There are a lot of costs associated with selling a house from conveyancing and surveys to stamp duty and moving costs. However, there is one fee that we Brits often resent… the one an estate agent charges to sell our house.
British estate agents are often given a bad rap. This is mostly due to practices that were common in the past like stretching the truth to secure sales and pressurising customers to buy their mortgages and life cover products. These practices, although less common nowadays, have made estate agents one of the least trusted professions (after politicians, advertising executives and journalists). It also doesn’t help that the profession isn’t properly regulated meaning pretty much anyone can set up an estate agency and start selling houses.
Estate agency fees have also been a bone of contention. In the UK, agency commission figures currently range between 0.9 per cent to 3.5 per cent for sole and joint agency fees; some estate agents also charge for photos and printed brochures on top of their commission. However, while estate agents need no qualifications to sell houses, their commissions often far exceed the amount a solicitor, who has studied for around six years for a law degree, will charge for conveyancing. For example, an estate agent sells a house for £231,000, which is the price of an average house in the UK; the estate agent charges the current average UK commission fee of 1.8 per cent* (including VAT) earning a total of £4,158 from the transaction whereas a solicitor will earn between £500 to £1000+VAT for a sale of the same value.
This fee, therefore, sounds like an excessive amount of money to charge, especially in times such as now when there is more demand for houses than houses for sale meaning properties generally sell more quickly and easily with very little marketing time, effort and costs required.
However, if you compare estate agency fees in the United Kingdom to those charged around the world you will discover that the fees our estate agents charge are quite modest by comparison.
Global Commissions Revealed
New research by property recruitment specialists, Rayner Personnel, has revealed that despite the stick UK estate agents receive for their high commission fees, they are actually quite reasonable compared to other nations.
To conduct their research, Rayner Personnel looked at the average agent commission fee across 28 global nations, factoring in VAT and other similar taxes where applicable, and found that the UK was actually home to one of the lowest fees of 1.8 per cent*.
According to the research, only China (1.75%), India (1.7%), Singapore (1.5%), the Netherlands (1.5%), Honk Kong (0.75%) and South Korea (0.55%) had lower estate agency fees than the UK.
By contrast, the highest estate agency fee was found in South Africa, where agents charge a whopping 7.5 per cent average commission on a sale! The United States of America (6%), Australia (5.7%) and Mexico (5.2%) were also home to particularly high estate agent fees.
Sources: Global Property Guide – Average estate agency fee adjusted to include VAT or similar if applicable and Numbeo – Commission as a percentage fee of property price
The UK Ranks 14th for Commission Earned
Of course, while UK estate agency fees might be some of the lowest around, the high price of UK property means the actual money earned pushes UK estate agents further up the comparison table.
Rayner applied each nation’s fee to the average cost of a 50 square metre city centre apartment to see how this would re-jig the ranking order.
Based on an apartment costing £219,542, the average UK commission would result in a monetary fee of £3,952, bumping the UK from the 22nd most expensive when ranked by commission percentage, to the 14th most expensive in terms of earnings.
While estate agents in the likes of Indonesia, Mexico and Brazil earn a much higher percentage fee, the lower property prices in each nation sees them fall below the UK in terms of actual money earned.
The lowest fee of all is in Nigeria, where the average city centre apartment costs just £32,811 and the average agent will earn just £656 selling one.
However, UK estate agency commissions are eclipsed by the earnings per property sale in Argentina, China, Italy, Germany, the USA, New Zealand, Canada, Honk Kong, Japan, Singapore, Israel, France and Australia, where agents earn between £4,000 and c.£13,000 a sale. Thank goodness we don’t have to pay those kinds of fees here in the UK!
So are UK commission fees fair and reasonable? As we well know, the UK property market has its ups and downs. We have just gone through four years of very challenging market conditions, where working in property sales has been tough. The estate agency fees are ultimately how the agents earn their living in both good times, such as now and in leaner times when businesses have suffered and jobs have been lost. So it’s not a low-risk profession by any means.
Founder and CEO of Rayner Personnel, Josh Rayner, commented: “There’s a pretty unfair perception in the UK that estate agents get paid a lot for very little, but when you compare the average commission fee to other nations around the world, it’s clear this simply isn’t the case.
“That’s not to say estate agency can’t provide a fulfilling and lucrative career path for those that opt to work in the sector and those that put in the effort will be rewarded with great earning potential,” the recruiter added.
Of course, to avoid the estate agency fees all together you could try to market the property yourself. We’d love to hear it that has worked for you. Alternatively, you could use an online or hybrid estate agency that generally charges a lower, one-off fixed fee to market your property; this will generally be cheaper than hiring a more traditional high street estate agent.
After reading the research do you think estate agency fees are too high in the UK?