It often makes me choke when I learn how much the estate agent is to be paid in commission on the sale of a property. Often fifteen times more than my fee and for much less effort. On top of this the agent may also be receiving a referral fee of around £200 to £300 from the solicitor he or she has recommended. Yes, you could accuse me of jealously, and yes, perhaps I should seriously think of a career change.
It is also I suppose a sad indictment of my profession when one looks at how the Law Society has allowed such a situation to arise. Solicitors were at one time paid according to a national fee scale, so depending how much a property was worth their fee would be calculated accordingly. Unfortunately an inept professional body combined with outside competition has led to many solicitors undertaking property transactions for less that the cost of a family ticket to gain entry to Alton Towers.
So how can an estate agent justify such a large fee? It is true that the cost of advertising and employing staff is high. It is equally fair to concede that difficult to sell property can often create a long running financial burden for the agent. However there can be no justification for an agent calculating a fee based on a percentage of the value of the property. This is outdated and has no relationship with effort or ‘value for money’ considerations.
I would perhaps be less harsh in my view if I could be convinced that most agents deliver a high and efficient service for the home seller and buyer. My experience suggests the opposite. There are a large number of agents who consider their role is nothing other than to advertise property, to introduce a potential buyer to a seller, and to then look to the solicitor acting for the seller to collect their fee at the end of the transaction for immediate banking. These agents are not keen to assist during the sale transaction and spend most of their time playing one solicitor off against another.
I am sorry but I expect an agent to be more pro-active and to do everything possible to assist the seller and the selling solicitor in making sure the seller’s experience in selling their home is pleasant and stress free.
There are a number of administrative tasks during a transaction that an agent could undertake. They could help with the delivery and signing of documents such as the contract and transfer. They could play a larger role in collecting replies to inquiries and also helping to coordinate exchange and completion dates. On the whole there are plenty of ways the agent could in collaboration with your solicitor help to speed up the process and to put it bluntly do more to justify the high fee charged.
At present our experience is that many agents actually contribute to delay through constantly calling the office for pointless updates as well as giving home sellers unrealistic expectations about how long the process will take to complete.
I did have an attempt to stand up to local agents. About six months ago I said I would only collect the agent’s fee from the client and meet the extra work and cost of passing this money onto the agent if the agent paid me £50. I did add that if the agent referred a couple of clients to me each month I would waive the fee. What reaction did I receive? Well it was if World War 3 had broken out. ‘What right do you have to demand payment?’ ‘You are not allowed to do that!’ ‘We will report you”. It was as if I had committed a crime. The agents just did not get it. For a fee of around 1% of their fee (or some referrals) I was offering to continue to collect their fee from the client (even no there is no obligation on me to do so) to preserve their cash flow and to minimize their bad debt. They could not see that given how my fee structure had been squeezed the extra cost to me of collecting and accounting to them was beginning to impact on my bottom line.
All but one agent refused to pay and I now tell clients that they must pay the agent direct. It’s a shame more solicitors do not recognize that this custom of collecting and paying the agent’s fee is no longer financially sustainable. In a climate where the likes of Ryan Air are looking to cover the cost of any extra administrative task however small surely its time to break away from outdated and unnecessary conventions?
At the end of each transaction we send out a client feedback questionnaire and on this we ask the client to give a rating on their agent. We always send the completed form to the agent and invite comment. Not one agent has come back to us. It seems the majority of agents just do not care.
Will anything change? This is unlikely to happen as long as homeowners continue to pay scale related commission. As long as the agent continues to receive such high fees why would the agent wish to change anything?