How much should I pay the estate agent?
Estate agents’ fees vary enormously, and add thousands of pounds to the cost of selling a home. It is difficult to avoid estate agents fees, but understanding them can help you haggle successfully – and save you serious money
The Basics: Fees & Contract Terms
- Estate agent fees and their contract terms vary. It is a good idea to be aware of these facts before booking a valuation and hearing more about the agent’s service offering.
- Ask agents to email standard contract terms – you should review and amend the contract before signing and ask questions or seek independent advice about anything that is unclear
- Pay attention to the sole agency lock in period which varies dramatically across agents and is very long in some instances (4 weeks or 12 weeks are the most popular terms); more than this is unnecessary
- In terms of fees, overwhelmingly, estate agents charge a percentage fee, which can be anywhere between 0.75% and 3.5% of the agreed selling price for your home depending on the type of contract you opt for with your estate agent. Our recent mystery shopping research of agents willing to disclose their standard fee indicated the average fee for a sole agency contract was 1.5% + VAT, similarly, a survey for Which? found the national average was 1.8% + VAT
- You should aim to get a fee that is 1% + VAT for a sole agency contract (on the agreed sale price)
- For higher value properties – such as over £500,000 – agents are often prepared to accept even lower fees, and perhaps go below 1% + VAT
- The upside for the seller in the fee structure is that the estate agent has an incentive to sell the property for as much as possible, so they get higher commission
- For more expensive homes fees can end up being tens of thousands of pounds – which many sellers will feel is a lot of money for not much work.
- Do not be shy about negotiating fees, most agents are prepared to be flexible on their commission
- Occasionally, particularly for cheaper properties, estate agents charge a set fee, which can end up as a high percentage of the total property cost. Online estate agents also often charge set fees – which we have summarised here
Watch out for additional costs
- Fees are often quoted excluding VAT, which is currently 20%. So a 1% fee is 1.2% inc VAT, or £3600 on a £300,000 home and a 3% fee is 3.6% inc VAT, or £10,800 on a £300,000 home. Estate agents should clearly state whether fees include or exclude VAT. If the agent does not say upfront, be sure to check this point. In their contract, agents should express their fee as an actual amount, based on the asking price, as required by The Property Ombudsman — note the actual commission you pay will be calculated on the agreed selling price which may be slightly higher or lower than this
- If you appoint a sole agent, fees are lower than if you appoint a multiple agent (normally in the range of 1%-2.5%, rather than 2.5%-3.5%). WARNING: if you agree sole agency make sure you read the contract carefully. If, further on down the road, you instruct another agent ensure that the original contract has been fully terminated so you don’t have to pay commission to both agents. For an explanation of types of contracts and what to watch for see our Estate agent contracts guide
- The estate agent is required by law to tell you what is included in the fee – does it include preparing the property details, advertising costs such as placement on property portals, and For Sale boards? Ideally, you should not face any added costs and most agents cover these services with their commission, so do shop around if you are being quoted additional up-front registration fees, fees for photos, fees for advertising or marketing incentive fees. You should not need to pay these
- Additionally, there should be ‘no withdrawal fees’ if you change your mind and decide not to sell your property for any reason
- Most agents can arrange for an energy performance certificate (EPC) to be done on your behalf, and this should be your only up-front cost. Shop around as we think you can find cheaper elsewhere. There is no obligation to use the estate agent provider and you may already have a valid EPC if the property has been recently built or sold
- Be aware that you are under no obligation to use any in-house estate agent services (such as mortgages or conveyancing). Be sure to compare rates and service ratings as estate agents almost always earn a commission on these extra services
Get the agents to compete on cost – and haggle over the fee!
It isn’t very British to haggle, but in a market where sellers are in short supply, you will probably find agents surprisingly willing to cut their fees to get properties on their books. If you are going for sole agency, you should aim for a fee of 1% – or even less for high value properties
- More expensive estate agents are not necessarily better
- Get quotes from at least three different estate agents, and ask them what their fees are for a sole agency agreement, and if there are any other costs. Make sure you tell each estate agents that you are seeing other agents, so they know they need to compete. You will probably get three different fees, although estate agents sometimes effectively operate in local cartels all charging the same fee
- Estate agents often ask for 1.5% up to 2.5% (+VAT) for being sole agent, since they know that most sellers won’t try to haggle. But that doesn’t mean they aren’t open to negotiation
- Go back to the more expensive agents, and tell them the others are offering lower fees. Tell them that you are expecting to pay only 1% (+VAT)
- Small estate agents are often more flexible on negotiating commission downwards than large chains, which often operate nationwide policies
- Agents who are trying to win business to increase their market share in an area will probably be more open to negotiation than the leading estate agent
- If you insist on putting the property on at an unrealistically high price, the estate agent is likely to be less willing to accept a lower fee because it will be harder to sell
- If you achieve 1% (+VAT) you can be pleased with yourself – you might have to settle for higher fees
Give the agents sliding scales to get a higher sale price
Sometimes estate agents agree to a sliding scale of commission, to give them a big incentive to sell the property at a higher price. This more closely aligns their interests with yours, getting around the problem that agents are often just keen to get the sale, even at a low price, so they can move on to selling the next property to earn another commission. You will probably have to offer the agent a sliding scale, as they are unlikely to suggest it themselves.
For example, if you think your home is worth about £300,000, you could suggest:
- 1% fee if they sell your home for under £275,000
- 1.25% if they sell it between £275,000 and £299,999
- 1.5% if they sell it between £300,000 and £325,000
- 1.75% if they sell it for over £325,000
You could suggest the sliding scale if you think an agent is insisting on too high fees. In the example above, if an agent is insisting on 1.75%, you could agree to that but only if they sell it above £325,000
You can also use incentives to reward the speed of the sale, if a quick sale is important to you
Online estate agents
If you still feel you are paying too much for an estate agent, you can always use an online estate agent for a fraction of the cost – as little as 0.5% or even £200. But you need to do your research. See How to save money with online agents?
When should I pay the estate agent?
Unless you made the mistake of signing a “ready, willing and able purchaser” contract with the estate agent (see How should I choose an estate agent?), then fees normally become due when contracts are exchanged. However, you don’t pay until the sale is actually completed. You should never pay an estate agent before you have the money in the bank, or if they do not sell your house for you. Agents usually refer to this as ‘no sale, no fee’.
Liked this advice, why not take a look at some of our other guides:
How do I lower my estate agent fees? What about online agents?
Estate agent contracts what to watch for
What price should I sell my house for?
Should I sell my home myself?
How should I choose an estate agent?
Step-by-step guide to selling your home
Top Tips: How to make your home sell faster and more valuable
Estate agent tricks
The legal side of selling a home made simple
How to resolve disputes with estate agents
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Great words by@iancowie in @TheSTHome on stamp duty reform. How about a new rate for investors to pay for homeowners http://t.co/af2E0jNY3u
09 March 2014
"It's only £150+VAT so not not double charging" In the real world £180 counts as a charge! @DouglasAllenEA http://t.co/cOw3QKL2MX #UKHousing
07 March 2014