“I’d like you to put my house on the market, but before you come and value my property I would like to know what you will charge.”
I guess this is a question that agents are asked most days, and I am not the one to tell you how best to respond to it, so I shall leave that to the likes of Julian O’Dell, Mike Day and others.
What I can tell you is just how much agents are charging – on a ‘no move, no fee’ basis. You can then decide whether your fees are good, pretty much average or less than good.
I am sure we settle more agents’ invoices at myhomemove than any other UK conveyancer, so the following observations are not based upon a random, or even a small sample, but reflect a substantial share of the market.
Bearing in mind that each year we undertake conveyancing in every single postcode area within England and Wales, our data covers the breadth of the UK property market.
We have been keeping these records since 2011, so it is interesting to make comparisons between then and now.
Please remember that all of the results below exclude the fees charged by online or hybrid agents, as of course we do not have to settle their invoice as the money is paid up-front. All figures also exclude VAT.
Do you remember what it was like in 2011? Amongst many other things transactions were still at a very low ebb, we had a Royal Wedding (and a second child is anticipated any day now), there were the Tottenham riots, and of course the sad loss of people like Steve Jobs and Amy Whitehouse. The only thing that remains the same is the Bank Base Rate!
So first things first: 16% of invoices were for over 2% back in 2011, but this has now reduced by nearly half. I cannot tell you whether these were for multiple agencies or you were simply more able to sell a much higher sole agency fee. (By the way, if you are receiving over 2% you should pat yourselves on the back as you belong to a small select group.)
At the other end of the scale, similar things have happened. In 2011, 2.1% of all fees were for less than 0.5%, but even more clients are now being charged this, having increased by 66%, with more than 3.5% of transactions attracting what seems to be a very low fee indeed.
In fact, if you charge just 0.5% on today’s average house price, which our data shows is £224,463, this equates to a fee of just £1,122. Of course, if you sell only 50% of your property stock, this equates to an average of just £561 per sale!
In 2011, the most common fee scale was between 1.4 and 1.6% – and I guess there is no surprise there, as nearly a quarter of all invoices were in this range.
In 2014 this also remained the most common range, so it seems we have identified a sweet spot. But in the interim there has been a distinct shift.
In 2011 over 40% of invoices were for more than 1.6%, but in 2014 this was the case for only 25%, which means that the majority (nearly 54%) are now for less than 1.4%, and most are between 1.2 and 1.4% or 0.75% and 1%.
So having identified the +/- 1.5% sweet spot, you may also notice that there is a range that seems to be rarely used – around the 1% mark. It might appear that if you set out to achieve 1.2-1.6%, and challenges arise from a prospective seller to reduce it, your knee jerk reaction might be to take it straight down to less than 1%.
From our 2015 data, it seems that agents are doing just that, or at least they are starting to identify a new sweet spot in the 0.75-1% region.
As we begin to reach a tipping point in the market, this new trend may suggest consumer demands are changing, as is the way that agents react to them.
There is just one other peculiarity that is worth mentioning – the average value of the client’s fee has hardly changed at all. Back at the beginning of 2012, the value of the average fee was £2,896. Today, the average fee is just £17 more!
Prices may go up, and fees seem to inevitably come down, but the average income per case remains much the same. Funny that.
* Stephen Hayter is sales director at the UK’s largest conveyancer, myhomemove
So interesting Mr H. Thanks for posting (and for the mention). Given that stock is at a premium, fees are inevitably under pressure as less skilled agents see that as the necessary point of difference. Of course, there are countless other ways to achieve differentiation which ensure clients perceive that the fee is not the most important factor. The initial fee enquiry to agents that you refer to is often dealt with poorly meaning valuation appointment opportunities are lost – the cost of these lost chances (and subsequently the missed instructions) is significant. Training on this subject is something we are being asked to run more and more as the months roll on, alongside the skills necessary to justify the fee. The right stock at the right price remains the key to success.
