Haggle with agents so you pay no more than 1% plus VAT, HomeOwners Alliance tells sellers

Consumers are being advised that they should pay estate agents no more than 1% plus VAT for a sole agency contract.

A newsletter from the HomeOwners Alliance yesterday said that for higher value properties – those over £500,000 – agents could accept even lower fees.

Sellers are told: “Do not be shy about negotiating fees – most agents are prepared to be flexible.”

It goes on to stress: “It isn’t very British to haggle, but in a market where sellers are in short supply you will probably find agents surprisingly willing to cut their fees to get properties on their books.

“If you are going for sole agency you should aim for a fee of 1% – or even less for high value properties.”

The newsletter claims: “Estate agents often ask for 1.5% up to 2.5% (plus VAT) for being sole agent, since they know that most sellers won’t try to haggle.”

The advice tells would-be vendors that agents charge anywhere between 0.75% and 3% plus VAT. It quotes a survey by Which? that found the national average in 2011 was 1.8% plus VAT, while in 2014, HOA’s own research suggested 1.5% for a sole agency contract.

In 2015, research by myhomemove came up with 1.3% plus VAT.

The HOA – which is one-third owned by conveyancing business ULS Technology – also warns its readers that “fees are often quoted excluding VAT”.

It adds that “more expensive estate agents are not necessarily better” and that small estate agents “are often more flexible on negotiating commission downwards than large chains”.

It tells its readers: “If you achieve 1% plus VAT you can be pleased with yourself.”

The advice also tells vendors that “online estate agents may be a cheaper option”, and can cost as little as £100.

The Property Ombudsman’s code tells agents that they must advise sellers of their fees, including VAT, in writing before they are taken on. Where agents quote fees in advertisements, the sums must include VAT.

How much should I pay the estate agent?

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22 Comments

  1. TwitterSalisPropNews

    Personally, I would nnever pay less than £2,000 to an agent, however cheap my house/flat was – as less than that is no motivation for the agent to squeeze best price from a buyer.
    Then again, I am shortly going to pay an agent £50,000 as a client’s commission – now that is shameful, sorry but it is. If an agent cannot secure best price for a property by being paid say a maximum fee of £10,000, then something is not right at all.  

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    1. LetItGo

      What is shameful is berating an agent that passed you business. How do you think they would react if they knew you had posted those comments on this forum? You really need to look at your own practices before condemning theirs.

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      1. TwitterSalisPropNews

        That isn’t a great excuse.

        In the example above it was a 2.5% commssion.

        My point – fair price. Value. If  higher fees can be justified then great, we’ll all pay the amount.

        I like the idea of paying a higher fee if an agent achieves more than £X. But I hear that that is not always popular.

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    2. undercover agent

      The question should be: “did that agent add £50k of value to the transaction for the seller?”

       

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      1. Richard Copus

        If you pay peanuts you get monkeys.  Never has that adage been more true than with our industry now.  Both Which and the Homeowners Alliance should move forward and realise that quality and efficiency for consumers should come before saving a few quid.  Fair price  –  yes.

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  2. EAMD172

    Idiots!

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  3. EAMD172

    Bet they all shop at Iceland and Aldi and only go out for meals at McDonalds as well. Buy cheap -buy twice. That goes for service as well as products. One third owned by conveyancers. Look at the state of that sector at present. Increasing timescales beyond acceptable to get a sale through and with instantaneous communication and electronic deeds and searches. Charge less, employ less people and pay lower wages, Discourage good solicitors from staying in conveyancing. End up with clerks doing much of the work. How’s that going for you and the general public?

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  4. Simon Bradbury

    In my opinion this issue is far more complex than it first appears and a simple piece of advice to pay no more than a 1% fee is just too simplistic and, ironically, not in the interests of the seller.

    We already know ( thanks to various surveys and our own experience as agents ) that fee is not generally the most important factor that a prospective seller considers when choosing an agent. The latest Home Moving Trends Survey carried out by Property Academy confirms this, as it  does every year. When sellers were asked the question “Did you choose the agent who offered the lowest fee?”… 84% of respondents nationally said “No”. They are generally, and in my view quite rightly, more concerned about achieving their objective.

