Selling your house can be a stressful time and can leave you with questions surrounding the house selling process. And whilst the work that estate agents do is incredibly helpful, when it comes to the fees you can be in for a bit of a shock.
You end up asking yourself ‘how much are estate agents fees?’
In this blog post, we will be looking at how much estate agents charge in commission, how much the average estate agent fee is, what estate agent jargon is, and how much you should pay your estate agent.
Looking for a quick answer? Check out our interactive menu below!
- What is an estate agents commission?
- How Much Do Estate Agents Charge?
- What Do Estate Agency Fees Usually Cover?
- Why Should You Compare Estate Agents Fees?
- Do Estate Agents Fees Include VAT?
- What To Look Out For
- Estate Agent Jargon Explained
- Online Agent vs Traditional Estate Agent
- No Sale, No Fee Agents
- Sole Agency Vs Multi Agency
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What Is An Estate Agents Commission?
To understand estate agent fees, we must first understand what an estate agent’s commission is. The estate agency charges a commission in return for undertaking the sale of your property. This commission is taken away from the profit of when you sell your property.
How Much Do Estate Agents Charge?
Estate agents will typically charge a percentage anywhere from 0.9%-3.6%. This figure depends on which estate agent you choose to sell with, how many you use as well as how well you negotiate.
Estate agent fees in 2022, were on average around 1.42% including VAT. If a property is £275,000 then the estate agent’s fees will be around £3,900.
You should be ready to negotiate the fees down as you can expect your estate agent to aim high.
What Do Estate Agency Fees Usually Cover?
Every estate agent is different, so what is included within their fees will vary from estate agent to estate agent. However, as a rule of thumb, these are what should generally be included within the fees:
- A property valuation
- Drawing up of floor plans
- Putting up a ‘For Sale’ sign
- Taking professional photographs of your property
- Providing you with a written description of your property
- Contacting a list of potential buyers
- Managing and organising viewings
- Negotiating a sale price for your property
- Marketing your house on property portals like Zoopla and Rightmove
Whilst what is included in estate agents’ fees varies depending on which estate agent you go with, if you decide to sell with an online estate agent you should be wary. An online agent may offer cheaper packages, but they are often not as robust. Make sure you check online reviews thoroughly and shop around before committing to an agent.
It is also worth making sure that the contract you choose includes all of the services that you would expect an estate agent to provide. You should also make sure that there are no hidden fees that you are not happy paying. After you have signed the contract, no additional charges can be added without your written permission.
Why Should You Compare Estate Agents Fees?
When you are making any big house purchasing/selling decision, it is always a good idea to shop around and compare before committing to one option.
Whilst it may seem like a tempting offer, it is not always the wise idea to pick the cheapest option based on fees alone. It is always a good idea to compare estate agents based not only on price but also on performance. You can do this by comparing the price that estate agents charge against their performance rate. If an estate agent is able to achieve the asking price, then they are usually worth paying the higher fees for.
An example of this would be a property listed for sale at £300,000 and the agent you choose sells at this asking price at an agreed commission of 1.42%. You would end up paying estate agents fees of £4,250. However, if a second agent charges a lower fee than this or no fee at all and then achieves 98% of the asking price, then it will cost you £6000 in a lower achieved sale price.
But just because you should be wary of cheaper estate agents does not mean that you should go with the most expensive.
Do Estate Agents Fees Include VAT?
You may come across estate agents’ fees that are quoted excluding the VAT, which is currently quoted at 20%. This means that if you are quoted 1% plus 20% in VAT you will pay £3,600 in estate agent fees if you sell your property for £300,000.
The Property Ombudsman’s Code Of Practice For Residential Estate Agents states that “fees advertised by estate agents must be shown to be inclusive of VAT”– alongside a statement confirming that VAT is included.
Agents are also obligated to express their fee as an actual amount including VAT based on the asking price in their contract. The Property Ombudsman says ‘The example amount should be based on the asking price. However, you must make it clear that, should the selling price be higher or lower than the asking price, your commission fee will be correspondingly higher or lower.’
What To Look Out For
Whilst there is a lot to consider when looking through estate agents’ bills, there are plenty of red flags that you need to be wary of. Below are some warning signs to look out for:
- If the contract type you agree to is sole agency, then you should make sure to read the terms and conditions carefully. If you decide to instruct another agent, it is vital that you make sure the original contract has been terminated so that you do not owe both agents’ commissions.
- By law, estate agents are required to tell you what is included in the fee. A lot of estate agents will cover the basics in their commission fees so if an estate agent is asking for quoted additional up-front registration fees, additional fees for photos or advertising then it may be worth looking at a different agent.
- There should be no withdrawal fees.
