Estate Agents Fee

publication date: Jul 15, 2011
author/source: Kate Faulkner, Designs on Property and Author of Which? Property Books

Estate Agents Fee

According to an article in the Guardian by Phillip Inman on 30th June 2011, the number of estate agents should fall dramatically over the next few years. 

This is an odd article with very odd conclusions and unlike the Guardian who normally do well researched work rather than just ‘rant' about their likes and dislikes, Phillip just heads off on a diatribe, most of which, from an independent, but insider's view is just factually incorrect.

The first premise is that as estate agents work on commission, they have benefitted from a 300% or more increase in property prices over the last 20 years. Well they haven't, this doesn't take into account inflation. When you do, an average agent would benefit from 1-2% commission multiplied by an average of 3% per year over and above inflation. These correct stats give a very different picture to the one portrayed.

It is also very London centric. Yes a few agents may manage to stay in business selling one property a year, but they are unlikely to stay in business for long and certainly won't have survived like this since the credit crunch. The average house price across the UK is £163,000 at the moment, some averages are less than £100,000 - and this isn't far from the Guardian's apparent 'London Central only' and 'Free Comment borders'! They earn an average of 1.8% commission (before costs) on a sale of a property. They fund all the cash to promote the property, have staff available and rent commercial property, and are only paid when a sale goes through which can take up to six months to happen. A third of these sales regularly fall through due to buyers and sellers and now lenders, pulling out.

So it's not exactly ‘easy' in the real world of estate agency to make a living.

Perhaps also he hasn't realised that the market volume has dropped by 50% and more in some areas (I suppose this is the estate agent's fault too, not that of the bankers or anyone else for that matter?). So the estate agency industry has already been culled severely and had to be because, unlike the banks, they didn't get any of the tax payers' money! However, he obviously wasn't interested in looking at the figures, if he did, he would have realised that his comments were way after the horse had bolted.

The only thing I do agree with is that commission based sales practices does give the business a bad name - especially one that doesn't have trust, nor is it particularly good at justifying its fee when asked, hence a poor reputation.

It is perhaps a reminder that is needed in this current market place - it's not agents that dictate prices, and lord knows they certainly don't at the moment! It's the buyers and sellers. Prices go up because buyers out bid each other (and sometimes lenders let them and sometimes they don't) and go down because there are too many properties and not enough buyers able to pay. Prices are currently not falling at expected rates, as sellers just aren't putting them on the market. That's not the agents' fault.

It is also worth reminding Phillip that without the estate and letting agents that have worked hard to carry on through the recession in some of the worst circumstances ever seen, then our commercial high streets (which he might need to do some research on) would be suffering a lot more than they are now.

Perhaps his next article will be about culling the chocolate industry - perhaps that too has become ‘bloated'?


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