What does it say about our profession when we charge little – or nothing – for our services?
If we don’t value ourselves, how can we expect the public to value us?
By consistently pushing down our fees, fighting against each other to be the most competitive or the cheapest, our industry has demeaned itself in the most unforgivable way.
If we don’t charge sufficient fees for our services, we can’t invest in our customers, we can’t invest in our staff, or our marketing, or our technology.
We can’t hire the best people for the job or invest properly in their training. We can’t improve our public image as an industry because we certainly can’t deliver the level of service that customers have come to expect.
For those relying on investors’ cash to push down prices, it simply won’t work in the long run. We’ve seen many of the internet agents burn through money – and still fail to return a year-on-year tidy profit, Purplebricks being a case in point.
We know the vast majority of sellers are prepared to pay the price if they want a great service, which is why the internet agents haven’t stolen anywhere near the level of market share that they’ve trumpeted all along.
Because of the dearth of properties coming onto the market, agents are stopping at nothing to win the work. Combine this with the increase in estate agents going it alone, or cutting costs by working from home, and we can see the pressure mounting to keep pushing fees downwards.
Just to give an example of where the market is at, we’ve currently got over 700,000 buyers registered with Spicerhaart – twice as many as our typical average, and yet we’ve got 60 per cent less stock now compared to the peak in 2007. We’re selling 87% of what we list.
The property shortage has pushed average house prices up by over 10 per cent this past year. So you’d expect estate agency income to have risen accordingly. But for many, that’s simply not the case.
Our fees as an industry are lower than they were five years ago so the amount everyone is reaping per transaction is less, while our bills are continuing to soar. Salaries are rising – but it’s impossible to match the rise in inflation, which is expected to hit 10 per cent this year, according to the Bank of England. Where’s the cash coming from, too, to cover our rising energy bills or petrol price increases?
It’s not just about charging what we’re worth. We also need to encourage more people to put their property up for sale. We need builders and housing associations to build more affordable homes. After all, home ownership remains the backbone of our economy.
Offering housing association tenants the right to buy is not the solution, in my opinion, as it will only reduce the amount of badly needed housing association stock and exacerbate the housing crisis even further.
This isn’t about providing value for money. Every estate agent seeks to do that. This is about standing up for our industry and recognising that it costs money to do things well.
If the public are going to trust us with their biggest investment, they need to see us fighting for the best price for their property. Not just taking the first offer so we can move onto the next job, with a pile ‘em high, sell ‘em cheap mentality.
I’ve written about the race to the bottom on fees many times over the years but in the 40 years that I’ve been involved in estate agency, I’ve never seen it so bad. Yes, we all need to differentiate ourselves from the competition, but it would be foolish to think you can do this on thin air.
Remember there can only be one ‘cheapest’ agent in any one town, so why all race to the bottom?
If we’re not charging properly, if we continue to push down our fees, there’s only one way for estate agents to go – and that’s bust!
Paul Smith is chief executive officer of Spicerhaart.
Totally agree Paul – and what I am finding as one of those agents that now works for himself, my fee is never an issue. When I demonstrate BEFORE my market appraisal in my pre-appointment content the level of marketing and service about the customer’s overall MOVE, not just the sale, and how I will help with the entire customer journey, including online market appraisal reports on homes the Client may be interested in viewing BEFORE they view (if on with another agent), my track record in sales over the past 18 months, the prices achieved, my Google reviews and the referrals and recommendations, fee is hardly ever discussed – it is an after-thought. Then, blowing the Customer’s socks off by demonstrating an understanding of why they are looking to move, when they wish to move by, what they want to move to and where (all about the move not the sale), then discussing the marketing of their home, is the game-changer. As ever, when Listers are focused on a ‘must win the listing’ attitude based upon targets and KPIs, the presentation to the Vendor is different to ones where we go out with one objective – to HELP the customer – this comes across totally differently and then they will happily pay the fee. The rise in the self-employed agent is driving professional standards up, particularly those setting up at eXp – as they must have a min 2-years experience and look at how many offer brilliant video marketing on homes. A service-led, helpful mentality secures the higher fee – a target-driven, KPI one drives fees down as it becomes all about the business or company, dog eat dog, and not about the Client. Placing the Client at the centre is the game-changer. Start with WHY – the Customer’s WHY.
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Agree Paul. However, the problem is that good old fashioned hard work is being removed from our industry and replaced with ‘we have prop tech’ to do it for you! The trust has gone from above. I have four offices, clear market leader and we haven’t reinvented the wheel. It’s all about phone out culture, speak to people, this seems to of gone from our industry and replaced with let’s do a pretty brochure and pop it on rightmove. I am constantly interviewing supposedly great sales people and the look on their faces when I explain our minimum standards for phone out numbers. We lead our market with market share and fee and delivery a good transparent, honest service. EAT are saying staff are underpaid……. You will be if you are in a 1% office!
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100% – the most often heard comment I have when out doing my viewings (every viewing is always accompanied) is the lack of communication, lack of feedback, everything done by email and people are sick of it.
