Looking to sell your property this year? Or perhaps you have made it your new year’s resolution to finally sell your current property and move elsewhere. Great idea. However, to do this with the help of an estate agent, you will have to pay an estate agency fee. This fee will come in the form of a small percentage of the final price that your property sells for. The estate agent takes this as commission to cover the various administrative services that the agent has provided you with in helping you sell your property. In this article, we summarise what the average estate agency fee is in the UK and what this provides the client with.
How much are estate agent fees?
The current average estate agent fee in the UK is 1.42% of the final selling price, and this percentage includes VAT. For example, if your property sold for £400,000 then your estate agent fee would be 1.42% of this final sum, which is £5,680.
Note that this is only if you enter into a sole agency agreement. Should you choose to use more than one estate agent, they will tend to charge a higher fee – 3% of the selling price to be exact. Therefore, you should take this added cost into account before entering a multi agency agreement.
It is also important to watch out for any additional costs an estate agent might try and include in your contract. Estate agent fees can sometimes be quoted without taking VAT into account, which is currently 20%. For example, if you were told that an estate agent fee was 1%, and this did not include VAT, the real commission fee would be 1.2% of the final selling price. This means that you owe more than initially stated (and more than you may be expecting to) once the estate agent has sold your property. So when you agree to your estate agent fee, make sure to ask if the fee includes VAT to avoid any nasty shocks later on. It is against the law to quote fees without including VAT for this reason, but it is good to be aware if this.
Fun fact: estate agent fees are actually significantly cheaper in the UK than in most other countries. In Brazil, France, Jamaica and Spain, the average estate agent fee is 5%. In Mexico, it is 7.5%. So bear this in mind when working with UK estate agents – as it could be a lot worse!
When do you pay estate agent fees?
If the estate agent is unable to sell your property, then you should not have to pay them. And the great news is that most high street estate agents work on what is known as a ‘no sale, no fee’ basis when selling properties. Therefore, you should only pay the estate agency fee once the property has been sold and the contracts have been exchanged.
What to look out for
You should not pay any fees until the sale has been completed and you have the money from the sale in your bank account. If you do not pay the fee by a certain date (as will be outlined in your contract), then the estate agent can charge you interest on a daily rate until you settle your debt.
What about online estate agents?
Estate agent fees with online or ‘DIY’ agents work slightly differently. With an online estate agent you will have to pay a fixed one-off upfront cost. While this generally works out to be cheaper than paying a commission-based estate agent fee, the downside to this is that you are paying this fee upfront. Consequently, you end up paying the same amount regardless of the price at which the house is sold or whether the house is even sold at all! This is why many people would prefer to use a high street agent over a DIY agent – not only do you benefit from having a face-to-face rapport with your agent, but you also will not have to pay anything unless your property has been sold.
Should I just choose the cheapest estate agent?
Selling a property is an important process, therefore you want to be sure that you hire the best people for the job. If an estate agent is offering to sell your property for a suspiciously low commission fee, there is probably a reason for this. Naturally, the best estate agents are going to have slightly higher fees than their rivals and as the best agents, this should be reflected in the quality of the service they offer. Selling a property can be very time consuming, and the process will usually take several months to complete. Therefore, it may be worth accepting that you may have to pay a higher commission fee to ensure that the sale of your property is in good hands and that it sells at all!
In addition, an estate agent charging a higher fee may be able to sell your property for a higher amount than a cheaper estate agent. In this case, while you may be paying a higher amount of commission, the amount of money you walk away with from the sale could be higher than that of a cheaper estate agent who would have sold the property for a lower amount.
For example if Estate Agent 1 charges 1.5% in estate agent fees, and sells your property for £130,000, then you get £128,050 out of the sale.
On the other hand, if Estate Agent 2 charges 1% in estate agent fees, but is only able to sell your property for £125,000, then you get £123,750 out of the sale.
Evidently, cheaper is not always better. Likewise, we cannot guarantee that the most expensive estate agent is going to be the best. At the end of the day, it is always best to choose an estate agent who you believe is going to do the best job of selling your property. Take your time in reviewing your options, always check online reviews and make sure to settle with an agency that has your best interests at heart.
If you are looking for an estate agent to help you to sell your property, then look no further. With over 27 years of experience in the South West London area, James Anderson has the professional networks and local knowledge to help you sell your property for the best price possible. If you are interested in selling your property with us, then get in touch today.