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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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!
Wendy
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In reply to Andrew
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The role of the Estate Agent on lettings.
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.
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100% agree with the first 3 comments
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.
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Time to turn the industry on its head
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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