How much should I pay the estate agent?

How much should I pay the estate agent?

Estate Agent’ fees vary enormously, and add thousands of pounds to the cost of selling a home. It is difficult to avoid estate agent fees, but understanding them can help you haggle successfully and save you serious money

The basics

Estate Agents charge a percentage fee, which can be anywhere between 0.75% and 3.5% of the price you sell your home. A survey for Which? found the national average was 1.8%

Occasionally, particularly for cheaper properties, estate agents charge a set fee, which can end up as a high percentage of the total property cost. Fees usually exclude VAT, which is currently 20%. So a 1% fee is 1.2% inc VAT, or £10,200 on a £1million home or £5,100 on a £500,000 home.

An estate agent is required by law to tell you what is included in the fee. Such as does it include preparing the property details, advertising costs and For Sale boards. Ideally, you should not face any added costs.

More expensive estate agents are not necessarily better. There are regional variations, with estate agent fees higher usually in London than elsewhere (even though properties are also far more expensive).

It isn’t very British to haggle, but in a market where sellers are in short supply, you will probably find estate agent 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%.

Estate agents often ask for 2% or 2.5% 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% for your £1million luxury home.

Small estate agents are often more flexible on negotiating commission downwards than large chains, which often operate nationwide policies. Estate 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% you can be pleased with yourself, you might have to settle for higher fees.

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 estate 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

When should I pay the estate agent?

Sales commissions normally become due when contracts are exchanged. Fees for marketing materials etc are payable in advance and are non-refundable in many cases. Be careful that you’re not paying an over inflated price for marketing brochures, premium listings etc. You’ll be amazed what it does to the final sales commission percentage.