We know – nobody likes estate agent fees, especially not after you’ve already paid stamp duty, legal fees, removal costs and so on. But, what is the state of estate agent fees in 2019, and what can you do to reduce them?
Luckily, we conducted some market analysis so you don’t have to. Oh yes, and we also commissioned a mystery shopper to do a little research into high street estate agency fees… and it may make for surprising reading.
What do researchers reckon?
Various companies have attempted to gauge estate agent fees over the years, with Which reporting average fees of 1.8% + VAT (2.16%) in 2011 and my homemove estimating 1.3% + VAT (1.56%). Property Industry Eye, a magazine aimed at estate agents and developers, suggest that agent fees in 2017 averaged around 1% + VAT (1.2%), although this polled its database of home sellers rather than estate agents.
This covers a huge range from 2.16% to 1.2%, and then you have fixed fees as well.
So who’s right?
That’s a good question, and so we sent off our mystery shopper to ask a few estate agents their fees for houses between £200,000 and £250,000.
The long story short is that commission ranged from between 0.75% + VAT to 1.5% + VAT outside London, with an average of around 1.2%.
Essentially, this means that you would be paying between £1,500 to £4,500 commission for a house valued at £250,000, depending on the agency you choose.
Wait, why isn’t VAT regularly included?
That’s a good question. It gives the impression of a lower fee, and in theory, it can be reclaimed by certain businesses selling off assets. However, most high street estate agents deal with customers, so they are supposed to advertise rates including VAT. According to the Property Ombudsman Code of Practice for estate agents, all estate agents should have been quoting prices including VAT for any quote from 1 October 2016.
In terms of our mystery shopper, the results on this were somewhat mixed:
- 56% of estate agents quoted prices without VAT and had to be asked whether this included VAT
- 20% of agents quoted prices without VAT, but stated that it was plus VAT
- 24% of agents quoted prices including VAT
Therefore, if you do get a quote from the high street estate agent, make sure you always ask whether the price includes VAT. If it doesn’t, add an extra 20% to their fee.
| Commission without VAT | Commission with VAT |
| 0.75% | 0.90% |
| 1.00% | 1.20% |
| 1.20% | 1.44% |
| 1.25% | 1.50% |
| 1.50% | 1.80% |
| 1.80% | 2.16% |
The smallest estate agents may not make enough from fees to charge VAT, and in that case, all quotes would automatically exclude VAT. These agents would have to be selling fewer than around 60 properties a year, assuming they charge an average of £1,400 per sale and assuming that they don’t accrue income from any other sources.
The difference between a 1% and a 1.2% fee is £500 for a property worth £250,000. For a 1.25% fee, it’s £750. This can make a huge difference depending on who you go with.
What about minimum fees?
Some estate agents charge minimum fees, particularly for properties that are cheaper. For those that quoted a minimum fee, it was at least £900, with some quoting as high as £1,300. This can boost the effective rate significantly, especially if your house is worth less than £100,000.
Can I change estate agents?
Some estate agents have a minimum contract length, whereas others take pains to note that they do not. If your contract has a minimum length, you usually cannot change estate agents without incurring a fee before that time. It’s a good idea to check minimum contract times before you sign anything.
What about using two estate agents?
There are three main types of contract:
- Sole agent
- Joint sole agreement
- Multiple agency agreement
Most people go for a sole agent. In general, the fees will be a little lower, as one agent takes the entire fee. Some people believe that a sole agent is the best way to go because (rightly or wrongly) the agent is better motivated to find a buyer.
In some cases, you might use a local estate agent and a national estate agent and then split the fees between the two. Again, you will often end up paying a little more, but if the local agent has an agreement with the national agent, you may be able to get local knowledge with national attention. This is essentially a joint sole agreement.
It’s not uncommon to use multiple agents, but financially, it may not be worth it. Most estate agents charge extra if you want to use several estate agents, mainly because they have to liaise with each other, adding extra overheads. You will often see this with properties that are repossessions, mainly because the bank doesn’t care about the final price as long as it covers legal fees and the outstanding mortgage.
What other fees might you pay?
Many properties require an EPC, as they may not have had one done in the last 10 years. If this is the case, it’s normally better to get one done independently, as these will cost you between £40 and £60. Our mystery shopper had quotes for EPCs ranging from £65 to £120 from estate agents. While it can be convenient to get an EPC arranged through the estate agent, it’s relatively simple to schedule it yourself. It really depends on your priorities.
What role does the valuer play?
Valuers play an important role for most estate agents. Essentially, their job is to get their foot in the door and establish a presence and then sell the product that they are offering. While most estate agents have a fairly standard commission model, you can negotiate with the valuer to include certain packages or to reduce the commission.
Interestingly enough, a number of estate agents told us that they had a price-match guarantee – however that tended only to be mentioned once our mystery shopper said she was comparing quotes. Like many things, commission is often negotiable, and if you wish to go for high street estate agent, you can usually negotiate the price down significantly. Fees of 1% including VAT are reasonable, and you may be able to go even lower if the agent really wants your business.
Why don’t estate agents list their fees?
It’s always a little puzzling when estate agents don’t list their fees. In many cases, this could be because the fees are set by the valuers. Indeed, according to our mystery shopper, some agents stated that they don’t charge commission, but they needed to know the value of the property so that they could work out what fee to charge. This sort of pricing structure is very close to commission.
Is it possible to haggle on fees?
The honest answer to this is “it depends.” Estate agent fees have come down significantly since the early 2000s, when they were ranging between 1.5% to 3%. Now, partly due to a slower economy and a significant rise in house prices, they run between 0.75% and 1.5%, although some estate agents catering to specialised clientele can still charge anywhere between 1.8% and 3%.
This means there is often a lot of competition in the market to secure your home.
Price matching
Most high street estate agents will price match a competitor’s quote, especially if your house is considered desirable for the area. A nice family home near good schools will attract a lot of attention, and it would therefore be easy to sell – less work for the estate agent.
In this scenario, haggling is perfectly possible, as those properties will make money for the estate agent even at relatively low prices. The surprising thing about house sales is that the costs of selling a house are fairly fixed. That means, the difference between a £200,000 house and a £300,000 house is simply that that the estate agency makes £1,500 more, assuming they charge a 1.5% fee.
The larger the estate agent is, the more likely they are to be able to drop fees to secure your home and your signature. It’s a good idea to talk to several valuers when they come round before making a decision — never feel pressured to sign on the dotted line immediately. Always ask about fees, and make sure you ask whether they include VAT or not. If the quote doesn’t include VAT, add another 20% to the price.
However, if you have a much cheaper house, you will usually start running up against minimum fees. Many estate agents have a minimum fee of around £1,200 to £2,600, depending on the area, and some will be even higher. While these minimums can sometimes be shifted a little, don’t expect to get more than a hundred pounds off.
Hybrid estate agents
With hybrid estate agents, you can sometimes get a coupon or voucher to reduce the fee, but in most cases, fees are fixed. Because they are so low anyway, you’ll usually find they represent a significant discount on high street prices, anyway, making them extremely good value for money.
