Words: Ashley Rigg
Published: 7th November 2011
*National newspaper says agents are "earning too much"
An article in the left-leaning British newspaper The Guardian this weekend implies that estate agents are raking it in whilst almost everyone else in the property market suffers.
Journalist Patrick Collensen somehow manages to ignore the fact that most estate agencies selling UK and overseas are struggling with some of the lowest transactions volumes since the early 1990’s.
1. Agents make money whatever price they sell at so the interests of agent and seller are not aligned (a point made famous by the book Freakonomics)
2. The internet has made the job of selling property much easier and therefore fees should come down
3. An agent makes double the amount of money selling a property worth £1 million than for selling one worth £500k although does the same amount of work.
Cue champagne socialist middle class outrage.
Poor economics
A great way to remain poor is put no value on your own time. To paraphrase Oscar Wilde poor economics is to know the price of everything and the value of nothing.
The vast majority of people do not have the sales or marketing skills to get the best price for their most valuable asset. An agent will not only get you on the best portals (Rightmove and Zoopla in the UK) but will have a good database of local buyers from which to email and phone to secure viewings.
To sell anything for the best price, you need to pick up the phone. Without a good local agent, you don’t have access to the best prospects and more often than not, the sales skills needed to recruit potential buyers and close a deal.
Pay agents more if you get a better price
The main issue is not that agents are paid too much for doing too little, it is that the economic interests of seller and agent are not always aligned. The difference in agent commission for another £10,000 in sale price is just £150 at 1.5% commission.
Surely a more constructive and more profitable suggestion for a national newspaper to make would be to link the percentage commission paid to the agent to the selling price achieved?
The most successful people value their time and pay the people who work for them well for great performance.
In the UK, you can pay £19.95 for a value range on your property from Home Track. Why not divide the range into five and pay commission of between 1% and 3% in intervals of 0.5% depending on the actual price achieved?
Contrary to the opinions expressed by the Guardian, with the exception of some booming parts of London, selling property has rarely been more difficult. Paying agents less to sell your property in a saturated market is just crazy.
The politics of envy is bad for your wealth.
Source: Global edge
User Comments
In the US, we have a concept called FSBO (For Sale By Owner). Most of these owners think they will save money if they sell the house themselves. The reality is that FSBOs sell their homes for 18% less than if they hired a realtor. 77% of FSBOs eventually give up and hire a Realtor. By trying to sell the home without help they have damaged the home's perception by the market implying that there is something wrong when the house doesn't sell. Their greed ends up costing them a lot.
Alan Forrester,
Cityscapes International Realty Group, Inc.
A well written article Ashley.
I am also concerned by the continued sensationalist and blinkered journalism by the quality papers in the UK. Particularly on finance and property matters.
Stuart Johnson,
Property Frontiers