    Of course fee/price is a factor in any buying decision – but what is far more important is VALUE! This is what I believe prospective sellers should be advised to look for from an estate agent.

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  5. ARC

    “Estate agents often ask for 1.5% up to 2.5% (plus VAT) for being sole agent, since they know that most sellers won’t try to haggle.”

    No it’s because it’s what that agents believes they are worth and is down to them to justify it or not.

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  6. NotAdoctor32

    If an agent spends many years learning their trade, building a great brand and adding value to vendors properties by experience and hard work then why should you be able to haggle?

    This isn’t a market stall, this is selling your most valuable asset.

    I’d like to see how many conveyancers are open to haggling from buyer and sellers.

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  7. Richard Rawlings

    Why does the Home Owners Alliance feel that UK fees should go even lower when they are already the lowest in the world? Most advisory organisations recognise that you get what you pay for so this is surprising. They are advocating employing a negotiating service by choosing the negotiator who can’t even protect their own commission! A good negotiator can usually secure at least 5% more than a poor negotiator. Do the maths. Also, estate agents are salespeople, many of who are excited by earning a fat commission from a juicy sale, while employing professionalism and expertise. Why demotivate them? Advice to serious estate agents – aim for 2% and don’t get out of bed for anything less than 1.5%. And don’t whinge at me about what your competitors are charging. I don’t care and nor should you! Have a great day.

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    1. GPL

      Serious Estates Agents are motivated regardless of commission. Simply put …….don’t take any property on for sale, unless you are happy with the fee you are charging. 
       

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  8. GPL

     

    Choosing your Estate Agent based on how “cheap” they are or how “cheap” you can negotiate them down to?

     

    Doh! We’re selling peoples Homes, NOT Burgers!

     

    I’ll stick with charging a fair fee for the work I have to do, and providing the best service that I can to ensure the best possible result for my client/s.

    If you deliver a quality service and the best possible result, Clients are happy to pay a Fair Fee. I won’t overcharge, nor will I undercharge.

    Home Alliance? …..provides exceptionally poor advice. Who are they? Who cares!

     

     

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  9. ansesyb18

    I think the HOA should mind their own business and refrain from involving itself in the forum regarding fees. Their generic comments do not help. Every business owner has a duty of care to ensure profitable trading, to pay accounts , pay staff etc and to get the best price for the client. Perhaps the individuals in the HOA should try self employment!

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  10. smile please

    A fair fee to sell a property is 3.5k the effort, cost and work needed warrants this as a minimum no matter the asking price. Our average fee is now 4.8k plus vat. Not the cheapest but you get a lot for your money. Highest fee received last year was over 18k but it took a lot of marketing and resources to get the property ‘Over the line’

    You can sell a property for a grand but you will go bust as numerous onliners and ‘Pop up’ agents on the high street / bedroom have demonstrated time and again.

    How many of you estate agent owners know your fixed costs you have to pay every month? I best its less than 20% of you. First thing to do work out your fixed costs, look at your variable costs, add in your draw. Then look at your average number of instructions and average number of exchanges in a month. That will tell you what you NEED to charge.

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    1. PeeBee

      “A fair fee to sell a property is 3.5k the effort, cost and work needed warrants this as a minimum no matter the asking price.”

      In fairness, smile please, your comment perfectly highlights the impossibility of the situation.

      £3500 to you is a fair fee.  It would pay your fixed bills; allow you to train, motivate and hopefully retain your staff by remunerating them well. It would give you a good living, and it would make your business viable.

      Today.

      Tomorrow?  Who knows.

      But let’s say that a new agent opens in your location in six months from today.  And they prove to be a good Agent. – and as a result, you and others each lose ten percent of your yearly listings to them.  All of a sudden your income – through no fault of yours – reduces by a tenth.

      At that point, £4000 becomes your new “fair fee”.

      And you are one Agent, in one location.  Robert May says there are some 3500 “activity centres” – and in each of those there are many individual villages and High Streets – each one with its own unique set of circumstances that fundamentally dictate prices.

