As a seller it can be a difficult task to choose the right agent. There are hundreds of estate agents in the market and while many offer the traditional agency service the arrival of online agents has fuelled the acceleration of agents offering an upfront payment for what can sometimes seem an overall lower fee. The appeal of what can seem like a lower fee is obvious, but many experts are warning sellers they may lose out by choosing a service with this payment format.
GetAgent, the estate agent comparison website, warn that paying an agent their entire fee up front could be a mistake. They explain: some agents work on the model of paying an up-front fee. In some cases, it’s the only option on offer, and in others as a cost-effective alternative to paying them on completion. With this model, the estate agent has no incentive to sell your property, or to progress the sale as quickly and efficiently as possible. As an alternative they suggest that by agreeing a “no win, no fee” commission payment, you only pay for results, and you’re also ensuring the agent has a real incentive to achieve the highest possible price for your property.
GetAgent is the estate agent comparison website. They use historical sales data to help vendors find the best estate agents for them and they work with over 5,500 of the best performing estate agents in the UK.
At Galley Properties we have had first-hand experience of this. We have had sellers come to us to sell their property after another agent, with whom they paid an upfront fee, failed to do so. These sellers paid a large sum of money but no sale was ever achieved. After instructing us we found a quality buyer within a matter of weeks and sold their property for a good price. The properties in question were of a good standard and with the correct marketing should have had no reasons why a buyer could not be found. The only reason we can guess as to why the agent with the upfront fee did such a poor job is that they had little incentive to sell the property or that they had little incentive to provide quality marketing to show off these properties at their best.
The main reason many experts within the property sector, not just GetAgent, warn is that upfront fees give an agent no incentive to sell. Essentially they suggest that thousands of sellers are paying without ever achieving their goal. If this is true then the agents using this model are getting money for nothing. But do the stats back up this assertion?
Concentrating specifically on online agents, because they are the main user of the upfront fee model, GetAgent looked at 500 new listings by Purplebricks and all listings by Tepilo, Housesimple and Emoov during 2016/17. They analysed the success of each of these listings from January 2016 through to February 2017, allowing 14 months. This analysis was followed up with questionnaires to customers who have used online estate agents so that they can understand their motives and their level of satisfaction. They then conducted telephone interviews with some of the respondents, which provided some in depth analysis.
The results showed over 80% of those interviewed chose an online estate agent to save money. But shockingly the research found that around half of online agent listings hadn’t sold after the 14-month period. Purplebricks completed on just 57% of the listings from January 2016, as of February 2017. Housesimple completed on 58%, while Emoov and Tepilo were even lower with 51% and 48% completion rates. This means up to half of the customers who pay a full fee up front may have never achieved their goal of securing a sale within this long period of time.
Some agents give their customers the option of choosing whether to pay upfront fees or pay a commission upon completion at the end. In fact, some online agents have since added the commission on completion option to their products. If you look at agents who offer both then it will mostly likely become apparent that there is a huge difference in overall price between the two options. You may wonder why there is such a huge difference.
Offering a range of options is actually a clever marketing tool used to direct customers to the option the agent would prefer them to choose. It’s not something new in marketing and is well known for selling everything from magazine subscriptions to car upgrades. The way this works for estate agents is that by making such an obvious price ‘saving’ when choosing the agents preferred option makes that option more attractive because the customer thinks they got a bargain. Think about if an agent only offered you one option and that was to pay a fee of £1200 up front, seems ok right? Now compare that to if an agent offered you the option of paying £1200 up front or £1700 upon completion. Suddenly the £1200 option is more attractive and choosing it would make you feel like you saved a whopping £500! You may ask yourself who doesn’t want to save £500, but now imagine the scenario that you are one of the thousands of sellers choosing upfront fees that never achieve a sale. That would mean you just paid out £1200 for an agent to NOT sell your house, and that would be a bad deal for you.
A reputable agent will be confident that they can deliver results and achieve a sale for you. They are incentivised to sell your property and to progress the sale as quickly and efficiently as possible otherwise they don’t get paid. Also by having a percentage fee they have an incentive to achieve you the best possible price. By paying based on results you will ensure that the agent works hard to not only achieve a sale but to make you, and them, the most money.
Sometimes sellers begrudge paying an agent a little more than a flat fee but by paying a little more you could actually make the most money yourself. GetAgent explains that most people believe that estate agents earn too much money. And yes, they do typically cost thousands of pounds. But your home is your largest financial asset, and you want an agent you can trust to do the best possible job. This means appointing trusted, local market experts who will dedicated themselves to marketing your home in the best way. Ultimately, the aim is to end up with the most money in you pocket when all is said and done. Put it this way – paying £3,000 to get an extra £10,000 for your home really is a nobrainer!
If you think of this example you will understand why a good agent is better than a cheap agent. A cheap agent who has a little or no incentive to sell your property would be happy to suggest an average sales offer is worth accepting. In this example we could suggest an offer of £250,000 was achieved and the agent charged a fee of £1500. Compare this to a good agent who would work hard and push for the best offer in the best time frame, they may achieve you an offer of £260,000 yet charge you a fee of £3000. While some people may think a fee of £3000 is far too high that agent actually worked hard to earn that fee and made the seller £8500 more.
Of course no one can be certain of the sales offers to be put forward, but an experienced local agent will have a better idea than most. An experienced and good agent will also know how to best market your property to achieve the best price. They also have a huge incentive to sell your property rather than letting it drag out over a long period of time or maybe even failing to sell at all. Therefore it is in all sellers’ interest to choose a good local agent who is paid the main fee upon completion rather than a cheap agent.
If you are thinking of selling your property why not speak to us. At Galley Properties we are confident we can sell your property for a great price and in the best possible time. We are happy to wait until we have sold your property to receive a commission fee, that way you know you are paying us based on our results to sell your property. We do have a very small upfront fee to cover the cost of our professional photographer, most agents don’t use professionals but almost all our vendors agree that our stunning professional photos help achieve the best sales prices and are more than happy with this small fee. Give our sales team a call on 01302570470 for a friendly no obligation chat.