Why do estate agents charge so much commission?

If you type the phrase ‘why do estate agents charge so much commission?’ into Google (or Bing, there are other search engines!) the first results you’ll see are from a clutch online estate agents. They promise that they won’t charge you thousands in commission but charge you a ‘fair’ fixed fee instead.

Why do estate agents charge so much commission? London terraced houses exterior

credit Maggie Jones, Flickr

It seems a tempting offer. After all estate agents commission is much maligned.  But also misunderstood. Here’s how I see it.

Online fixed fee vs no sale no fee

Headline grabbing offers aren’t always what they seem and this is very much the case with online agents.

YES they charge a lot less than ‘traditional’ estate agents BUT they charge their fee when you sign up to them and crucially, BEFORE they’ve done any work for you.  And that means BEFORE they’ve sold your house and proved their worth.

If your house doesn’t sell after putting it on with an online agent, you’ll have paid money for nothing and be back to square one.

But traditional estate agents only charge commission once they’ve sold your property.  In some cases they will put a lot of effort into marketing a property and never get paid a penny for doing it – i.e. no sale no fee.

In a buoyant market many houses sell themselves, as demand is high and online agents have done very well selling lots of houses in the past few years.

Why do estate agents charge so much commission? Pretty Kensington house exterior


But we’re not in a buoyant market. We’re in a tricky market where savvy buyers know they hold most of the bargaining chips. And it’s in these market conditions where traditional estate agents come into their own and the service online agents provide for their ‘fair’ fee sometimes isn’t enough.

Here are the three reasons why:

1. Traditional agents are local experts who will price realistically

they will value your house taking into account a whole host of factors such as schools, transport and current market conditions. A realistically priced property should sell far quicker than one priced by a company that doesn’t have the knowledge of your street or is willing to use the price that you dictate for your property (many sellers have an inflated view of what their property is worth!)

2. Traditional agents keep buyers and sellers apart to keep deals on track –

selling your property is an emotional process and I’ve lost count of the number of times I’ve refereed bitter battles between buyers and sellers.  Deals can go sideways over the most minor issues that shouldn’t matter in the grand scheme of things.  This is where traditional agents come into their own.  Unlike online agents who let sellers do viewings and have direct contact with each other, a good agent will act as a go between – and a calming influence.

3. Traditional agents have databases of buyers

when you give your property to a traditional estate agent, chances are they will have a database of people they know who are ready to buy in your area. That’s the benefit of having local offices. Which means you’re one step ahead before you’ve even started. Make sure you ask your agent how successful they’ve been in selling property on your road.

How much commission can you expect to pay traditional agents?

The phrase ‘you get what you pay for’ definitely applies to estate agent fees.  As with any transaction, beware the really low price.   Estate agents need to cover the cost of not only marketing your property but if they get an offer accepted, keeping the deal on track for the next few months.  That’s potentially a lot of hours work. Anyone who says they can do it for less than 1% is probably desperate for the business and you should ask yourself why they are.

Most estate agents charge between 1-3% of the agreed selling price of your property as their fee. According to a survey conducted a few year ago by Which, the national average was 1.8% plus VAT.

Unlike online agents, traditional agents don’t have a fixed fee which means you can negotiate on the price. Agents are negotiators by trade and will always be willing to do a deal with you.

Mountgrange Heritage Careers

A few points to bear in mind:

  • Sole agent or multiple agent? If you decide to appoint more than one estate agent, you can expect to be charged a higher fee, typically between 2 and 3.5%, as both agents will need to be paid from the one fee.
  • Always get at least three agents to value your property and let them know they’re competing against each other for your business.
  • Small independent agents can often be more flexible on commission than large chains who have to follow company policy.
  • Offer your agent a sliding scale of commission to incentivise them to put more effort into selling your property. This works a treat with most agents. For example, 1.5% if they sell your property for £x but 1.75% if they sell for £y and 2% if they sell for £z.
  • Check if the commission quotes is plus or excluding VAT – this will mean a price difference of 20%!
  • Check what’s included in the fee – you shouldn’t have to pay any additional charges for things like photos, EPC or marketing.
  • Beware agents cross-selling you other services such as mortgage advice or convincing. Be aware that you can get these services elsewhere so shop around.

When should I pay the agent?

Estate agent commission normally becomes due when your property deal has exchanged. However you shouldn’t pay until the property has completed and the money is in the bank.

You decide our fee

We believe estate agents should prove their worth before a fee is agreed.  After all, what’s the point in agreeing a fee upfront before the agent has had a chance to prove themselves?

This is why all of our clients are offered a flexible fee structure where they decide what percentage fee they only once we’ve sold their home.  There is a minimum of 1.5% and a maximum of 2.5% but clients can choose any amount in this bracket depending on how we’ve performed for them.

We think it’s only fair.  Read what previous clients think

If you’d like a free property valuation or want to chat to a Sales Director, fill in this form and we’ll be in touch

Michael Wilson, Managing Director


One thought on “Why do estate agents charge so much commission?

  1. Hi Judith Pons
    The Dangers of Choosing a “No Sale No Fee” Conveyancer!

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