Why Are Estate Agency Fees So HighJust how much do estate agents actually charge for their services, then? According to the Office of Fair Trading, we're looking at £2,800 or so. That's the average commission on the sale of an average house, or to put it in numbers, 1.6% of £175,000. Then, of course, there's the VAT on top of it all, so we're looking - again, on average - at a £3,360-shaped hole in our bank account. It's not what we'd usually spend on an average day, is it?
But spend it we do, whether we like it or, more likely, we don't. And that's even though we're not terribly sure what we've paid for with all that cash.
"Ah," the estate agent will say, leaning back from his expensive Italian desk in his expensive Italian chair, fingers steepled, "It's for our vast experience within the industry... our extensive local knowledge... the superlative marketing exposure we offer and, of course, the immensely high calibre of our staff." Yeah. Right.
Back in the dark ages, say up to the end of the twentieth century, it would have made sense to grin (or at least grit the teeth), bear it and sign more than three thousand pounds away on the dotted line, and push the document in question back across the desk. And perhaps doing that for a few more years into the age of the World Wide Web could have been excusable, but there's simply no excuse for doing that now. Why not? Well, just have a look at the UpMyStreet website - that'll give you a clue. And if you don't find the answer there, visit pretty well any online property portal and you'll find some interesting resources. For example, like high-calibre estate agency staff, you, too, can now calculate the value of almost any given property in the country. Oh, and, of course, you'll also have that extensive local knowledge now, as well. For comparables, you can find details of almost every single property transaction anywhere in the UK on the website of HM Land Registry... who also feeds that kind of information to other sites like nethouseprices.
In fact, if you just spend an afternoon online, you'll end up with the vast experience, extensive local knowledge and the capability of creating some superlative marketing exposure of your very own. And that should qualify you to paint your name on a brand new lease Mini and drive around the area all day, every day. It would probably be easier, though, if you're planning on selling your home and buying another, to pour yourself a glass of fizzy water and stay online for another couple of hours. You want to sell your house? List it online. Someone wanting a house in your area is going to find it - just like that. You want to buy a house in Petersham? Do a search for "Houses for sale in Petersham" - you'll find one, maybe more, soon enough. As the meerkat says - "Simplesh." But what about the property classifieds? Surely it's worth looking through those? It might well be - if you don't end up spending most of your time looking for them. Back in the dark ages, estate agents would send out weekly mailings to their "hot prospects", hoping to match them up with one of several "hot properties" on their books. If it's done at all these days, it's done by email. So, in all honesty, is there any point in estate agents and what they do if, as RIghtmove suggests - more than ninety percent of property buyers and sellers do their own searches online? Given the choice between listing a property on sites like FindaProperty, Zoopla and PrimeLocation or paying out over three grand for someone to glue a digital photo printout onto an A4 property detail printout and stick it up in a storefront window... well, let's face it - there is no choice really, is there? Especially when agency staff are away from the shop the exact 12 hours each day when clients and prospects can actually find the time to talk to them.
So... is there any way estate agents can justify charging us that £2,800 (plus VAT)?
Again, no. And that's because they've still got a business model that might have been justifiable way back when, but which is sadly out of date now. And not only is it out of date, it's all very, very expensive - from the office itself, to its location, to the storefront and sign hanging over it, to the expensive fittings and furniture inside... all the way down to that glass fronted fridge full of Perrier over there in the corner. It may be all to do with giving the impression of being a successful agency, but in this day and age that kind of expenditure doesn't impress nearly as many people as it used to. And let's not forget the staff - they don't come cheap, either. How much does the average 'Julian' cost a month - not including the lease on that sparkly little Mini he trolls around town in, all day long? And how much does it cost to have somebody manning the office in case someone with money to burn actually does come in through the front door? On the bright side, at least there's someone there to make sure the Perrier fridge is well-stocked.
But there are also other expenses to take into consideration, as well: sky-high town centre rentals, fuel and utility bills, extortionate business rates... and more. Costs vary throughout the UK, but as a rule of thumb, there won't be much change from £15,000 a month for all that.
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