you want to terminate the contract and it actually happening.
Most agents require two weeks’ notice for termination. You must also consider the tie-in period when giving notice (more on this in a minute).
This describes the duration of the contract once you sign it, or how long you’re “tied” into it. If you cancel or terminate the contract prior to the end date, you may face additional fees.
Most contracts are at least six weeks long. Avoid committing to anything longer than eight weeks to give yourself flexibility.
This period also includes the two-week notice period.
Terms of Payment
Most estate agents charge interest. Find an agency that offers a several-day grace period for transferring money before charging interest.
Some estate agent companies have several agents working on your property sale at once, This agreement ensures that only one agent (the one who sells your property) receives the commission.
Multi-agency agreements generally cost more since you have several agents working on your behalf.
Different from multi-agency agreements, sole-agency contracts mean that only one agent is allowed to sell your property during the contract term.
The benefit of this agreement is that if you find a buyer yourself, you don’t have to pay the estate agent fees which typically don’t exceed 2%.
Sole Selling Agreement
Similar to a sole-agency agreement, only one agent has the right to sell your home. The selling estate agent can claim a fee of 1-2%, even if you find your own buyer.
Ready, Able, and Willing Purchaser
This is one important phrase to look out for in any estate agent contract. This clause requires you to pay the agent fees even if you withdraw from the sale or your situation changes.
Know Your Rights
You have certain rights when dealing with an estate agent. Knowing these rights will protect you from being taken advantage of.
For starters, all contracts must be written in clear terms. There are certain duties that all estate agents have to perform including:
- Reveal all financial or personal interests they have in all offers made on your property
- Respond to all offers promptly in writing
- Keep detailed records of your sale progression for six years
- Provide information on which government-approved scheme they’re a member of (The Property Redress Scheme, Centre of Effective Dispute Resolution, or The Property Ombudsman).
If you have any complaints about your agent or their practices, confront them first. If the agent is unresponsive after eight weeks or you’re not satisfied with their answer, you can (and should) take your grievances to the appropriate scheme.
In case of a grievance, it’s important you keep detailed records of all exchanges with your estate agent.
7. Selling via a quick sale company
Looking to sell your house – fast? While “quick sale” companies might sound like a great idea at first, they’re often too good to be true. These companies offer to sell your house fast and at a discounted rate.
Unfortunately, most deals are misleading and don’t benefit you financially. Read below to understand fees, terms and issues when using quick sale companies to sell your house
What is a Quick House Sale Company?
On average, it takes between 3 and 12 months to sell a house. Quick sale companies promise to sell your house in just one week!
Quick sale companies buy your house from you directly and then quickly find a third-party buyer to take it off their hands.
Many companies will negotiate a discounted sale price because they pay cash for homes.
Reasons Homeowners Use Quick Sale Companies
The biggest appeal of quick house sale companies is their ability to pay in cash. If you’re a homeowner looking for cash now or want to sell your home immediately, you may consider using one of these companies.
Quick sale companies also pay all related fees including solicitors.
Here are a few more reasons why you may want to sell your house quickly:
- Get rid of unwanted inherited property
- Relocate due to a recent career change
- Relocate for health reasons
- Financial issues including repossession or excess debt
- Unable to sell using a traditional estate agent
- Pre-existing issues with the property (high risk of flooding, short lease, etc.)
- Your need to move is greater than your need to sell for the best price
While using a quick house sale company may benefit you in the above-mentioned situations, there are a few downsides to going this route.
- Incorrect property valuations
- Unclear fee structures
- Contracts that restrict you from selling to someone offering a better price
Protection for Homeowners Using Quick House Sale Companies
If you decide to use a quick sale company, you’re entitled to some protection.
Unfortunately, the quick sale market isn’t regulated, which means you’re not protected when entering into an agreement with one of these companies.
Some quick house sale companies join the NABP (The National Association of Property Buyers) to put seller’s minds at ease. The NAPB ensures that all members are registered with TPOS (The Property Ombudsman) and follow their strict Code of Conduct.
This protection allows homeowners to contact the NAPB or TPOS if the quick house sale company breaks the Code of Conduct or takes other unethical or immoral actions. In some cases, homeowners will receive compensation.
How Fast Can Reputable Quick House Sale Companies Close a Deal?
Realistically, professional quick house sale companies can provide cash for your property within 7 to 28 days, even though most claim they can do it within 24 hours.
There are only a few specialists who have the resources to close a deal this quickly. If you use an unreliable company, this “quick sale” process could take months as they try to find a buyer and secure financing.
How Much Can You Make Off a Quick House Sale?
There’s no set cost, but most quick house sales close at between 75% and 82% of market value. Be wary of any company that promises to get you up to 90% or even 100% of your home’s value.
Many companies will use the words “up to” when describing percentages to mislead homeowners.
These offers aren’t a guarantee to buy your home for cash but instead, an offer to sell your home for you — no matter how long that takes.
How Do I Know How Much My Property Is Worth?
