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
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