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Fantastic article, very interesting. More like this please
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I worked in a village where there were just two independent agents and we were both fairly adept at keeping most other (corporate) agents out.
Where we consistently charged 1.8% (and won good, sellable instructions) the other independent would charge 1.25%. There’s a level of stupidity in UK estate agency that is unbelievable…
We are the only country that beats itself out of a living for estate agency work.
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Stupidity?
Two competing local agents. One differentiates themselves on quality of service, the other differentiates on price.
That sounds like a properly functioning market to me.
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I’m sure people will find holes in this to suit them but it looks like a sensible bit of information that is probably as accurate as it’s going to get, so with this in mind do the budget lot that drill on about how much a customer can save now have to redo their numbers? -Jonnie
P.s – Average% at Jonnie & Co is 1.68 and 98% of customers who get the survey with the bill say they would recommend us
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Don’t you worry, Jonnie – the budget numpties will be quick to recalculate their “savings” accordingly… the minute, that is, that the next ‘report’ comes out from SaveTheWhale or similar group slagging off the average Estate Agent for charging twenty grand (PLUS!!!!!! VAT, of course…) to every defenceless granny on the planet who needs to sell her modest one bed flatlet to pay for her next pint of milk.
Until then, they’ll continue to use fee examples that don’t exist in the real world.
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This misses the minimal charge, lots of agents these days charge a low % but have say a £2K min charge.
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But that’s just the point, ringi – it DOESN’T “miss the minimal charge”… it simply chucks it in to the sausage machine and calculates it as an AVERAGE % of the AVERAGE sale price.
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Really interesting and also frustrating information Stephen. There are just too many agents out there killing their own industry. Short sighted is an understatement.
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Isn’t that a natural part of the competition process? As an example Peebee couldn’t afford to sell his average home for rock bottom commissions. He doesn’t have too because; values and commission rates control the level of competition the incentive to open up in competition with him is reduced because property sales values are lower. Only if transaction levels were through the roof would the incentive increase.
I am not picking holes in factual averages but every single commission on every single instruction is unique to the circumstances, the property, the level of service and the level of competition.
Stick some trend lines on the graphs and it becomes very apparent how Agent fees are rising in line with general inflation rather than inflating property prices. A booming market in any one area introduces increased gold rush competition which self regulates commission back to lower levels which then naturally reduces competition.
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Hi Robert – long time no EYE contact! ;o)
If you’re anything like me, you will have been bashing away at your keyboard before and during my post being submitted and will see that I’ve been saying something similar.
Now you can pull your amazing RainMan trick here and either back me up or knock me down – but I seems to remember our mate Paul H stating quite a while ago that his average fee was six grand?
Jonnie states that his ‘average’ commission rate is 1.68% above – but like Mr Hayter’s article that statistic is (with respect to my old mucker J…) as much use as a chocolate fireguard. IF the average PROPERTY Jonnie sold is £357250 then he’s two quid up on Paul H – if it’s £120000 then Jonnie’s having to put in three times the effort and expenditure for the same top-line financial result of only one transaction.
BUT… if Jonnie sells fifty, and Paul H sells fifteen – then the branch turnover is higher.
Mr Hayter is sweeping with an awfully wide brush. It’s a pity that seeing as he states his company covers every square inch of the UK they can’t at least give a REGIONAL breakdown and make a load of the usual ‘national average’ b0ll0cks a bit more relevant to those reading it, who usually work an area covering only a couple or so thousand chimney pots.
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Rainman says- August 20th, 2014 @ 11:21 Paul H “my average fee is £6500”
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I knew you’d come back with that!
Who needs Google – when we have something WAAAY better… ;o)
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Google simply didn’t want to know, by the way.
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I can get the same result using my advanced Google function but that functionality is there to ween people away from the holiday route search results that take you past places of interest on the way.
What has become very very obvious during my tweaking and testing is how some sites attempt to fog veracious search results with chaff.
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If you recall the fair charge fee structure we were discussing for my sortal project. Paul H could in theory be paying 227% of an average subscription but given the transaction levels and prices in your neck of the wood you ought to be paying about 80%.