Knowing the fair market value of your property is the first step in preventing yourself from being taken advantage of. So, how can you determine just what your house is worth?
The easiest way is to elicit the help of a few local estate agents. Ask their professional opinion on how much they could sell your house for in a specific timeframe (i.e. 4, 6, or 8 weeks).
By asking specific questions, agents are more apt to give you an accurate estimate of open market value instead of an overvaluation designed to impress and motivate you into using their services.
Other Costs to Consider When Using a House Buying Company
Reputable selling companies don’t charge any fees. In fact, most will pay your legal fees and deduct this cost from their offer price.
Beware of quick house sale companies that claim to buy any and all houses regardless of condition. Also, avoid any buyers that offer a verbal agreement but insist you pay inflated surveyor valuation costs.
These can range from £200 – £600. Always get all agreements in writing.
These charges are usually called a ‘refundable payment for valuation’, which at least gives you some protection since it’s refundable. The loophole here is that you can only get your money back if you accept the company’s offer.
Some companies can offer you a strong verbal offer, pocket £200 or £300, and then lower it after you’ve paid. For companies that do this enough times, they can make a profit without ever buying a property!
Avoid using quick sale companies that require payment upfront. Another red flag is if the company requires a cancellation or withdrawal fee.
Using a Quick House Sale Company If You’re Already Listed with an Estate Agent
Some homeowners may not want to put all their eggs in one basket, so to speak.
If you’re wondering whether or not you can list your property with a quick sale company and still use a quick sale company the answer is yes — but with some exceptions.
Estate agent fees depend on the type of contract you sign. Be sure to check if your contract specifically states that it’s a SOLE AGENCY agreement or a SOLE SELLING RIGHTS agreement.
If you’ve signed a SOLE SELLING RIGHTS agreement, the agent can claim a fee, even if someone else buys or sells your home! On the other hand, if your contract reads as a SOLE AGENCY agency agreement, the agent isn’t entitled to a fee.
Home Auction vs. Cash House Buyers
There are two ways to guarantee a quick sale of your home — at auction or using cash house buyers. But which one is the better option?
There are 2 major problems with trying to sell your home at auction.
First off, the minute you decide to auction your property, it’s publicly advertised on Zoopla and Rightmove with a low guide price. Second, if your house doesn’t sell, home buying companies will now base their offers on these low guide prices.
The bottom line is that the cash offers are reduced by nearly £1,000 following a failed attempt to sell at auction.
8. How Much Do Estate Agents Make?
Estate agent fees can equal large amounts of money when selling high-valued properties. Because of this, many people perceive agents to be extremely wealthy.
Estate agents work some of the longest hours of any other profession. When it’s broken down, most agents aren’t making more than minimum wage to start.
In most urban areas, some agents work 12 hour days during the week and another 8 hours on Saturdays. Since most of an agent’s income is based on commission, many work outside the parameters of their normal business hours if it means closing a deal. Agents must accommodate the buyer and seller’s schedules. Competition for estate agents in the UK is also fierce, making it difficult for many agents to reach their OTE (on target earnings) which carries a bonus in addition to regular commission. The bottom line is, most estate agency employees are making between £20 and £30 per year while working between 45 and 60 hours per week.
When Estate Agent Fees Are Paid
Estate agents don’t get paid until the new owner (the buyer) becomes the legal owner of your property. Once you exchange binding contracts with the buyer, the estate agent will submit their invoice to your solicitor. Once the transaction is legal, your solicitor will take the estate agent fees directly out of the sale proceeds. The balance will then be transferred to you. Not settling the agent’s invoice within a set number of days (usually detailed in the contract), can result in daily interest fees of 5% or more. Avoid these additional fees by settling the invoice in a timely fashion.
Things to Look for When Paying Estate Agent Fees
Before you cut a check or sign a contract with your estate agent, keep your eyes out for these factors:
- Check that your agreement doesn’t entitle the agent to collect their fee as soon as the buyer/seller contracts are exchanged. If so, you’ll need to have the money available outside of the sale proceeds. Make sure the agreement reads that the fees are paid upon completion.
- Some estate agent contracts detail that the fee is payable as soon as the binding contract is signed by the buyer, not “on condition”, which means when the deal is complete. This loophole means that the agent will get paid even if the contract is terminated prior to completion. If it’s the buyer who backs out of the deal, you can sue them for breach of contract and keep their deposit. However, if you’re the one to pull out of the deal, the estate agent fees will come out of your pocket.
When Can an Estate Agent Claim Their Commission?
Commission and estate agent fees are slightly different. The commission is the amount paid upon the sale of your property and is a percentage of the market value. Estate agent fees can include a long list of services including advertising your property and viewings. All conditions of your contract must be met before an estate agent can collect their commission. There are 3 specific conditions they must satisfy.
- The agent must find a buyer willing to enter into a valid binding contract. This means that the contract meets the requirements of the Law of Property (Miscellaneous Provisions) Act 1989, s.2. The contract cannot be void for mistakes, fraud, etc.
