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Are estate agents worthwhile? A view from an insider

Ask any member of the public how an estate agent earns their fee and they will simply tell you: "They sit around all day in their flash offices and drive their expensive cars and all they do is make a phone call and match an applicant to a property and for that they get paid thousands of pounds…easy!"

In reality the costs and expenses incurred in setting up and running an estate agency are huge – as with most other businesses.

We need nice offices to attract clients in the first instance. We need computers with specialist software, we need phone systems and numerous lines, fax, photocopiers etc.

We pay business rates and rent on our office, plus utility bills. We also need staff – all of whom need a salary and then take a percentage of the commission on any deals. As members of a professional body we pay membership fees plus we also have client money protection and professional indemnity policies.

Our properties are advertised on internet portals such as Rightmove, Find a Property, Prime Location and so on – all of which charge a large monthly subscription fee.

We have to use For Sale/ To Let boards and these cost to make and erect/collect. We don’t have company cars as such but our pooled car is on hire and uses petrol and needs insuring. Again, all costing money.

To market a property correctly involves an initial inspection during which we detail our services to the potential client, and believe me there is a lot so discuss especially with all the recent legislation covering Energy Performance Certificates (EPCs), Home Information Pack (HIPs) Gas safety Certificates, Tenant Deposit Protection Schemes to name but a few.

Once the instruction is agreed and marketing commences we can be lucky and make that one call, do that one viewing and secure a deal.

However, for the other 99% of the time it involves numerous visits to the property to meet applicants (normally more than once) and it is quite usual to have to carry out 20 to 30 viewings on a property before even an offer is forthcoming. That’s an awful lot of man hours to pay for.

Once an offer is forthcoming then we have to agree the deal by negotiating with the client. This is not always straightforward and usually frustrating. However once a deal is agreed then the first part of our job is over and the second part can begin.

For sales to be achieved means months of liaising with solicitors, the client, the buyer, surveyors and lenders. If all goes to plan an exchange of contracts occurs followed by completion – however in many cases where problems arise these two months can be very labour intensive.

Let us not forget that everything is "subject to contract" so even up to the day of exchange and after all this hard work and money spent the deal could collapse if either party decides, for whatever reason, not to proceed.

For rentals there are references to collate and check and then report to client, there is the Tenancy Agreement to draft and approve, the organising of the Inventory, Gas Safety Certificate and the EPC plus the collection of the initial funds.

Once all legal documents have been completed in the correct manner and in the correct order then the tenants will be checked into the property and as far as a letting-only service goes then that is pretty much it.

For management the work continues 24/7, 365 days a year, and we are on call via a 24-hour pager system in the event there are any maintenance issues which need urgent attention.

If requested we collect rent on the landlord’s behalf, deal with the Inland Revenue and handle any maintenance issues which may arise (and believe me they do – usually on a Sunday or late at night!)

Every month an account has to be submitted and funds transferred to our client and our bank does not do this for free!

And our average fee? Well in the good days when it was easy to sell and rent property the average rate would be 1.5%-2% sales and 10% lettings with an additional 5% for management. Nowadays with more competition, with every sales agent seeming to be involved in rentals just to stay afloat, landlords are requesting 5% fees.

The trouble is that to offer these lower rates you have to cut corners and can’t possibly offer the level of service or professionalism required to secure a decent tenant and to safeguard your clients’ interests and in rentals.

If you get it wrong the financial cost of having a tenant not paying rent for three or four months while you take court action to evict them can cost many thousands of pounds.

The list of work we do and the expenses incurred can go on and on however the above gives the lay person a brief insight into what we do for our fee.

And believe me when I say if all we had to do was make a phone call and agree a deal then not only would I, and all those in our industry, be delighted we would also offer lower fees!

Andrew Vos, MNAEA, is a director of Space Residential in Edgware, London

Have your say on this story using the comment section below

5 thoughts on “Are estate agents worthwhile? A view from an insider

  1. Oh how right you are! I have been in the industry over 23 years and have heard the “what do you do for your huge fee?” / “money for nothing” comments more times than I care to remember!!

    I don’t think that “Joe Public” does appreciate just how much effort and expense is involved in selling/letting their properties, and the fact that it is “no sale/no fee” puts the risk firmly on the agent and not the vendor/landlord. Perhaps as a group, we should all be charging up-front fees which could be offset until successful completion/occupation. At the very least it would save us agents a few ulcers and grey hairs!!

