Fees – Is it a race to the bottom?

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  • #17052

    Nick Salmon Managing Director of EYE
    Admin

    With cut price agents online and in every town and city, is ‘cheapest is best’ becoming ingrained in the mind of the public? What can the ‘traditional’  industry do to combat the perception. Should it even try? Maybe  it is already too late…

    #17071

    PeeBee
    Member

    I’ve been in the industry for a period spanning five decades – and there have always been bargain basement Agents.  They pick up the virgins, have their wicked way and leave them badly scr***d – and then proper Agents show them how they should have been serviced in the first place.

    Erm… am I allowed to say that? ;o)

    #17105

    smile please
    Member

    Great post and question, probably the most important in my opinion that faces agents today.

    Agents need to do a much better job in selling their service in general, too many agents think coming up with a price and showing what they have sold is enough to win business.

    To justify your fee, you should explain exactly what you will be doing, the hours spent in marketing, showing, generating interest, negging offers, putting the sale together, checking chains, checking financial standings, offering advice, progressing the sale, liaising with all the different counterparts.

    This is where the true value in your fee is.

    If you do all of the above properly (and probably more) you can justify a sensible fee, trying to compete with the cheapest agent in town is not where you want to be.

    Believe me people will pay you a good fee if they believe in you. Going into a room saying you are great and you are as cheap as any agent is not good for you or the industry. In the end we will be reduced to listers like the onliners.

    I also feel we need a spokes person to promote our industry, have the ear of the press and media and let them know what we do for our fee and why its important to have a professional not a call center.

    #17113

    PeeBee
    Member

    Is that you putting yourself up for the position, sp? ;o)

    #17115

    smile please
    Member

    I would never say no, but would our industry want me is more the question PeeBee!

    #17240

    Paul House
    Member

    I can’t speak for anywhere else in the country but for my firm in Central London we have definitely seen fees as a percentage come down over the past 2 or 3 years. However, the actual amount of fees earnt per sale has gone up.

    There are clearly a number of factors for this and obviously a rising London market has helped. But I think ultimately it will come down to the model you use. A fixed fee model will inevitably lead to the ‘race to the bottom’ scenario. But with a no sale no fee, percentage based commission model, an agents fees should stay fairly steady.

    For the time being I have been given no reason to change my approach.

    #17278

    Clarkuk
    Member

    Over the last 2 years we have consistently raised our prices as we have found that we are in demand.  We do our job well and consistently and I feel our fees are fair for the job we do.

    The fee that people are willing to pay had to be justified by the job you do.  if all they can justify is fixed fee for pictures, a listing and a person to accompany viewers and a ‘we’ll leave it to the solicitors’ attitude that is all you get.  If you pay for your home to be staged for the photos, the details to be available to anyone online, the person on the other end of the phone to know; the market, their buyers, other properties available, and even the funny story about the extension you have then you pay for that.

    It’s also true that there is a place in the market for these companies who are ‘cheaper’ take Easyjet, their result is the same as British Airways they get you from A to B, but the way you get there, the time it takes and how comfortable the trip is sometimes what is important too.

    There are horror stories from both ends of the scale too, when a cheap agent get it wrong you blame yourself and the price you paid to the agent, when the elitist agency gets it wrong it is ALL the Estate Agents fault.

    If you are happy to shoulder that responsibility raise your fees if you aren’t reduce them.

    #17281

    Tcos
    Member

    Totally agree, its a long game process in some cases. Sometimes people need to get burnt before realising that cheap isn’t always good.

    • This reply was modified 3 years, 2 months ago by  Tcos.
    #17283

    Tcos
    Member

    Agree with Peebee that is…

    #17287

    Trevor Mealham
    Member

    The industry is simply in flux. made up of

    *hands on agency processes
    **legislation for B2B and B2B/ and the need to comply
    ***technology

    At the mo, vc’s and media techs have scaled and cheapened one part. What they haven’t done is to understand the wraith of legislation in, and coming.

    Thus budget agents can tech and media wise do like the pound shops and offer stack em high and cheap.

    But cheap will fall over as legislation kicks in more. Once all have come to terms with cheap advertising. the real revenue will be in providing ‘safe hands’ service to steer consumers through expensive situations and being able to offer best negotiation skills to gain best offers.

    Any Joe can be cheap. Not any Joe can be best.

    • This reply was modified 3 years, 2 months ago by  Trevor Mealham.
    #18120

    VTUK1
    Member

    An interesting question. We at VTUK have explored the issue of fees and whether agents can justify them in quite some detail over the past month. We recently held our 10th annual Roundtable debate on the topic “Can Agency fees be justified” where we were able to ask leading industry professionals their opinion on the matter. Please feel free to watch the debate on our YouTube channel by clicking here – https://www.youtube.com/watch?v=4tUu1ZZPeTw.

    • This reply was modified 3 years, 1 month ago by  VTUK1.
    #18186

    View from the sideline
    Member

    Maybe the answer is in changing the “Normal” commission structure.

    For example:

    To achieve £1,000,000 with Purple Bricks £899.00

    To achieve £1,000,000 with Local Agent £20,000

    Would it be possible to convince the seller that your agency has the skills to negotiate another 5% more than Purple bricks? £1,050,000

    Now the true commission rate is:

    Purple Bricks £50,899

    Local Agent £21,000

    If agents had the confidence to back themselves then they would charge the same for achieving the same.

    What about matching the online commission, then charge 50% for the extra value you achieve? Its a win,win

    Thousands of agents already offer this to sellers – Spain

    Why does England have the lowest commission rates in the world?

    The world is a very small place – isn’t it?

    Maybe agents could copy, any other country? Possible

     

    #20071

    PaulC
    Member

    It is my belief that the industry will change. I think we will see prices fall but service level increase.

    This has been seen in other service based industries. The service is better in the aviation industry than ever and the prices have fallen.

    I think smaller agents will struggle in this new landscape.

    Its about what is perceived as value for the consumer. Estate Agents need to decide are they PREMIUM and therefor can charge a premium price or value for money and higher volume.

    Estate Agents charging a premium price but not ultimately providing the service will see their market share fall. As they lose out to value providers providing as good or better service.

    Estate Agents charging a value price and delivering a good service will see their share grow.

    Personally I think the % model is archaic and arguably is not fair for the consumer.

    Think about this a average joe walks into a barber and has a haircut, as he looks like an average joe the barber charges him £5

    Then a wealthy man in a suit walks in after and the barber thinks this guy has done well for himself I will charge him £10

    That would be crazy! and yet that is what our industry does daily.. You have done well your in a more expensive home I will charge you more.

    Now don’t get me wrong the next time the wealthy guy wants a chop if he chooses to go to Toni & Guy and pay £40 that’s his choice and if hes happy to pay it let him. That’s where the premium end will come in.

     

    • This reply was modified 3 years ago by  PaulC.
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