Average estate agent’s fee sinks to 1% – how low can it go?

The average estate agency fee has fallen to almost exactly 1% excluding VAT – and is likely to fall further, despite mounting costs for agents.

Peter Knight, of the Property Academy, said that moving off the high street and/or going ‘hybrid’ would not be a solution for most agents because of their marketing and staffing costs.

In the 2017 Home Moving Trends Survey carried out for this month’s EA Masters event, 5,838 home sellers were asked about fees.

Knight said: “In simple terms, you can break things down into three thirds.

“One third pay more than 1%. One third pay less than 1%. And one third pay 1%. The average fee is now, as near as damn it, 1%.

“And as if this isn’t concerning enough there’s a worrying trend – the fees are going even lower.

“Those currently selling are paying less in percentage terms than those who have sold within the last 12 months.

“This confirms data Stephen Hayter of My Home Move shared with me that estate agent fees fall between 0.1% and 0.15% every 12 months.

“On that basis, in the first quarter of 2019, the average fee could be as low as 0.75%.”

The study of home movers showed that relatively few (30%) were selling for over £1m, and most (60%) were selling for £250,000 or less.

Knight told EYE: “This is the tenth year we’ve surveyed people who are currently selling a property and we’ve seen a marked reduction in the average fee.

“In 2011, 76% of sellers were paying in excess of 1%, whereas today it’s just 31%.

“We will be sharing further insights from this survey and also two others, the 2017 Landlord Survey and 2017 Tenant Survey, at the EA Masters.

“In addition, we will also be revealing insights from our 30,000 mystery shops for the Best Estate Agent Guide and highlighting what it takes to be exceptional.”

Knight said the continuing reduction in fees cannot continue – “unless the industry is prepared to experience even greater levels of change than those of the last few years”.

He said the main costs of staff and marketing are going up, not down: “So, while a small saving can be achieved by leaving the high street and working from a conventional office, or from home, or going ‘hybrid’, this isn’t enough to compensate for the reduction in fees.”

Knight said that the subject will be tackled at the EA Masters on September 22. There are just 50 tickets left for what will be the largest estate agency event ever staged in the UK.

Details here – where you will also find a rather stirring short video about the Best Estate Agents Guide, also to be part of the event:

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36 Comments

  1. AgentV

    Be interesting to know if the 1% includes or excludes VAT. With 60% selling for £250,000 or less, the online listers cannot claim that their average customer saves thousands ( in the plural) let alone figures like £5,000 which are often bandied around!

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    1. Nick Salmon, M.D. Property Industry Eye

      Your question answered AgentV – It is excluding VAT. Opening sentence now clarifies.

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      1. MartinCo40

        The other side of the equation is how many properties does the average estate agent sell? Last time I looked the industry average was 1 completed sale per week (total transactions divided number of trading agents). On that basis the average agent is probably generating revenues of around £100k to £120k and with premises costs of £18k (rent & rates energy and cleaning) portal costs of another £15k and software/website costs of say £5k that’s £38k straight out the door before paying for staff. Traditional high street agency is under threat unless you can achieve £200k+ of annual revenue. For many agents the best solution would be to check their next lease break and get out of their premises.

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  2. Chris Wood

    Stephens figures are the UKs largest published data set of agency fees. There may be a built in bias to these fees by nature of PPLs’ client base however, any firm claiming average fee savings in the U.K. would be very unwise to continue to make wild claims based on ‘high’ fees when the evidence makes it clear that on like for like comparisons, the high street, in many areas is far cheaper than call-centre agents and on average, the average cost per fee earning event is about the same.

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  3. Andrew Overman

    A pathetic “race to the bottom”, largely fuelled by two national agents in my location, with unrealistic valuations and pathetic fees – although it might explain why some are (allegedly) favouring buyers to whom they can upswell additional products / services to.

    Happily a race I won’t be entering.