    My ambition is to change the public’s perception of agents and promote professionalism in the industry. You certainly have my support and agreement Andrew!


  2. Mr Thomas Smelt says:

    I couldn’t agree more with this young man, who is clearly a pro and knows his onions. The market has been depressed for some time now and everyone wants a deal, yet it is the estate agent who has to act for both parties and often invests a great deal of time to no end. I am sick and tired of people talking about how easy estate agents have it when we spend a lot of time hammering in ‘for sale’ signs wherever we can and sometimes where we shouldn’t and we see some shocking properties on a daily basis that have not been modernised for a long time, often with the game of life and top trumps still on the coffee table and yet we bite our tongue. The industry needs more Andrews who can speak up for the smart-casual wearing, smooth talking, degree qualified professionals of the estate agency world. Anyone would think we simply wait for a bargain property, buy it for ourselves and spend the rest of the time taking out other agencies ‘for sale’ boards, face-booking, bemoaning the property slump and talking about the good old days when we made ‘Dire Straits’ (money for nothing). I hope this comment re-installs some faith in the ethics of our great profession and is a timely reminder to those who find it all to easy to take a swipe at us, that there are some good guys amongst us like Andrew who only strive for excellence in an otherwise sub-standard world of sales.

  3. John Thorpe says:

    Yes, a fee of 5% inclusive of VAT is quite often the level of remuneration for theAgent introducing a client. He will only get paid if the Landlord accepts the tenant.
    Most landlords just need an introduction and can perform the other details for themselves. In these case the 5% level seems about right.
    But there are some Agents who demand 11% for an intriduction and even then ask for this fee for every subsequent year.
    At the moment, based upon a current valuation for the capital value of the property to let, the return on capital after all expenses and befor income tax can be as low as 2.6% and more normally is about 3 to 4% before tax. So the agents fee takes a healthy slice off the return on investment with his fee.
    The only redeeming feature is that a one months void on the rented premises is a significant loss to the landlord and that is where the relationdhip between the Landlord and the Agent begins to look more worth while.
    One gets the distinct impression that some “Agents” in London are not full time profesionals but are earning a bit of cash working from the spare bedroom in their home. Some of them can be very good to work with.
    I have been a private landlord for 40 years and the scene has changed dramatically in that period.

  4. Andy Smith says:

    We EA’s do have to carry the weight of the industry’s poor reputation around with us no matter what we say or do. Most landlords that contact me for the first time will mention a previous agent that they have used and how let down he/she was by that agent. Immediately you are up against a trust issue before any mention of fees or what you services you offer.

    To give the best possible service you need to have time and that is one thing most of us do not have which is why I have built my agency different to most high street EA’s. I will only work with a certain number of properties at any one time to be able to give as much time and effort needed for each property. The problem with this is that the income is much lower than it could be, but I need to build my reputation and maintain it. Since the downturn in the sales market more and more letting agents are opening their doors which are usually run by estate agents that have lost their jobs recently. This is now making it even harder to keep a small portfolio going by charging the lowest possible commission due to competition looking to undercut you.

    I am now having to take on more income streams to keep everything running and offer more services or options to potential clients.

  5. I started my property website, purely because of my utter frustration in trying to buy property. I found the number of propety websites out there was overwhelming, and confusing. If there was something I found interesting, I had to “fill in a form” each and every time. If I went through 20 webpages, I needed to fill in 20 forms and an “agent will get back to you:”
    The majority of them never got back to me. I found it incredible that in todays modern world, that websites often do not have a contact email address, and one is expected to fill in a form, over and over and over again.
    We all lead busy lives, and I did not want to call several agents, and explain to them what I was looking for, as it is not an easy call to make from work( where most of us sit all day) and I was loathe to repeat myself x 10.
    the website was set up so that you filled in one form once….. agents registerd on the site receive the leads for the areas they work in.
    Why this has worked so well, is that the smaller agencies now have a slice of the pie, that before hand, would not have been available to them.
    Most of the propsective buyers prefer to be contacted by email, so that they can reply at their leisure, and not have to take 10 phone calls a day….
    The agents are receiving up to 18 leads a week – and the entire process is driven from one central portal.
    My take on it has always been : selling property is exactly that : selling!

    Thank you for a wonderful insightful website.

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