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 contract terms vary. Try to gather these facts before booking a valuation and hearing more about the agent’s service offering.
- 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 house depending on the type of contract you opt for with your estate agent.
- A survey 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.
- Do not be shy about negotiating fees, most agents are prepared to be flexible
- 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.
- Ask agents to email standard contract terms. 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
- Review and amend the estate agent contract before signing and ask questions or seek independent advice about anything that is unclear
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
- 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.
- 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
Give the agents sliding scales to get a higher sale price or faster sale
Sometimes estate agents agree to a sliding scale of commission, to give them a big incentive to sell the property at a higher price.
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
Online estate agents may be a cheaper option
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.
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, 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’.