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  4. J1

    This signals the end of the medium sized and larger agents with massive central overheads

    they cannot survive on such fees, if the story is true,  and the trend continues

    the lettings fee ban is their meteor hurtling through space towards them

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  5. GPL

    Less property stock over the years has equated to better fees for me, reflecting the fact that I have more time to look after my clients best interests. Clients who understand what we do are, in my view, happy to pay a fair fee.

    I note the thundering hooves of Property Academy rushing to the front of the class with its Rightmove Tradeshow Industry Lecture… my business received a lovely little light cardboard Best Estate Agency Guide Certificate? …along with many others no doubt, noting the pay £100? per month extra to publicise for your own company and the “perceived” pressure of will one/won’t one makes next years guide?

    …..I can’t hide my amusement that “I am being Sold to” …..sucked into another monthly fee of some sort ….sounds familiar? Aye Yes, Rightmove Own Branding on your Property Listings …I didn’t take it for years …then they upped my Annual Fees again and hid behind the “but we’re including branding for you in your listings” line.

    Suck in a deep breath aaaaaaand…. all together now …..singing ” Money makes the world go round, the world go round, money makes the world go round…. ”

    As I look at the client Thank You Cards & listen to the positive comments from clients ….this is what I am listening to most, my clients

    Rightmove & it’s EA Masters is a Circustastic Trade Industry Sales Show, as long as we understand that… remember folks, only 50 Tickets left?

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  6. JAM01

    This is why, in the medium term, the future of estate agency is the full service hybrid model (no High Street office) for 60% of agencies out there. 20% will be DIY/online only. There may be flagship offices supporting the outliers. The remaining 20%, those able to command higher fees, will be the ones to maintain a high street presence. We will be left with a mixture of online only, hybrid and high street.

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    1. surrey1

      For the majority of locations high street premises isn’t really the significant cost. My office/shop rental costs about £4k more a year than a serviced office locally. The problem is staff, notably in bigger corporate agencies or call centre agents, being gradually replaced with cheap “bums on seats” to try and maintain margins, but ultimately further eroding the already poor industry reputation.

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    2. smile please

      JAM01

      You seem to change your opinion on which way the wind blows.

      When you started posting you were a “Hybrid” agent that concentrated on high-end London property, and this was the future as you do not need an office.

      THEN it was a complete change of direction when you join CW – In which case you thought the management was terrific and you were rewarded for working hard, customer service was at the heart of the organisation.

      THEN it looks like you join another corporate (thinking ARUN estates) where they are the best thing since sliced bread!

      NOW we are going back to offices are expensive hybrid is the way (FYI offices are not expensive).

      I admire your passion for who you work for but would offer the advice of make your mind up on what you think is best and go down that route, you may find yourself in a happier place for longer.

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  7. James

    The devaluation of the hard working, local, high street agent who is undercut every which way by the ‘get rich quick brigade’ and slaughtered by the ‘liberal elite’ with very little foresight or knowledge is leading to one thing…. complete anarchy and dysfunction in both property sales and lettings.

    Personally my fees are will not decrease; they may even go up! I have made a conscious decision to value myself, my work ethic, and my service to clients. In my opinion it’s about time all agents did the same.

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  8. Estate_Agent_Memes

    Some areas of the UK have been struggling to get 1% + VAT for years now. Makes interesting reading and then you think why not present this to the ASA etc then BAM – the advert for the course…. #pacepalm

    The above makes interesting reading and then you think why not present this to the ASA etc then BAM – the advert for the event…. #pacepalm

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  9. tommyvtb56

    Rightmove continues to look for increased revenue from thousands of fee paying estate agents while supporting big online agents. The end of the High street agent will also see the demise of rightmove.co.uk . Perhaps they should think about their future and whether or not purplepricks !! as a stand alone will support rightmove.

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  10. gk1uk2001

    A sad race to the bottom, with an attitude of “would rather have it at 0.5/0.75% than someone else have it”. Personally I’d rather have half the stock at twice the fee and earn the same amount of money – work smarter, not harder!

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    1. dave_d

      But then stand to lose market share – not smart business unfortunately.