      Here ‘oop North, there are some agents who might well have an average Fee approaching your £3500.  But for every one of them, I will wager there is one that would make Purplebricks seem expensive by the time you add on all their extras.  I was up against two Agents that couldn’t justify asking for a grand to sell a property – and that was on the basis of NSNF as well!  The ‘norm’ in my town of operation was under £1400 (£1680 inclusive of VAT).

      But in the Capital – and many other cities and major towns – you couldn’t open the doors for three and a half grand a pop.  Not if you wanted to staff your office – or furnish it – the way it is now, at least… and even cutting back all the bells and whistles that make up the very essence of the company wouldn’t be enough to strip the fee to that extent by a long chalk!

      HoA understand nothing about our industry – which makes their very existence a farce.  Thankfully nobody knows about them – but the infrequent snippets that they spew out hitting mainstream press sources can and will have a butterfly effect.

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      1. Woodentop

        Well said PeeBee.

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  11. AgencyInsider

    Home Owners Alliance knows the price of everything and the value of nothing.

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  12. Maverick Global

    The comment, made by HomeOwners Alliance, is very destructive and the damage will be most felt by the Customer, not the Agent.
    We live in an empowered consumer-centric society aided by ‘portals’ such as RightMove Zoopla OntheMarket etc to create a business-portal-consumer to launch and create a marketing reach for home owners advertisements.
    Detrimentally this has opened the floodgates to cheap-fee agency and the trade-off becomes ‘a skeleton service’ but a guarantee for ‘portal inclusion’.
    The detriment is to both Agent and Consumer as the lack of a fully exhaustive professional service, which is denied by low fees as time commitment to an individual property cannot be justified based on cost of transaction, may impact on the nett return of the transaction (The eventual sale price in the transaction becomes the casualty).
    In the 2020’s we need to get away from this obsession for low fees (cost of transaction), rather… focus on the transactional outcome itself.
    To get the best possible outcome for the customer…Time and Commitment needs be invested into consultation, presentation, exposure to the market and service. The cost of the transaction has to finance this time and commitment to ensure the best possible net return for the customer.
    The right agent that can dedicate quality time each day to fully commit to a strategy on behalf of their client would cover their fees even if they were 5% + VAT. If the alternative is ‘price drop till it sells’.
    Any less … then the customer may as well simply promote their own home on eBay.
    Simon Hawkesley – Private Client Services
    Impartial Property Consultant  

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  13. Woodentop

    If you follow HOA advice, who clearly do not care or understand how to run a business, you will go out of business and it will destroy the market for both sellers and buyers.  
     
    There is a minimum fee, many are below this figure trying to buy the customers and this has been the norm for far too long and failed … just look at all the cheapo on-liners that have gone bust and massive debts. Far too many high street agents have cut their throats trying to compete with them and between each other…….. idiots, lemmings call them as it is, for it is they that has encouraged this mess where agents struggle to pay a fair salary to employees and all things running a business.  
     
    Not many agents are in the market for £50k commission and well in excess of the norm and is a very different market and for HOA to be using this in their propaganda with Joe public is disgraceful.
     
    No agents should be charging less than 1.5% plus vat commission on achieved sale price, no matter what part of the UK you live in and if your area costs and service are a % above, then it should be no problem to add that % and justify to vendors if you communicate sensibly.

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  14. BryanMansell

    NO seller has ever wanted to pay the cheapest fee regardless of what they make NET from the sale proceeds.agents need to demonstrate the value they bring and make it clear. Typically fees are negotiated because every single agent rocks up with the same price on RM best price guide, and fails to differentiate the value they can bring to that seller. So in order to choose the seller chooses by fee. Be different and charge what you are worth. If you want to be a 2% agent then you will have to act like one

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    1. PeeBee

      Mr Mansell
       
      “Typically fees are negotiated because every single agent rocks up with the same price on RM best price guide, and fails to differentiate the value they can bring to that seller.”
       
      If that were the case – what about the 1990s?  Or the 80s?  Or before? 
       
      What reasoning do you offer for homeowners deciding on the cheapest Agent in those dark and distant times pre-Rightmove?

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