Beyond upmarket estate agents, where partners are still trousering thousands of pounds in bonuses, fees for property sales are falling – but they remain a source of contention
Partners at Knight Frank, the upmarket estate agency, have trousered bonuses worth half-a-million pounds and more in further evidence (if, indeed, any more were needed) of the grotesque state of Britain’s property market.
The partners will share a bonus pot of £73m after the firm reported profits up by 10% in the year to March. Knight Frank no longer discloses how many partners it has, although in 2010 the bonuses were reported to be worth £600,000 a head.
It comes at a time when the number of properties sold in the UK is running at less than half the peak level in 2007; when properties are taking longer and longer to sell; and when first timers are being squeezed out of the market by landlords. The average flat in London now goes for £237,000 in a city where average wages are a fraction of that. As campaigners at PricedOut point out, that means a deposit in the region of £25,000 and a mortgage of about six times a typical London salary. Little wonder so few young adults are getting on the property ladder.
But Knight Frank doesn’t sell the type of property you and I live in. Along with Savills it is an agent to the rich, marketing the likes of this £75m 12-bed pad in Holland Park. Property experts are fond of saying there are thousands of mini-property markets across the UK, but in reality there now seem to be just two: London, and the rest of the country.
One of the odder features of the capital’s property market is that some agents have been raising their fees since the onset of the financial crisis. Foxtons won’t negotiate below 2.5%. The likes of Knight Frank and Savills don’t disclose their fees, but it is likely to be close to that, or more.
Meanwhile, in the real world – ie outside central London – fees in some areas have dropped substantially. Henry Pryor, one of the few property experts who deserve the moniker, tells me that in Cambridge vicious competition has sent fees below 1%. Elsewhere across the country he talks of “zombie agencies” which haven’t seen a sale for weeks or even months. Those that are surviving are doing so by switching to the lettings business.
Estate agency fees are probably the murkiest part of what we all regard as a shifty business. The National Association of Estate Agents says it doesn’t collate data on fees, so all we have is anecdotal evidence. Which? researched the market in March and found huge variations, from 0.75% from an independent to 2.5% for three Foxtons branches and one Connells branch. The national average was about 1.8%.
I asked a number of the big agencies to disclose their fees, but didn’t get far. David Newnes of LSL Property Services, owners of Your Move and Reeds Rains, said: “Residential estate agency fees are under downwards pressure as agents fight for market share in a difficult market.” He added that cheaper fees aren’t necessarily good news for sellers. You may not agree.
The continued use of percentage fees after the giant rise in prices is perplexing. An estate agent who charges 1.8% on a £250,000 property today is, in cash terms, raking in double what he or she made when the property was half that price 10 years ago. Are they doing any extra work? If truth be told we no longer use estate agents to put up a pretty picture in their window or stick an advert in the local paper. All we really want to make sure is that our property goes up on Rightmove or FindaProperty.
Yet Which? found that the alternative – fixed-fee deals – weren’t necessarily better value, and on low-value properties were even worse.
The internet should have been the perfect tool for property buyers and sellers to eliminate expensive intermediaries such as estate agents. After all, this is what has happened in travel agency, as we research and book flights and hotels direct. The net should have driven down estage agency charges, but it hasn’t. Neither have we become any more informed about fees. Most people put their home on the market with no clear idea of the going rate in their area.
Estate agents, rather like death and taxes, will probably always be with us. It’s still the case that the vast majority of property sales go through agents. But we should at least be better at exchanging information on what we have to pay.
Here’s a starter. My colleague is selling her home in north London. She got prices from three agencies. Two quoted 1.25%, the other 1.5%. None offered a fixed fee, although one very cheekily said the minimum fee would be 1.25% of the asking price, not the sale price. What are you being charged?
Article source
http://www.guardian.co.uk/money/2011/oct/25/estate-agent-fees-property-sales?newsfeed=true
Why sell when you can get a guaranteed rental income