When you’re choosing potential agents to help sell your property, you need to know how much estate agent fees are, specifically their commissions and what they charge. The fees and commission you pay are the largest single cost associated with a property sale, so it makes sense to know what you are being charged and how this will impact your finances.
It’s worth knowing that estate agent fees and commissions are not regulated in the UK, and are ‘set’ by the market. This means that the rates or commission an estate agent charges varies, with some commission rates including advertising and marketing costs in their commission structure, and others breaking these costs up and charging you a separate fee for them.
Average real estate agent commissions
Estate agent fees and commission percentages in the UK vary from 0.75% + VAT to 3% + VAT of the total sale price, depending on location and the amount of competition between agents in an area. The simple rule of supply and demand dictates that postcodes with lots of local agents drives competition for your property. To get your business they are forced to lower their rates. The reverse applies in rural areas, where fewer agents means there is less competition for listings, which typically results in higher commissions.
Let’s take a look at two examples, one in bustling London and one in rural Norfolk:
- If you sold your property in London for £600,000 – where the average agent commission rate is currently 1.9% – you would pay your agent a commission of £11,400. This would leave you with £588,600 from the sale.
- A property sold in rural Norfolk for £600,000 – where the average agent commission rate is currently 1.3% – you would pay your agent a commission of £7,800. This would leave you with £592,200 from the sale.
As you can see a small difference of just 0.6% in the agent commission translates to thousands of pounds in difference that you could end up paying your agent following a successful sale.
Now let’s look at estate agent fees and commission in more detail, starting with tiered and fixed commission rates.
Fixed vs. tiered commission
There are two main options when it comes to estate agent commissions: fixed and tiered.
Fixed commission is the traditional method when it comes to calculating what real estate agents charge. It’s based on the sale price multiplied by the negotiated commission rate.
For example, if you were to sell a home for £300,000 and were charged a commission rate of 1.5% you’d pay £4,500 in commission (£300,000 x 1.5% = £4,500).
A tiered commission rate is based on performance, and is used as a way to encourage estate agents to get a higher sale price. How? With a higher commission rate above an agreed sale price. This is also known in the trade as a “commission accelerator”.
First, you and your agent need to agree on a target sale price (usually close to what you expect your property to sell for). Then, define 2 different commission rates:
- One if the property sells under the agreed sale price (usually low)
- One if the property sells above the agreed sale price (usually high)
For example, let’s say you expect a sale price of £430,000. Rather than going for a flat 1.3% commission rate, you could agree on paying a lower rate of 1.0% under £430,000 and a higher rate of 1.6% on everything above £430,000. This will give the agent a greater incentive to work hard and achieve a price above your expected sale price.
How much commission does an estate agent make?
As we have seen, estate agents charge commissions of anywhere from 0.75% to 4% of the sale price of your property, depending on where you live and the forces that influence your local market. Do the math and you would assume that agents are rolling in cash.
The reality is, when an agent works for an estate agency, they don’t take the whole cut. The commission gets split and shared between the parties, so they actually make less than one would typically think. Add in franchise fees from agencies on top of this, and agents make even less – something to bear in mind when you begin negotiating fees and commission with your estate agent.
Another factor to consider is the condition of the market. When markets are slower, commission rates tend to be higher as there are less properties to list for sale and it often takes much longer to sell – especially in rural areas. Not only does this mean agents find less business in slower markets, but it also means they have to work harder for you in order to achieve the positive results that come with an active market.
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Estate agent fees and negotiation
What’s important to remember from all this is that commission structures are flexible. In fact, it’s common to negotiate estate agent fees, especially since there is no legal regulation of commission percentages for the real estate industry in the UK.
For this reason, it’s important to ask potential agents all about their commission structure when you first speak with them, or when you have Property Deck pre-screen them for you. Then you can compare apples with apples when deciding on the right agent.
Negotiating fees with agents
Once you’ve researched and shortlisted potential agents it’s worth speaking to a few different local agents to see how flexible they are on their fees and commission.
If you want to get the lowest possible commission you will have to fine tune your negotiating skills – and remember that everything is negotiable! With this in mind here are our top tips for negotiating fees and getting the right agent on board.
- Ask about commission
Ask each agent what their commission is, and don’t be shy – let them know you’ll be comparing them against one another. This way you might be able to get an agent you like more to “price match” against a competitor.
- A higher sale price comes at a premium
If you want a record price for your house, don’t expect an agent to drop their fee. Record prices require much more work, and you’ll obviously have to pay a premium on it.
- Incentivise your agent
Consider asking for a sliding scale rate structure (like the tiered commission discussed earlier). The idea is to incentivise the agent to secure you a better selling price.
- You get what you pay for
Don’t just settle for the agent with the cheapest commission. More often than not you get what you pay for.
- Check everything is included
To make sure you’re comparing like with like, include the advertising fees in your cost estimates, since they may or may not be included in an agent’s quoted commission.
- Negotiate the rate
Don’t forget that if own a high-end or luxury property, you can probably negotiate with the agent on a lower commission rate.
- Don’t be afraid to haggle
When it comes to negotiations don’t be shy – haggle on all the fees and costs. Of course the agents won’t tell you this, but everything is negotiable.
- Get it in writing
Lastly, make sure you get all fees and costs in writing from the word go. That way you won’t be left high and dry when it comes to selling time.
Are cheap agents worth it?
It may be tempting to go with the agent who charges a lower commission, but will they be able to get you the best possible sale price?
Newer agents will be looking to get as many listings as possible, so may be prepared to negotiate a lower commission rate with you. Even though they have less experience in your area, you could save thousands by using them to handle your sale.
On the other hand, experienced agents may have sold more properties than a newcomer. Although their commission rate is likely to be higher, they have the know-how to achieve a better sale price for your home and get you more money in your pocket; especially if they have a proven track record of selling above market rate. Hence it’s usually well worth the money to go with an agent who will work hard for you and has a proven sales record of delivering.
Ultimately we think you should pay your agent what they’re worth and focus on their performance and the service they provide, rather than just their fees and commission alone.
How do you know if an estate agent is any good?
It can be tricky choosing a real estate agent. How do you know they are any good?
Their sales track record is a great indication of their ability. Ideally look for a local agent who has sold properties similar to yours. Some agents are great at selling one type of property and make it their speciality. Others are more flexible and understand the local market really well.
Sometimes, it is not so much about what an agent charges you, but more about what it could cost you if you get the wrong agent to sell what is your most valuable possession.
You can also use our platform to research agents and produce a tailored agent shortlist. Our unbiased agent selection uses multiple data points to find agents with experience selling properties just like yours. This includes support on hand, when you need it – like recommending additional agents or advice on how to negotiate commissions.
Did You Know?
Less than half of all home sellers achieve a sale with the first agent they choose. We solve that problem!
We understand that every person’s circumstances and selling journey is different. That’s why our platform allows you to choose the agent that is the best fit to sell your home. Whether your driven by saving money or getting a first-class service, you can be assured that Property Deck will allow your selling journey to be less stressful.