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We live in a consumer driven media flogged society which is ‘anti paying for service’. When people within your own industry take the cheap option, there isn’t much others can do but join the slippery slope. The public are no longer interested in value for money but pay as little as possible …… or are they? Some agents have held their ground and still get a good commission, so why can they and not others?
Half the problem is media advertising by the £m’s which does influence the consumer and is not just within our industry. Just look at all the supermarkets fights, yet customers still go to them all.
The consumer can be very loyal and this is where the high street agents knock the socks off the bedroom boys and girls. The high street has a service, a perception and more often than not a working experience at some time or other with the consumer/its family and not forgetting the image/standing in the local community.
In one: Look good, do good, work good and importantly be the sales person with confidence, right planning and always listen to your client. Its how you go about it and not cowering to the over the shoulder syndrome to become a lemming which makes for success. Never forget, the consumer knows they have to pay for the best service. We all see it everyday we go shopping. But you must have the service, the customer wants!
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Surely an aspect contributing to lower fees is the referral fee industry, hence I would consider Paul’s comments would be better directed at those agents who have embraced it, including well-known corporate entities such as Spicer Haart, from whose perspective he writes. When such agents see each instruction as an opportunity to cross sell financial, legal, insurance and a variety of other services for which their staff are targeted, the client is the loser.
An article in last Friday’s Bricks & Mortar in The Times makes sobering reading about this scourge.
Seduced by the appeal of a high valuation (guaranteeing a longer period to cross sell to every applicant) and a discounted fee, and moreover locked in for an extended agency term to maximise the opportunity, independent agents have to educate their potential clients to these risks.
An informed decision by the client is still nigh on impossible. Where are the Referral Fee declarations on the Spicer Haart website ?
A different approach from a local agent near me, proudly boasts on its website that no referral fees are paid by their named FS provider. Surely this might encourage the client to believe in their agency as an honest broker. However a Companies House search confirms, the directors of both companies are one and the same.
Transparency is clearly not in their interest, and I am sure many truly independent agents will have read Paul’s article with a sense of frustration.
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I’ve worked in three different countries and we are the only one that beats each other out of a living.
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I used to be an agent for many years. I have had the fee discussion a zillion times. Often with an idiot from a corporate head office who has never ever been on a valuation in his entire life.
Similarly, with so called trainers who can pontificate all day but do not do the job.
I have worked in a company where we did not drop below 1.75%.
Some vendors will only go for the lowest fee. It is the loser’s lament to say that these people are a waste of time and not worth bothering with which is what I have often heard, or that the agent who gains the instruction is rubbish.
We lost instructions on houses that were going to sell in a week. The vendor knew what they were worth. They knew they were going to sell in a week. The vendor was not going to pay 1.75% when he knew another perfectly good, reputable agent would do the deal at 1-1.25%.
Was losing that deal good business?
To suggest that all agents who charge all lower feet than someone is nonsense. Everyone has the right to decide how they run their own business. Amazon seem to be doing ok on that basis.
A guy I worked with at the corporate who charged 1.75%, who had lived in the town all his life, played football and cricket in the town, his family had shop for years in the town so they knew loads of locals.
He set up his own business which I joined.
He was happy to negotiate and would not lose an instruction due to fee. His view was if I get for example 3k I would rather have that than not.
He would say – that is the gas bill paid for the year for instance. He also has the view than any instruction he sold hurt the opposition.
He has been going for years and is by far the dominant agent in his town.
Some other agents who used to charge a higher fee have gone.
I am now into development.
I have used Savills and Hamptons in affluent areas where they I paid 1-5-% and was happy with that as they were the best agent in my view for the job.
Equally I have sold in less affluent areas and paid 1%. Last year I sold 4 houses[BR1] in Staines.
I had 4 agents come to pitch. 3 of them quoted 1.5% and a figure of 700k
The agent I instructed quoted 1% and said he would get no less than 750k – produced comparables.
Has a nice modern office and experienced, mature staff.
They got 750+ for all 4 units. Higher than other agents who quoted a higher fee. The argument most agents give is that an agent who charges a higher fee will geta higher price. There is no statistical evidence to demonstrate this. Of course this happens on occasion but there is no evidence to say it is always the case. A valuation is purely subjective.
As an agent I found negotiating hr price to be the easiest thing of all. As a vendor it is no big deal if I am offered less than I am prepared to take I just say no. Equally as a buyer if I think a property is not worth want the vendor wants or the agent is telling me it is worth, I just do not buy.
[BR1]
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This is a good article, especially the point regarding burning investor cash. Buying market share in the hope that profitable competitors will fail is a flawed strategy. In a world where raising cash is easy, the value destroyers stay around for longer, their day will however come. There is no such thing as a free service. There are no successful companies with a long term loss-making model. Sure, they make a noise and get in the way of well established, customer focussed businesses, but not forever. Customers will always pay if they see value and feel valued.
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