- The buyer must be financially able and willing to complete the deal. The buyer’s eligibility is determined at the contractual date for completion. If there’s a dispute over the agent’s rights to his fees, the contractual completion date must pass before proceedings for commission collection can proceed.
- The agent must prove that they were the effective cause of sale, which means that they introduced the buyer to the property and created the contract between buyer and seller. This is a gray area since an “introduction” can technically mean just bringing the property to the buyer’s attention.
9. Why Estate Agent Fees Aren’t Normally Published
Many estate agents worry that the public views them as a commodity rather than a service. What’s the difference? A commodity is something that’s interchangeable with consistent quality, whereas a service depends on the level of skill with which it’s executed. The quality of service will also impact the price, speed, and stress of the entire process.
It’s no wonder that estate agents worry that homeowners paint all agents with the same brush. Publishing their fees will only draw attention to the agents quoting the lowest rates, not the ones with the most experience.
Many agents avoid publishing their fees in the hopes that they’ll have a chance to speak directly to a potential client and make a strong first impression. This gives them a chance to prove their worth and justify their pricing.
It’s also unfair for an estate agent to publish fees before physically viewing a property or speaking to the vendor. This would be as if a contractor quoted a renovation project without first visiting the site.
Not listing fees upfront also gives agents a bit of flexibility as they determine how much work the job will entail. Now, agents can raise or lower their fees based on the difficulty of the sale and the seller.
Some consumer groups press estate agents to openly publish their fees without considering the above-mentioned points and concerns agents have.
If this were to come to fruition, it would be worse for both the agent and the public, since more attention would be placed on price than on quality or reputation.
10. Understanding Estate Agent Fees and the Law
All estate agents must follow the laws and guidelines outlined in The Estate Agents Act of 1979 (EAA 1979) and the Estate Agents (Provision of Information) Regulations 1991.
These documents require agents to provide specific information to sellers which are known as information obligations. These include an explanation of all terms used in the contract between the agent and seller client in regards to what payments and remuneration the agent is entitled to.
All estate agents must provide clients with the following information:
- The circumstances around which the seller must pay remuneration to the estate agent for carrying out their work and services, the amount of the payment, and the manner in which it’s calculated.
- Any particulars surrounding other remuneration that doesn’t fall under the category of “carrying out estate agent work” and how these other payments will be made.
- The amount of all other payments, an estimate of this amount, and how it will be calculated.
How The Ombudsman Handles Fees
All estate agents must belong to an approved redress scheme, with The Property Ombudsman (TPO) being the most popular scheme for 95% of UK agents.
The TPO outlines an approved code of conduct that all members agree to and must follow. The TPO includes rules and guidelines for charging estate agent fees. Knowing what these are, helps protect sellers from dishonest agents.
- All agents must disclose their Terms of Business which includes all fees and charges before you commit to a contract or have a liability towards them.
- All additional costs and fees must be clearly and fully explained in writing before a seller commits to the terms of the contract.
- All quotes for agent fees that are based on a percentage must also include VAT.
- It must be explained that the agent’s commission is first based on the asking price of your property but may go higher or lower depending on the sale price.
- For agents that charge a fixed fee, this price should also include VAT. The contract must state that the fee won’t change regardless of the final sale price.
- Commission fees are due upon exchange of the contracts. The only exception is any previously agreed upon added fees.
- If you terminate your contract with the agent, they must clearly state, in writing, any continued liability you have including commission fees. They must also outline under what circumstances you must pay more than one commission fee.
- The amount of all other payments or an estimate of this amount and how it will be calculated.
11. Should You Choose an Estate Agent Based on Cost?
You get what you pay for, which is why the answer to this question is no. Some people feel that the commission estate agents collect is exorbitant compared to the amount of work they do.
While there are some unreliable estate agents out there who take the “post and pray” approach to selling homes, there are also plenty of proactive agents who have your best interest in mind. (Post and pray means they post your property on a popular site like Zoopla or Rightmove and just pray the phone rings, without doing much more.)
With that being said, you can expect to pay more in estate agent fees for a qualified, experienced agent than you will for a “post and pray” agent.
So, how do you find these reliable estate agents? Remember 2 important points: the most capable estate agents often work for agencies that pay the highest wages and charge reasonable fees.
On the other hand, agents that work for agencies with low fees have to take on more house sales in order to reach their sales goals. An agent who’s spread too thin can’t provide the level of service or attention that you deserve.
The second point was already mentioned — you get what you pay for. The less an agent is making (and charging), the lower their quality of service will be.
If an agent is working for less than they feel they deserve, chances are, they’ll put little effort into the sale of your property.
The more you invest (both monetarily and emotionally) in your estate agent, the more you’ll get back. By paying the agent’s full fees, you’re showing a gesture of faith. This, in turn, gives you a better experience, service, and sale price.
Instead of focusing strictly on the estate agent fees, focus on how much you stand to make on the final sale. This is the figure that really matters.