If this is your first time selling a house through an estate agent, then the different range of contract types available can be confusing and intimidating. Each of these contracts has pros and cons, so it is important to do your homework on each of these types before you commit to one:
- Sole Agency Agreement – The most common type of contract, a sole agency agreement means that you agree to give one estate agency sole selling rights to your property for a fixed term stipulated in the contract. There will be no fee payable to the agency if you agree to a private sale.
- Multi-Agency Agreement –If you are willing to pay a higher fee, with a multi-agency agreement you can have several estate agents market your property. The agent who successfully manages to sell your property is the one who earns the commission.
- Fixed Fee – This is when the commission is given as a fixed fee rather than a percentage of the final sale profit. This is often a lower fee and a cheaper way of selling your home, but the fee must be paid upfront. This is most commonly offered for low-value properties or by online estate agents.
- Open-Ended Agreements – This is what happens when you pay the agent a fee for any sale that comes out of an introduction they made, even if there is a gap of several years.
- Sole Selling Rights – Similarly to a sole agency agreement, you will give one agency sole selling rights. However, you will be liable to pay the estate agent a fee even if you find a buyer yourself.
Do I Have To Pay The Estate Agent If I Sell Privately?
Whether or not you have to pay an estate agent if you sell privately is down to your individual circumstances. If you sell your property without listing it with an estate agent then you will not need to pay any fees for the sale. However, you should be aware that if you go down this route you run the risk of not getting the best price for your house as you will be unable to list it on the big property portals.
If a buyer approaches you directly and you are signed up with an estate agency, you should still check your contract because you may still have to pay fees even if you sell privately.
If you decide to part ways with your estate agent, it is critical to make sure that the contract is completely terminated before you try to sell your home again. It is also a good idea to ask your estate agent for a list of potential buyers that they have contacted about your property as well. This is because estate agents can claim commission for the sale of their homes if they believe that they played a role in introducing them to you.
Estate Agent Jargon Explained
Below are some of the most common estate agent jargons explained:
- Open-Ended Agreements – This is when an agent claims commission if you sell your property to someone they introduced you to, even if years have passed since you were first- introduced.
- Ready, Willing, And Able Purchaser – Even if you pull out of the sale, you will still have to pay the estate agent for finding you a buyer.
- Tie-In Period – A tie-in period lasts on average between 4 to 12 weeks and is the period of time that you are tied into a contract with an estate agent from when you first sign. If you decide to change agents during this period, you’ll be liable to pay fees to your original agent.
- Notice Period – Often lasting around 2 weeks, a notice period is the amount of time between you notifying your estate agent that you wish to end the contract and it actually happening.
When Should You Pay Your Estate Agent?
The estate agent fees are usually due once the contracts have been exchanged but you do not have to pay them until the sale is complete. The only time you would have to pay any fees before the house sale is complete is if you have signed a ‘ready, willing, and able’ buyer contract.
Online Estate Agent Fees vs Traditional Estate Agent Fees
If you have had a shop around high street agents and can’t find a price that you like, online estate agents are always an option. Online estate agents often offer lower fees than high street estate agents. Some online agents even have packages that start at £100.
As previously mentioned, it is not a wise idea to choose your estate agent based on price alone. Before committing to an estate agent, you should always shop around and compare.
No Sale, No Fee Agents
Estate agents will usually charge two types of fees. They will either charge you a flat fee that will be required to be paid upfront, or they will charge a ‘no sale, no fee’ commission that will only need to be paid if the agent sells your property.
Selling through a ‘no sale, no fee’ agency is a great way to sell your property as it provides great motivation for the estate agent to sell your property so that they may get their commission. And if they are not able to sell your property then you do not have to pay them anything. However, it is worth bearing mind that if you have a property that is worth a lot, then selling through a multi-agency agreement could prove costly. This is because the amount that you would be paying, even if the commission was only 1%, could end up being thousands of pounds.
If you decide to sell through an online estate agent, they will more than likely have an alternative way of selling. Instead of a ‘no sale, no fee’ approach, they may take a different route and charge a fixed upfront fee. One such online estate agency that does this is PurpleBricks. Whilst this can work out cheaper than being charged a percentage fee, you will still have to pay this fee regardless of if your home sells or not.
Sole Agency Vs Multi-Agency
When you use a multi-agency agreement, you are instructing two or more estate agents to compete with one another in order to sell your property. The good news is that whilst a multi-agency agreement is more expensive you will only have to pay the estate agent who successfully sells your home.
As the estate agents will know they are in competition, it means that they will work harder to sell your house for a higher price. However, the average fees for a multi-agency agreement are 3%-3.6% compared to the 0.9%-3% that a sole traditional agent brings.
Who Pays The Estate Agent Fees?
The seller of the property is the one who has to pay the estate agent’s fees. This is because the estate agent works on behalf of the seller. If you are selling a house, be sure to remember to add this to your moving costs.
This covers everything you need to know about Estate Agents Commission. If you have any questions, queries, or insight into the subject, please feel free to get in touch!