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      1. Paul

        Why?  If you can articulate the reasons for your fee and demonstrate the difference between yourself and the competition at 0.5% and 0.75%, any sensible vendor is going to give you the business.

        It’s only when you can’t do that, will they feel there is no point in paying you the extra.

        I’d focus my efforts on those that are prepared to pay a proper fee and deliver what you promise to them, as they will be the best recommendation you can get if you do. They will more than likely know other likeminded people and that’s the type of PR you want.

        You’ve got to believe in yourself.

         

         

         

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  11. NAL4726

    The simple fact is the reason fees are dropping is the majority of agents don’t ask for a higher fee in fear of losing the instruction or ‘negotiate’ in blocks of 0.25% which doesn’t take long to fall!

    As an exercise i had a bunch of agents value my own home and all stated their fee as ‘1% but i won’t be beaten’ – ‘1.25% but i am open to negotiate’ – ‘Instruct me today and i will be the cheapest’ – typical agent terminology but the best bit is this was prior to me myself negotiating or even asking the question! They had no where to go after that apart from down and as they were all weak they simply crumpled.

    So as an industry we ourselves are to blame, not PB or any of the other guys that always seem to be getting stick on here.

    This is my first posting, i am a new online agent and i charge 1.95% with zero nada negotiation full stop. Try it you may be surprised.

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  12. Hillofwad71

    Seems the result of CWD entering the race is a complete erosion  of shareholder confidence .Testing new lows today the company currently valued at  a quarter of what it was 2 years ago. Hundreds of millions of pounds wiped off Surely Platt must now walk the plank

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  13. AgencyInsider

    I believe that a key factor in fee erosion is the lack of proper training of valuers. There are a number of highly effective techniques for presenting the fee correctly and ensuring a full fee is obtained in most cases. In my experience very, very few valuer/listers have the knowledge to do it properly.

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    1. JAM01

      Training and confidence in delivering the fee is absolutely vital. When agents cannot differentiate their services, the only thing they then resort to is to be different by being the cheapest. A road to ruin.

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  14. Anonymous Coward

    I think that the general public will miss us when we are gone…

    🙁

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    1. smile please

      Spot on.

      How many people wish they could go in and see their ban manager instead of an automated telephone system or computer.

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  15. Essjaydee51

    As my father in law used to say half a loaf is better than no loaf or in your terminology 1% of a house sale is better than 1.95% (naive idiot) of a failed instruction.

    what some of you seem to be saying is we should all start working together and uphold a higher fee structure!!

    How naive are you all!

    none of us work together, except in chain sales follow ups,we are each other’s competition and for those few who believe they will continue to get high fees, wake up before you lose your business.

    kid yourselves but don’t try and sell that kidplogy to us on here, this is a tough business with good and tough competition and when instructions are down we adapt to the market and at the moment that is a market where the public want cheap and if you don’t give it then you have three competitors that will until you relies that unless you do too, then you won’t have a business.

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    1. gk1uk2001

      Totally disgree. The top agent in our town, who lists & sells approx 3x the number of properties than their next nearest competitor, and has been the top agent by a mile for 15 quarters in a row also charges the highest fee in the town (which they don’t negotiate on at all) which is 2 or 3 times higher than the fee charged by the cheapest agent so your argument doesn’t stack up.

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      1. dave_d

        Market share is a very very strong position to be in – people will generally ask you to come out to value their home without seeing any of the other competition – you also have the upperhand of being the market leader which people are prepared to pay more for. We are the largest in our area in lettings by a long shot and people instruct us for that reason as well as our very good service – we very rarely lower our fee because we have such a strong position. We are top 5 in sales for instructions/sales and regularly creep up to top 3 – the reason is that we negotiate on fee where we need to – failure to do this means another agent will put up a board and we all know “boards breed boards”..

        Winning the instruction on fee may mean you can turn that sale into a let, it may mean you get another property near by someone who saw that you sold it.. If you never won it in the first place you stand to lose a lot more.