I can fairly much pinpoint to the penny what an agent ought to be earning for a given area with an algorithum that goes far deeper than averages. One only has to look at an Agent’s register to work out that £6500 is a big commission compared to that which you receive selling a 3 bed semi for £135,000. However if you are selling 78 per year and Paul H 26 there is not a penny between you when it comes to the end of year tally up.
You might have to work a bit harder to sell more but without a doubt Paul H will have far more competitors trying to win every instruction.
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“However if you are selling 78 per year and Paul H 26 there is not a penny between you when it comes to the end of year tally up.”
Almost… but no cigar. I currently aspire to that £135k semi earning me £2167.
Two more % hikes will do it nicely, I reckon.
I’ll update you in 6 months… ;o)
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Hmmm… first lengthy comment deleted before pressing “Post” – breathe a temporary sigh of relief, chaps and chapesses… ;o) .
I’m still at a loss as to whether this is a late April 1 wind-up – and having re-read the article several times, and noted some of the comments made to it, remain perplexed.
Mr Hayter seems to like ‘sweet spots’. Every golf club has one – but the rare occasion you actually strike the ball with it equals squat when it comes to running a profitable Estate Agency.
Mr Hayter seems to like ‘averages’ – and also likes to state that he has more sausage to throw into the sausage machine which in his opinion produces a better more reliable ‘average’ sausage.
So lets have a look at these ‘averages’. According to his figures, the ‘average’ Sale Commission Fee today is £2913. For that figure, he could staple together SIX Invoices from The Quirkster’s outfit. Or the VAT amount only on an okay semi on the right road in Cricklewood or somewhere ‘dahn sarf that I’ve never had the pleasure of visiting – never mind listing a house there!
But the realism is that at £2913, this equates to an ‘average’ % Fee on the ‘average’ Sale Price of £180252 (source: Land Reg data Feb 2105) of 1.62%.
So as we are talking percentages, MY stab at it is that the above ‘average’ Fee (£) is totally irrelevant to 96.8% of the market – and that of that 95%, the BIGGEST chunk is on the lower side. To put in further context – and this is REAL context to ME – it is irrelevant to 100% of the market within a ten-mile radius of where I work. It is, I would guess, 40% above the ‘average’ Fee within that radius. The ‘average’ Agent in my patch wouldn’t know what to do with £2913 per case, Mr Hayter. Luckily, that ain’t gonna happen soon, so we’ve got time to prepare for it.
But, as always, every number goes into the big sausage machine and out of the funnel comes a figure that people call a ‘statistic’. That ‘statistic’ is then used and abused – the information skewed and manipulated – and turned into a USP in another ******** ‘article’ to satisfy an agenda or two.
Yippee! I can’t wait.
In the meantime, I’ll just aspire to being ‘average’…
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I think the “sweet spot” fee level will be higher for an agent who dominates an area as the public sometimes have the feeling that they “need” to use them as they are the local market leaders . Some of our older “flagship offices” consistently achieve higher fees than branches where we are only in the top handful of agencies.
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I would tend to disagree, wilko – although it is more down to what the definition of “dominance” is and how the “dominant” Agent achieves that status I am referring to.
The “dominant” agent (in the eyes of the public) where I am is so by being a Numbers-Game player – taking on anything and everything at whatever Fee they can get. Their Lister has followed me into more than one property and the opening gambit was “whatever Fee he told you I’ll undercut him”.
Their FOR SALE boards ‘dominate’ the streets. The AVAILABLE stock in their branch ‘dominates’.
In the meantime… we just plug away at having a higher percentage of our stock SSTC than the rest of the pack.
