Can estate agents justify their fees?
14 September 2012MeetMyAgent
Announcement of a proposed amendement to the Estate Agents Act, allowing for private listing websites to operate outside the scope of the Act, will make many a seller consider whether estate agents are worth paying for when you can sell privately at a fraction of the cost.
We look at the differences in service offered and consider whether estate agents can really justify their fees.
Using an agent vs selling privately
Private sellers are unable to list on the large property portals, even through an intermediary, as the details may be in breach of the Property Misdescriptions Act, which estate agents are bound by law to observe.
Unlike estate agents, the large majority of whom charge a percentage on the price achieved on completion, private listing websites will charge upfront fees or monthly subscriptions. Although individually they may be cheaper, given their small audience reach you will likely need to list your property on a number of different portals at once, which you will have to pay for regardless of whether you property sells or not.
So if you want to advertise on RightMove, Zoopla or PrimeLocation then you have to use an estate agent. Portal costs are hugely expensive – in the region of £1,000 per month for a single branch agency on just one of the major portals – but the exposure they bring sellers is crucial. Good agents will also have a pool of applicants already registered with them that they know well and can match to your property.
With private sales websites, you won’t be able to tell who your potential buyer is until they reach your door. Agents will pre-qualify your buyer’s financial position, ensuring that your time isn’t being wasted by someone who is unable to afford your property, and there is the safety aspect of accompanied viewings.
Managing the process
Buying and selling property is also a highly emotional transaction, and agents can use their local knowledge and expertise to divert a lot of the emotional aspect by managing your own expectations as well as that of your buyer. In addition, people generally don’t feel comfortable negotiating with each other directly, which the estate agent will take care of.
With so many thing that can potentially go wrong after the sale is agreed, your agent will be there to chase solicitors, surveyors and mortgage brokers to push the sale through to completion. Their experience and knowledge of the sales process also means that they can manage issues as they begin to develop, averting unnecessary and lengthy delays.
Private sellers are not bound to adhere to the Property Misdescriptions Act (while it still exists), nor can they be prosecuted under Consumer Protection from Unfair Trading Regulations (CPRs) as these apply to businesses. This means that buyers can be at risk of being mislead with no route to redress except via the courts, which can be both costly and time-consuming. Similarly, sellers who act on bad advice will not have any recourse.
Private sales transactions therefore do not afford either buyer or seller the same protection as through an estate agent. While the government in its consultation said that the CPRs could apply when using a private sales intermediary since they are businesses that deal with consumers, the intermediary’s responsibilities will be proportionate to the service offered as will the level of protection offered to consumers.
Why use an agent
It is therefore the services that agents offer over and above the private sales websites, as well as a proven track record of achieving the best value in their local area, that helps agents justify the fees charged. The majority charge a commission on the price achieved, so there are no upfront costs and nothing to pay if your property isn’t sold.
While more consumers may think about selling privately, agents that differentiate themselves on service and show themselves to provide value-for-money for the fee they charge will still continue to operate. This is not just the difference between online intermediaries and traditional agency services, but also between agents who provide excellent service and have long-term businesses versus those who go out of business within a few years.
Read our blog Things every seller should know about Estate Agents Act changes for an overview of the proposed changes.