PROPERTY - 09.06.2014

Dodge hefty commission fees from estate agents

A costly decision

If you want to sell a residential property, chances are you’ll contact a few local estate agents and instruct the one that impressed you the most. On the traditional sales model, they’ll either charge you: (1) commission based on a percentage of your property’s sale price; or (2) a flat fee. The vast majority will also need to add VAT on top.

Example. So, if your property went on the market for £300,000 and the estate agent quoted 2.5% commission, you would have to pay them an eye watering £9,000 on completion of the sale (assuming you sold at that price).

Hefty price to pay

That’s a lot of money by anyone’s standards, particularly if the first person through the door leads to a sale. When you scrutinise what an estate agent actually does, it’s difficult to see how many can ever justify such sums.

Legally speaking

Interestingly though, as far as the conveyancing process is concerned, you don’t need to use an estate agent - you could stick a “For Sale” board up outside your house and sit back and wait.

However, there are downsides to the DIY approach. The first is the amount of your time it will consume, e.g. putting together marketing details, fielding enquiries, conducting viewings and, having tied up a sale, chasing for updates. This isn’t difficult but it’s unlikely to suit a busy director like you.

The second is that a prospective purchaser may not be willing to share their financial circumstances with you. Therefore they won’t be able to confirm if they’re in a strong position to proceed with the sale, e.g. by providing clear proof of their deposit funds and the status of any necessary mortgage application.

Tip. Not only will a good estate agent insist on seeing and checking a prospective purchaser’s financial status, most buyers expect to provide that information to them.

Online solution

If you don’t want to go down the DIY route, there is another option available: use an online estate agent. This highly competitive market allows you to obtain exactly the same services but for a fraction of the price. For example, one well-established provider we found was charging £695 plus VAT for a dedicated account manager, EPC, photos, a “For Sale” board, Rightmove, Zoopla and Primelocation upgrades, plus supported sales progression through to completion regardless of the value of the property (see The next step ).

New figures. Using our £300,000 sale example, that represents a potential saving of £8,166.

Tip. The other plus point of online estate agents is that many won’t demand an exclusivity agreement or a fixed notice period. Conversely, high street ones usually insist on a minimum twelve-week marketing contract.

For further information on online estate agents, visit http://tipsandadvice-companydirector.co.uk/download (CD 15.18.06).