Cheap agents could cost UK consumers half a £Billion in wasted fees

Cheap agents could cost UK consumers up to half a £Billion in wasted fees

the 60 to 70% of customers who didn’t go on to sell would have paid almost half a billion pounds to these firms for nothing.

Confused girlAlso see “Online agents – Big savings or, paying up-front for failure?”

There has been a great deal of press coverage of the savings that owners might be able to make with an on-line agent as opposed to the more traditional agents. However, notwithstanding, recent ASA rulings that some of these claims are misleading; the hidden costs of putting your home up for sale with an on-line agent do not appear to have been calculated by many journalists or consumer champions and, has been conveniently left-out of these agents ‘savings’ calculations in their advertising literature.

the hidden costs of putting your home up for sale with an online agent does not appear to have been calculated by many journalists or consumer champions and, has been conveniently left-out of these agents ‘savings’ calculations in their advertising literature.

Put simply, if on-line agents had every property currently up for sale on Rightmove (1.2 Million homes) and sold a typical percentage of that stock (average industry norm’ for online agents is estimated to be circa 30% to 40% of stock) then the 60% to 70% of customers who didn’t go on to sell would have paid between £468,000,000 and£500,000,000* (half a billion pounds) to these firms for nothing. Not much of a saving for the vast majority of their customers in my view.

The traditional high-street agent, however, would have charged all those unsuccessful customers a cumulative total of around £0.00

The difference between the cost of selling with an online agent and a traditional one when all of the successful and unsuccessful fees are added in? Around £650 per sold property (assuming the current average UK sale price of £177,377 using HM Land Registry figures). A far cry from the thousands of pounds in savings that online agents would have the public believe and, all of which without the expert negotiating, valuation skills and local knowledge a good agent can bring to the table for sellers.

Journalists and consumer champions, please do your sums before singing the virtues of these allegedly cheaper agents.

* Assuming an up-front fee of £600

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I welcome feedback so please feel free to leave constructive criticisms or ask questions below. If you could also take a second to rate my blog and pass it on to others who you think may find it interesting that would be great. Thanks.

Chris Wood of PDQ Estates Ltd

Chris Wood

About Chris Wood: Chris is an estate agent with over 25 years of property experience and is a leading campaigner against #PortalJuggling

His business PDQ Estates Ltd based in Penzance and Helston, West Cornwall. He has worked with all sizes and types of businesses from single office independents to the management team and board of RBS and Tesco. A former President Elect of the NAEA and board member of NFoPP until he resigned in 2009, Chris has always championed the highest professional standards forestate agents in the UK. No stranger to the media, he has appeared on various programs including BBC, News 24, ITV, independent and BBC radio and is a regular contributor to trade journals, local and national Newspapers. Chris is on KloutLinkedIn Ecademy Facebook and Twitter

He lives in in Penzance in his beloved West Cornwall and I n his spare time; Chris likes to keep fit and is a former long-standing member of the Territorial Army. In 2010 he mobilised for a tour of duty in Afghanistan with 1 Rifles as part of 3 Commando Brigade.

13 comments

  • Nice work!
    Let’s see what happens when it hits the fan.
    Regards
    Richard

  • Hi Chris. I like where your head is at but where does this figure come from? “Sold a typical percentage of that stock (average industry norm’ is circa 30% of stock”

  • That’s one way of looking at it but how about the money that could have been saved by the sellers who could have used an online agent?

    • Hi Ashley
      If every customer who put their property up for sale with an online agent, sold their property through an online agent they would make substantial savings* compared to the same scenario played out with high street agents however, this is not what happens.

      To make a saving, you must be financially better off* than you would be by purchasing another product or service. To claim that all online agents customers save is misleading as all online agents (that I am aware of) charge up front for a service whereas, typically, with high street agents you do not. So, if a customer pays up front and does not sell which, dependent on the agent used, there is a statistical probability that they will not sell; then those customers have not saved when compared to a high street agents service.

      In effect, what customers are doing with both agency models is gambling.
      With a high street agent, they are placing a free bet that the agent will sell their home and, if they don’t sell, they will have paid nothing for trying but, will pay a higher fee if they do sell**
      With an online agent, the customer is placing a blind bet of several hundred pounds up-front with no published knowledge of the odds on the chances of actually selling against the potential for a saving* on the final commission – no online agents that I am aware of have published their annual ‘instruction to sold ratio’ – e.g. with my company, we have sold circa 80% of the amount of properties we have put up for sale this year to date whereas, with one online agent operating in my area, they have sold just 29%. Instruct that agent in my area this year and you would have a 71% chance of losing circa £600 and, not selling your home.

      *assuming they achieve the correct market sale value and, there is some evidence to suggest that this may not be the case.

      **though many agents, myself included, would argue with evidence to back up our argument, that the customers will achieve a better selling price due to local knowledge and trained negotiators working on behalf of the seller and, so, end up better off overall than they would have done by selling privately or with an online agent.

  • The most sensible, structured comment on online agents this year.

  • Hi Chris and thanks for the response. Yes I hear you and in the examples given you could be right. I know high street agents I would choose over online agents and visa versa because it is the value the customer gets that is important and some just go that extra mile. And I get your argument about how much money would be wasted on properties that don’t sell, all I really wonder is how much could have been saved by those who did if they used an online agent. It’s hardly only good for the customer if their house does not sell.

    A good estate agent worth his or her fee is a rare thing indeed and I think the online agents will weed out the money for old rope brigade. It’s good to have choice and it’s good to empower people to do it themselves if they are confident they can do a better job than their usual agent, like so many of our customers are. I have worked for a commission based agent and I know many others that are only interested in getting an acceptable offer for the vendor. Why would someone on % push for an extra few grand and risk loosing the deal when the difference in earnings is negligible? They don’t!

    It is a mine field out there for the consumer and I don’t think positioning about how one skins a cat is not helpful. Let those who provide the best overall deal, value and result for the customer win as I’m sure they will.

    • I don’t disagree with much of what you say but, in my office, we will always try for a those extra hundreds or thousands of pounds for our customers if we think they’re there to be had

  • Pardon the double negative in the last paragraph.

  • Yes I know you would Chris because a mutual connection who is the possibly the best in our business, rates you very very highly. All due respect to you and your agency for that. My main frustration lately is that so many of us are fighting for the listing and we resort to slagging off the methods others use rather than concentrating on what makes us different and how we can provide better overall value for the client, regardless of the method.

    Have a great holiday, I think we all deserve one!

  • Pingback: Online agents – Big savings or, paying up-front for failure? | PDQ Property In West Cornwall

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