17 Dec Online-only vs the High Street – Fees
The popularity of online-only estate agents and their promise of cheap fees has prompted speculation over recent years about the future of the high street estate agent. However, it seems the cheap service has been tried and tested by enough home-movers over the last few years and, although there is a place for the online-only firms, the tables are firmly turning back in favour of the high street.
In this series of articles, we’ve explored the differences and the evidence towards a winning high street agent. In this concluding article, we examine and explain differences in fees.
Fees – cheap isn’t necessarily cheerful
Selling fees are one of the major points of difference between traditional and online-only estate agents, in both the actual figures and the way the fees are structured.
When online-only agencies first launched, they were very much portals on which vendors could advertise their properties for sale – more of a DIY listing service, and the fees reflected that. But, over the years, it has become increasingly apparent that this cheap, bare-bones service has had to evolve, and so have their fees.
In a previous article, we’ve looked at service levels and established that traditional high street agencies are ‘full service’, with their fee encompassing the whole valuation to completion process, on a fair No sale No Fee basis, set as an agreed percentage of the final sale price, payable on completion of the transaction. So, with high street agents, sellers don’t pay until their property is sold, and it is in the agent’s best interests (as well as the sellers of course), to negotiate the best possible price.
High street agency fees in the UK have been steadily falling for the last few years, from an average of 1.8% in 2011 to the current average of 1.18% plus VAT, putting the UK’s fees among the lowest in the world.
Onliners’ fees have increased over the same period. They are a fixed amount ranging from £0 to £999 (£1,499 in London) including VAT, chargeable upfront and payable whether the property sells or not. More recently, after mounting criticism of the ‘pay anyway’ pricing model, some have introduced a No Sale No Fee option costing around £1,999 (£2,999 in London) inclusive of VAT.
The supposedly simple know-what-you’re-paying ‘fixed fee’ model is actually not so simple. What’s included in the package varies from provider to provider – those at the lower end of the scale charge additional fees for basics such as photographs, floor plans, writing descriptions, virtual tours, and For Sale boards, and even the packages at the higher end of the scale don’t include accompanied viewings, which are charged at additional cost, typically between £300 – £400 for a viewings package add-on.
Much of the criticism over the ‘pay anyway’ fee model is that there is very little or no incentive for the agent to negotiate the best possible sale price for properties, or even to sell at all. In addition, the ‘pay later’ or deferred payment schemes offered by some of the onliners’ involve the seller entering into a third-party credit agreement, which has been known to affect mortgage borrowing.
So, there is no doubt that selling with online-only agencies can be less costly than selling with high street agencies. But, when factoring in the personal contact and therefore the accountability that comes with a high street agent, their incentive to negotiate the best possible price and motivation to get the transaction through to completion, only at which point their fee becomes payable, without having to enter into any credit agreements, is getting a cheap service actually the most important thing? In many instances, it can end up being a false economy. Let’s look at an example:
A property is on the market at £210,000. It sells with a listing agent at £200,000 and the fee is £999 (inc VAT), so the net gain is £199,001. But, with a motivated full-service high street estate agency, a sale is negotiated at £208,000 at a commission rate of 1% – the fee is £2,496 (inc VAT), which is more than the cheap onliner, but the net gain for the sale at the negotiated higher price is £205,504. So, despite the higher estate agency fee, the seller is quid’s in to the tune of more than £6,500. The seller has more money in their pocket and has had very little stress because they sold through an agent who took care of everything for them.
Our homes are our biggest, most crucial, and highly valued assets so it makes absolute and non-disputable sense to take the path of greatest care when selling them.
To summarise… traditional full-service estate agencies have high street offices with highly experienced, local agents who know their patch, and a local reputation to uphold. They take professional quality photographs, prepare property brochures and provide For Sale boards, if required. Our clients’ properties aren’t just listed on major portals, they are advertised in the local press, in office and they feature on our own web sites and via offices throughout the South West as well as our affiliate office in London. We are in regular contact with prospective purchasers, we accompany viewings and report feedback, and we are trained negotiators with the objective of achieving a sale at the best price. Once a sale is agreed, we keep in touch with solicitors and estate agents up and down the chain to ensure the transaction progresses as smoothly as possible to completion, ironing out any issues before they become problems.
Traditional full-service estate agents are real local people proactively selling local property. We do all of this on a No Sale No Fee basis, for an agreed percentage of the sale price on completion, giving us even more incentive to sell homes for the best price.
So cheap is not necessarily cheerful – it could actually end up being more costly in the long run!
the Experts in Property network is made up of local, independent estate agency offices in villages, towns and cities across the South West. To find your nearest, visit the Agent’s Directory at www.theexpertsinproperty.co.uk.
By Steve Moir, chairman of the Experts in Property (www.theexpertsinproperty.co.uk)