22 months out of 24 so far ain’t bad, I reckon. I’ll ‘dominate’ THAT statistic, if you don’t mind. ;o)
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I would agree with PeeBee’s comments, very early on in my career I used to think that I had to lead the way with boards and did whatever fee I needed to to get the instruction. I ran around like a headless chicken, unable to deliver on the promises I made and probably upset more clients than I actually helped. Its a bit cliche but Turnover is vanity, profit is sanity. However you cut it that saying applies, there is no point in having market share if you make very little from it. I have had offices in the past who have said to me they need to “compete” on fees and every time they have tried they take on a few more houses but earn less for all of the ones they take on because, how can they know what instructions they might have got at the higher fee, so they quote low on all of them. Once re-educated though they realise that if they value their service and charge accordingly, then they can make the same money as their 1% rivals by selling 40% less property and actually offer their clients a much better service in the mix. That in turn brings them more recommendations. Clients want value, they don’t want cheap.
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Two very interesting posts. It is always good to hear different experiences are, especially location wise.
I agree with what you both say. However the “flagship offices” that I mentioned have been the independent market leaders for a considerable amount of years in the towns…….over 100 in one case. Those branches are more successful at achieving a higher number of higher fees because they have consistently delivered a high level of customer satisfaction and only have 3 other competitors in the town(2 corporates), in short, fees don’t come into sellers equations when considering a selling agent. If you compare that to another branch that has not been open anywhere near as long, and competes with 23 other agencies in the town they sometimes have to be a bit more flexible to achieve the instruction and keep up a good presence.
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Points noted and acknowledged, wilko.
It is – and always has been – my firm belief that reputation and performance are the ONLY factors that a prospective vendor should take into account when making their choice of which Agent will get them the best result. Of course, “reputation” is subjective in today’s world of spin and spivvery as we know – and “reputations” are being created and manipulated on various ‘review’ sites as we type and read this.
And, in fairness, whilst a century-old company has a reputation based upon decades of PAST PERFORMANCE (which we know means it wouldn’t be here now if that past performance didn’t meet or exceed the expectations of its’ customers…) – it is only as good as its’ LAST sale.
Same goes for people. I know that the minute I stop ‘performing’, I’m history.
And so it should be.
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Stephen I have no argument with anything you’ve done in this article bar the outrageous use of Photoshop for your photo. Really how can you expect anyone to believe the rest of it when you’re pedalling that Tom Cruise esque propaganda picture,especially those that have met you!
I said in your début column that I was looking forwards to your future articles and this is a classic example of why I’m right 102% of the time. Really only MHM could have pulled these stats together and shows a great angle that almost everyone’s going to be interested in.
Your conclusion in particular nails a massive point of interest, and its fascinating to think if there is a ‘natural’ level of fee that a compensating factor of % and rising house prices is delivering.
For the damned statistics crew, nothing more absurd than the claim you can do anything with stats. You can’t, that’s what’s so good when they can be presented in such a clear concise fashion as these ones have been today.
As Oliver said ‘More please’
Over to you Mr H
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I couldn’t agree with you more…
…ain’t the same guy in the photo.
Other than that – pretty much opposite poles.
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A good article that gives the averages for this particular company and a great sharing of their specific market intelligence. Figures for property sold where conveyancing is completed by higher end solicitors may give different figures. However, good to see some facts and figures rather than speculation being debated. The fees are around £2800 on a commission of 1.2 to 1.4 per cent. Our fees average 1.46% and this is only meaningful when connected with the value of our portfolio
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“Our fees average 1.46% and this is only meaningful when connected with the value of our portfolio”
EXACTLY, JAM01. A meaningless “statistic”.
So… why bother quoting it?
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Peebee
It is an example of why quoting fees as a percentage is actually of no significance. All that matters are the monthly/annual costs and the actual monthly/annual income per agency. Only these figures are of ANY importance and when the latter is less than the former – closure. When the latter is greater than the former – profit. Then, it does not matter for which part of the country the figures are quoted. It all balances out. Percentage figures on their own are meaningless…as you rightly pointed out!
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Ahhhh! Apologies, then, JAM01 – I wrongly thought you were just adding another layer to the deep pile of ******** that is collectively known as “statistics”, which only serve to propagate unwanted weeds in the flowerbeds of truth and reality…
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