        We won’t lose out on fee (within reason)

        Some people need to realise that the market really has changed and you need to move with the times. It’s worth noting that we have continued to grow on sales each year to now the top 5 largest in the area

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        1. Marketshare

          And that is exactly why fees are going down.  Its great to hear that your sales are rising year on year but if your average fee is falling then you need that to happen just to stand still.

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    2. smile please

      Last time i checked Foxtons are still listing and selling property twice the fee of every other agent.

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    3. Marketshare

      If potential clients don’t see the difference they won’t pay the difference.  It is down to us as agents to demonstrate our worth, it always makes me laugh when agents have on their business cards ‘negotiator’ or ‘senior negotiator’ and the first thing they do is cave on fees!

      I tell my entire team that the only excuse I will accept for a lost instruction is that our fees are too high.  Fees are a mindset but most agents use them as an excuse.  Some clients think they want low fees…great, point them in the direction of PB.

      I simply don’t agree with those agents who think that an instruction at a reduced fee is better than any instruction at all.  Mentally you are lowering the bar, no matter how much you’ll say it’s a one-off you have just given yourself the excuse to do it again and again.

      Explain the difference, explain why you’re worth more and walk away if they won’t pay you what you are worth.  Rightmove say that 60% of sales are through the second agent, second time around the fee is nowhere near as important to the client so sign them up then.

      Over the past 3 years our average fee (percentage terms) has increased by 21%.

       

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  16. fluter

    Why be the average agent then? Provide genuine outstanding service to justify better fees. It can be done as we are proving.

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  17. AgentV

    One of the critical things is to improve cost efficiency, whilst keeping as high a profile as possible and giving the best service you can. We have lots of systems we have developed to achieve that.

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  18. aSalesAgent

    “This is the tenth year we’ve surveyed people who are currently selling a property and we’ve seen a marked reduction in the average fee.

    “In 2011, 76% of sellers were paying in excess of 1%, whereas today it’s just 31% [of sellers].”

    House prices have come up in that time though, haven’t they? 1% of a £500,000 property is more than 1% of a £400,000 property… no?

    Does Peter Knight know what the average estate agency fee is in monetary terms?

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  19. biffabear

    As a national debate the situation will vary wildly.

    But in London, competition is fierce. Once, an agent charged 2.95%, I will agree most of our competitors are around 1% .  We have a significant independent around here that frequently charges 0.85%.  The only plus side is, 1% will probably nett you £5k.

    However, no’s of property on the market are the lowest, I have seen in 30 years.  A good 50% of those are overpriced.  I can’t see too many local agents making any money anytime soon.

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  20. cyberduck46

    I was looking at a company called Arun Estate Agencies Limited’s filed accounts for the year to September 2016. They reported a £17.4M profit before tax on turnover of £67M (approx). A significant increase over the previous year £13.5M (exceptional item ignored). An increase from rental and financial services making up for a drop in estate agency fees.

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  21. Property Paddy

    Groan !

    Yes fees are going down, yes there are too many agents chasing the same business, yes we have on line competition and yes we don’t earn what we did 30 years ago.

    However here is reality.

    Vendor: you choose on line call centre or full service high street?

    Agent: You choose full service and be the best in town and charge what you’re worth or go down the hybrid/call centre option.

    These are the only two choices.  As an agent you cant even offer a mixture of the two unless you can define very clearly the difference in what you do and how you do it like Green and Red if not you get a muddy brown which will be how you are seen by your potential client. Trust me I tried I got red paint and green paint and mixed the two together…………!!

     

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  22. Robert May

    Since digital  completion records arrived in 1995 the house price index has risen by 406% to £281,000, retail price index has risen 177%.

    I would much rather have 1% on £281,000 than 1.75% on £69,211. Like for like 0.76% plus VAT is the equivalent fee. That said there is a  lot more competition about these days and completion volumes are also down so with all that taken into account; get what you, can when you can.

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  23. DSS59

    Can anyone recommend a good company that deals with updating utility companies? Currently use Homeshift and they are really poor! Thanks

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